Papers relating to the foreign relations of the United States, 1928, Volume III
871.63/41
The Minister in Rumania (Culbertson) to the Secretary of State
[Received April 30.]
Sir: Referring to my telegram No. 16 of April 11, 1928, 11 a.m.,9 stating that the Standard Oil subsidiary (Romano-Americana) had accepted the proposal of the Rumanian Government for the settlement of the dispute concerning the subsoil rights of embatic lands, I have the honor to transmit herewith two documents prepared by the Romano-Americana: (enclosure No. 1) a memorandum reviewing the history of this case, and (enclosure No. 2) the draft convention between the Romano-Americana and the Rumanian State embodying the settlement. This convention, on account of the Easter holidays, has not been actually signed, but no reason exists, so far as I know, why it will not be signed in the immediate future.
I have [etc.]
Memorandum Prepared by the Romano-Americana Company
The company Romano-Americana acquired petroleum concessions directly from the owners of the lands, or purchased same from the holders of the concessions, both before and after the war. The State contested our claims on some of these concessions before a special commission (Validation Commission), asserting that these concessions were part of the State’s property, and that the owner-lessors held only the proprietorship of the surface as “Embatics” (perpetual leases).
With the Agrarian Law of 1921 it was decided that the Embatic owner becomes the full owner of the land held by him. The State, however, still maintained that the Agrarian Law only gave the holder the surface rights, and that the State was the owner of the subsoil rights.
In a case tried before the Supreme Court in this connection, it was established (Decision No. 81, of 29 Feb., 1924) that the subsoil of Embatic lands belonged to the Embatic holder, and that the concession granted by him is consequently valid on basis of this precedent set by the Supreme Court: thus most of these concessions were consolidated in spite of the State’s contention. Not content with [Page 804] this the State again brought up the matter before another Commission called the “Validation Commission”, instituted by the special provisions of the Mining Law of 1924, and in order to create stronger motives on which to base its rights the State promulgated the law of April 1, 1926, by which, through interpretation of some of the provisions of the Agrarian Law of 1921, it declared that the subsoil of Embatic lands did not belong to the Embatic holder but remained the property of the State. This law was enacted and made retroactive to June 1921.
In spite of this law, and through some motive or other, the State subsequently closed a convention with the Eldorado company, which was enacted into law and published in the Monitorul Oficial No. 41, of Feb. 22, 1928, in which the State recognized the rights of the Eldorado company over Embatic lands which they had taken into concession from the owner-lessors up to the promulgation of the interpretative law of April 1, 1926. In consideration of admitting the Eldorado company’s rights the State demanded a royalty of 4%. This 4% is in addition to what is to be paid to the peasants, and a 2% tax which is collected by the Government.
The Eldorado company was more favorably situated in this respect than the Romano-Americana, as their royalties average between 4–6%, whereas the average royalty contracted by the Romano-Americana was 12%. After the State had closed the convention with the Eldorado company it then proposed the same settlement to the Romano Americana. The Romano-Americana objected to paying the State 4%, in view of the high royalties which they had obligated themselves to pay to the peasants and lessors, viz: 12%, besides the 2% tax to the State. The State refused to make any change in the conditions of the contract already made with the Eldorado company, stating that this had established a precedent from which it did not wish to deviate, but promised to assign a commissioner who would negotiate with the peasants for the reduction of their royalty to the Romano-Americana, under threat that the State considered itself the owner of the land, and if the peasant would not reduce the royalty the State would then bring suit for ownership, with the likelihood that the State would win and the peasant lose out.
In consideration of the incessant efforts of our Minister, Mr. Culbertson, in insisting upon the Government making an equitable settlement, and which undoubtedly prompted the Government to make the first contract with the above-mentioned Eldorado company—we have taken in good faith the Roumanian Government’s proposal to assist us by getting the peasant to reduce the royalty, and [Page 805] have agreed to settle with the Government under the conditions as outlined in the Eldorado agreement.
Draft Convention Between the Rumanian Government and the Romano-Americana Company, Prepared in April 1928
The Ministry of Industry and Commerce and the Ministry of Agriculture and Domains, representing the Roumanian State, close with the “Romano-Americana”, Joint Stock Company for the Industry, Commerce and Export of Petroleum, domiciled in Bucharest, Calea Victoriei No. 126, the following convention:-
Art. 1. The Roumanian State recognizes, as acquired in good faith, the concessions which the Romano-Americana acquired before promulgation of the interpretive law of the Agrarian Law of April 1st, 1926; considering that it may have been convinced that the concessions taken were in conformity with the existing laws, in accordance with the judgment of the Supreme Court No. 81/924, for the exploitation of the subsoil. The concessions in question have a duration of 30 years from promulgation of the Constitution, or up to at most, July 1953, during which period the Romano-Americana Co. may have undisturbed possession and dispose of the exploitation of the lands comprised in the said concessions.
