888.2553/1–1453: Telegram

No. 279
The Ambassador in the United Kingdom (Gifford) to the Department of State1

top secret
niact

3840. From Byroade. This is message No. 2.

Following is text Arbitration Agreement agreed last night with UK in London subject to final clearance later today:

Arbitration Agreement

The Government of Iran and the Government of the UK:

Desiring to bring about a settlement of all claims and counter-claims which have arisen between the Government of Iran and the Anglo-Iranian Oil Company and to submit the matter to international adjudication, to take place between the Government of Iran and the company:

Conscious, however, of the fact that, under Article 34, paragraph 1, of its statute, the International Court of Justice can only entertain cases of which states are parties:

Have agreed that the said claims and counterclaims shall be referred to international arbitration between the Iranian Government on the one hand, and the Anglo-Iranian Oil Company on the other, in the manner provided by, and before a tribunal constituted as specified in, Parts I and II of the present agreement, and the arrangements for the payment of a balance due from either party to the other in consequence of the award of the tribunal shall be those set out in Part III:

[Page 612]

part i

1. (a) The above-mentioned claims and counterclaims shall be referred to a tribunal consisting of those members of the International Court of Justice who hold office as judges of the International Court of Justice on the date of the conclusion of the present agreement, together with the Iranian Judge ad hoc who was designated to sit on the International Court of Justice in 1952, provided that the number of members of the tribunal so constituted shall not be fewer than the number of judges (including the Iranian judge ad hoc) which made up the bench on the International Court of Justice in July, 1952, for the hearing of the preliminary issue of jurisdiction in the Anglo-Iranian oil dispute. In the event of the resignation or retirement of any judge from the International Court of Justice, such judge shall continue to sit on the tribunal in his unofficial capacity. In the event of the death, or incapacity or withdrawal from the tribunal of any member, the remaining members of the tribunal shall proceed to adjudicate the case. The tribunal shall select its president, and shall take its decisions, and give its award, by a majority vote.

(b) If the tribunal cannot be constituted as set out in subparagraph (a) above, the matter shall be referred to a tribunal composed of the following judges of the court acting in a private capacity, and assuming they are willing so to act; that is to say the UK judge, the Iranian judge ad hoc, above referred to, and any other three judges agreed upon between the UK and Iranian judges; or, if they are unable so to agree within two months from the date on which the present agreement has been communicated to the court as provided in article 11 hereof, any three judges designated after consultation with the UK and Iranian judges by the vice-president of the court, who shall in any case designate one of the three additional judges to act as president of the tribunal. In the event of the death, incapacity, or withdrawal from the tribunal of the UK judge, the Anglo-Iranian Oil Company shall have the option of designating a substitute member of the tribunal; in the event of the death, incapacity, or withdrawal of the Iranian judge ad hoc, the Government of Iran shall have the option of designating a substitute member. In the event of the death, incapacity, or withdrawal of any of the remaining members of the tribunal, a substitute member shall be designated by means of the same processes by which his predecessor was designated. In the event of the death, incapacity, or withdrawal from the tribunal of its president, his successor (who shall replace him as president) shall be designated by the vice-president of the International Court of Justice. The tribunal shall take its decisions and give its award by a majority vote.

[Page 613]

(c) If the tribunal is not constituted in one of the foregoing ways, the matter shall be referred to a tribunal consisting of five eminent jurists from outside the court, to be nominated after consultation with the parties and with the court by the vice-president of the court, who shall also designate one of them to act as president of the tribunal. In the event of the death, incapacity, or withdrawal of any member of the tribunal, a successor shall, by the same process, be nominated by the vice-president of the court. The tribunal shall take its decisions, and give its award, by a majority vote.

2. The function of the tribunal shall be:

(1)
To determine the sum required to provide fair compensation to the Anglo-Iranian Oil Company for the loss of its enterprise in Iran as the result of the Iranian Oil Nationalization Laws of March and May 1951; and for that purpose the tribunal shall employ the principles applied for the purpose of determining the compensation awarded under any UK law which the company may specify, nationalizing any industry in the UK.
(2)
To determine the validity of all counterclaims which the Iranian Government may have against the Anglo-Iranian Oil Company, and the sum required to meet them.
(3)
In determining the matters specified in Article 2 above, and subject to the provisions of that article, the tribunal shall give its decision in accordance with international law, applying.
(a)
Any relevant international conventions by which the Governments of Iran and the UK are both bound;
(b)
International custom, as evidence of a general practice accepted as law;
(c)
The general principles of law recognized by civilized nations;
(d)
Judicial decisions and the teachings of the most highly qualified publicists of the various nations, as subsidiary means for the determination of rules of law.
(4)
The decisions of the tribunal shall be definitive and binding on both the parties to the arbitration (hereafter called the parties), and the tribunal award, which shall be expressed in terms of sterling, shall be regarded as a full and final settlement of all claims and counterclaims of the parties.

part ii

5. If the tribunal is constituted in the manner specified in Article I (a) or I (b) hereof, its procedure (and all matters incidental thereto) shall, mutatis mutandis, and so far as deemed appropriate by the tribunal, be the same as that provided for the International Court of Justice by its statute and rules of court.

6. If the tribunal is constituted in the manner specified in Article I (c), it shall (subject to the terms of the present agreement) settle [Page 614]its own procedure, but shall in any case apply the following provisions:

(a)
As soon as possible after the coming into force of the present agreement, and after the nomination of the members of the tribunal as provided in Article I (c) hereof, the president of the tribunal (hereinafter called the president) shall, in consultation with representatives of the parties, as designated by them, determine the procedure for the exchange of written pleadings between the parties (number, order and time-limits et cetera) and for their transmission to the members of the tribunal.
(b)
As soon as possible after receipt of the last of the written pleadings, the president shall, after consultation with the other members of the tribunal and with the representatives of the parties, name the date and place for the oral hearing and determine the order in which the arguments of the parties are to be presented.
(c)
The tribunal shall give its award as soon as possible after the close of the oral hearing.
(d)
The tribunal shall hold such sittings, whether for private deliberation or for hearing the parties, as it may consider necessary for the carrying out of its functions under the present agreement.
(e)
Subject to the provisions of Article VII below, the president shall make all the necessary formal arrangements in connection with the sittings of the tribunal (premises, and interpreting, clerical and stenographic staff).
(f)
The languages of the tribunal shall be English and French. The written and oral pleadings and statements of the parties may be drawn up or presented in either language, and the arrangements for translation and for the interpretation of speeches shall be determined by the president in consultation with the other members of the tribunal and the representatives of the parties.

7. Whatever the character of the tribunal, each of the parties shall bear its own costs of the arbitration. The expenses of the tribunal shall be borne by the parties in equal shares. Any question relating to the fees, expenses and allowances of the president, and of the other members of the tribunal, and all matters incidental thereto such as the time and method of payment, shall be determined by the parties in consultation with the president.

part iii

8. Any balance due by either of the parties to the other in consequence of the award of the tribunal shall be paid as follows:

(1)
Any balance due from the Iranian Government to the AngloIranian Oil Company shall be discharged by payments in cash in sterling, to the credit of the company, in a bank designated by the latter, of 25 percent of the receipts from all sales of oil and oil products exported from Iran; or, if so agreed between the Iranian Government and the Anglo-Iranian Oil Company, by deliveries of [Page 615]oil to the company in such quantities and over such period of years as shall be mutually determined by them.
(2)
If a balance is due from the Anglo-Iranian Oil Company to the Iranian Government, it shall be discharged by payments in cash in sterling to the credit of the Iranian Government with a bank designated by the latter of such amounts over such period of years as shall be agreed between the Iranian Government and the company; or, in default of such agreement, in such amounts over such period of years, as shall be determined by an arbitrator appointed by the vice-president of the International Court of Justice.

9. Pending the award of the tribunal, 25 percent of the receipts from all sales of oil and oil products exported from Iran shall, unless another currency is agreed between the Government of Iran and the Anglo-Iranian Oil Company, be deposited in sterling in a trust account with a financial institution or trustee bank to be agreed upon between the Government of Iran and the company, or in default of such agreement, to be specified by the vice-president of the International Court of Justice, and shall await the award of the tribunal. If there is any balance remaining in the trust account after the discharge of the award shall be paid to the Government of Iran.

10. Any amount still outstanding under Article VIII (1) or (2) above, one year after the date of the award of the tribunal, and thereafter from year to year, shall carry interest at a rate to be agreed between the Iranian Government and the Anglo-Iranian Oil Company, or, in default of such agreement, to be determined by an arbitrator appointed by the vice-president of the International Court of Justice.

part iv

11. The present agreement shall be subject to ratification and shall come into force immediately upon the exchange between the Governments of Iran and the United Kingdom of their respective instruments of ratification. The agreement shall thereupon be communicated to the International Court of Justice.

In faith whereof the undersigned plenipotentiaries have signed the present agreement.

Done in duplicate at ——— this ——— day of 1953, in the English, Persian and French Languages, all three texts being equally authentic.”

This message is verbatim text.2

Gifford
  1. Transmitted in two sections; sent to Tehran eyes only for Ambassador Henderson as telegram 146 and repeated to the Department.
  2. Several minor changes were made in the text of this document. These alterations are in Document 283.