The Romano-Americana Company has not the obligation to work on these lands, unless it wishes to.
These concessions are shown in the table attached to the present convention, signed by both parties.
Art. 2. The Ministries of Industry and Commerce and of Agriculture and Domains withdraw, finally and irrevocably, the contestations made against the demands for consolidation, the execution of consolidation and the demands for validation, filed by the Romano-Americana Company, or its lessors, relative to the concessions shown in the table provided in Art. 1 of the present convention.
Art. 3. The Romano-Americana will pay the State, when it exploits the lands, a 4% royalty on the gross production of oil or gas, apart from the royalty paid to their lessors. Should the State establish its rights of property, by any means, so that the Romano-Americana Co. would cease to pay royalties to the owner-lessors or lesseelessors of the lands, and would only pay a royalty to the State, this royalty will in no case exceed 10%.
Art. 4. The provisions of Art. 59, 98, 99, 100, 250, etc., of the Mining Law do not apply to the present convention.
Art. 5. The present convention is executed in triplicate.
Articles 59, 98, 99, 100, and 250 of the Rumanian Mining Law (Royal Decree No. 2294, July 3, 1924)
Article 59
Obligatory leases, charges on the land and expropriations are carried out exclusively in the interest of the exploration or exploitation of the stratum and the exploitation of the substances extracted. They form an integral part of the estate of the exploration or exploitation.
At the cessation of a concession for whatever cause, the expropriated surface (with the installations on it) return to the State by right, without indemnification, excepting in cases where it has been agreed otherwise as regards the installations of the last years of the concession.
If the State should sell the expropriated property the former proprietors have the preference, other conditions being equal. To this end, they, or their successors, will be notified through the administration, or by publicity, regarding the conditions of the sale.
If they do not answer the notification within the term of 30 days from the date on which it was made by the administration or by publicity, the State is free to sell the property to anyone they choose.
Article 98
When the lease ceases, the mine, with all its accessories and additions, passes into the possession of the State, without any indemnity and free of any charge or obligation of any nature.
On the cessation of the concession for any cause, the lessee is obliged to hand over to the State all plans of the mine together with the notes of Geological measurements, production and staff registers, the funds of the benevolent Society and its books of revenues as well as any other registers, deeds or documents in connection with the exploitation and sale of mining products.
Article 99
During the tenth year, and for petroleum during the fifth year, which precedes the end of the lease, the Ministry of Industry and Commerce, on its own initiative upon the Superior Council of Mines’ advice, and after hearing the lessee first or on his request, will fix or approve firstly the working program which the lessee is obliged to execute during the period of the last 10 years, respectively 5 years, for the purpose of ensuring the continuity of the exploitation, and secondly it will fix the conditions and rules for dividing between the State and lessee the expenses incurred for these operations.
The concession may be exploited by the State according to regulations [Page 807] of the Law of Commercialization, either renewed to the old lessee, or transferred to another enterprise, but in the last two instances according to the regulations provided by the present law and to the conditions which will be established in the new schedule of work, the latter keeping an account of the inventory and the existing installations given in use in the new concession period.
If the Ministry of Industry and Commerce considers it to be of general interest to renew the lease to the old lessee, it must advise the lessee within the tenth year preceding the end of the concession.
Concessions which expire may be renewed upon request, made two years previous, to the old lessees, under the conditions of the Law and if they respect the dispositions of the new schedule of work, if they fulfil the obligations in period expired.
Article 100
When the lessee has not been informed in regard to the renewal of the lease, in the term mentioned above, the Ministry of Industry and Commerce will take steps, during the course of the fourth year which precedes the end of the lease, for transfer according to the provisions of this Law. In the schedule of work there will be determined also the working program which has to be executed during the last three years for the account of the new lessee, in view of ensuring the continuity of the exploitation for the future.
The lessee is obliged to carry out these works within the period of the last three years of the lease for account of the new lessee, and under his supervision and that of the Mining Authority.
For this purpose the new lessee must deposit the corresponding guarantee, as fixed by the Ministry of Industry in the schedule.
When an understanding can be established between the old lessee and the new one, the work may be executed directly by the latter or by another enterprise, keeping in view not to impede the normal advance of the exploitation.
Article 250
All the lands which have become free by the expiration of the term for which the rights were validated, together with the installations located on them, become the mining property of the State, free of all burdens and any obligations without compensation, on the conditions and in accordance with the rules fixed in the present law. If the owner of the surface has any right to the installations, the State may retain same by granting due compensation, while in case of dispute the compensation shall be fixed in accordance with Art. 66 and the following articles.
The objects which may be taken away without impeding the continuation of the exploitation shall be fixed by regulation.
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