Concession agreements, which until the early 1970s were the legal basis for the oil industry in most oil-producing countries, can be best summarized as an agreement in which a government grants a company or individual exclusive rights to conduct oil transactions in a defined area for a limited period of time. The concessionaire bears the burden of financial and commercial risks, but acquires the right to excavate and dispose freely of the oil, in return for payment of certain sums to the government as the owner of the resources (Parra, pp. 8-10). He came to London, he won and he had dinner, and he spent day and night negotiating. There were a lot of interviews. He married his daughter, he took his son to school [Harrow], he met with the Secretary of State, there was a change in our government, and in the midst of all this maze of activities, we reached a preliminary agreement on the principles to be included in the new document, so that some numbers and the lump sum would be determined at a later date. After the dispute between the two countries was resumed in The Hague, the Czech Foreign Minister, who was appointed mediator, put the case on hold so that the parties to the dispute could try to settle the dispute. Ironically, Reza Shah, who had strongly called for the abolition of the D`Arcy concession, suddenly gave in to British demands, much to the chagrin and disappointment of his cabinet. A new agreement with the Anglo-Persian Oil Company was reached after Cadman visited Iran in April 1933 and received a private audience with the Shah.
A new agreement was ratified by the National Consultative Assembly on May 28, 1933, and received Royal Assent the following day. In its essential characteristics, the agreement provided for the creation of a consortium holding company, Iranian Oil Participants Ltd. (IOP), in England, where it was also to have its registered office. The IOP was to be the parent company of two wholly-owned operating companies established under Dutch law to exploit the oil industry in southern Iran. These were the Iranian oil exploration and production company that was to take over exploration and production; and iran`s oil refining company, which was to resume refining. Operating companies should be registered in Iran, have their headquarters there and have two Iranian directors on their boards. They were to operate and manage the Abadan oil fields and refinery on behalf of NIOC, which was to own the assets. Another company in the consortium, Iranian Oil Services Ltd, was to be founded in England with its headquarters in London. Its function was to provide operating companies with supplies, engineering services and non-Iranian personnel. In addition to owning the oil industry in the contract territory, NIOC should also be responsible for the management of non-essential facilities and infrastructure such as industrial training, public transportation, road maintenance, housing, medical care and social facilities. In addition, NIOC is expected to own and manage the Naft-e šāh oil field, the Kermānšāh refinery and internal distribution facilities to supply the Iranian domestic market.
Profits from oil operations under the deal were to be shared equally between the consortium and the Iranian government, while maintaining the principle of 50/50 profit-sharing, which had become the norm in the Middle East. As far as duration is concerned, the agreement should last twenty-five years and provide for three five-year extensions, with a maximum duration of forty years. However, each of the expansions was linked to a reduction in the area covered by the agreement (originally about 100,000 square miles), so that it would be half the initial area in the last five-year period. Reza Shah rejected the validity of the 1920 Armitage-Smith Agreement on the grounds that he had exceeded his powers in reaching the agreement. APOC considered the agreement to be valid, but acknowledged that a revision of the concession was desirable. To this end, talks were opened in 1928 between Sir John Cadman (s.v.), the president of the APOC, and ʿAbd-al-Ḥosayn Teymurtāš, the minister of the court. Petroleum Act of 1974 and risky service contracts. In order to further improve the control and management of oil activity carried out on its behalf by qualified operators, NIOC drafted in 1974 a new innovative petroleum law, which was approved by the Council of Ministers and adopted by Parliament. This new law provided that exploration and production contracts with foreign oil companies could only be concluded on the basis of “risky service contracts” in which the contractor had no right of ownership either over the discovered reserves or over the production of the contract area. An important clause (Article 3, Section 1) stated that “Iran`s oil resources and oil industry belong to the nation. The exercise of the sovereignty of the Iranian nation over Iran`s oil resources with regard to the exploration, development, production, exploitation and distribution of oil throughout the country and its continental shelf is entrusted exclusively to the National Iranian Oil Company, acting directly or through its agents and contractors.
(The text of the law was published in 1974 by Public Relations Affairs, Iranian Oil Industry). The purchase contract. In addition to the fact that the 1954 agreement did not achieve the main objective of the nationalization of oil in 1951, namely the complete control and management of the oil industry by the NIOC, there were many weaknesses and shortcomings in the agreement, many of which were inevitable due to serious economic problems in the country, Iran`s weak negotiating position. and policies and practices in the international petroleum sector. In early 1973, the NIOC issued an ultimatum to the oil consortium that Iran would not extend the 1954 oil deal beyond 1979 (the initial 25 years) unless a new agreement was reached, and that the consortium members would then be treated as ordinary buyers of Iranian oil. Under these circumstances, the consortium members opted for a new deal to become preferred customers of Iranian oil, in exchange for relinquishing the management and control of the oil industry on the contract territory. As a result, on July 19, 1973 (retroactive to March 21, 1973), a 20-year purchase contract was signed between the parties, replacing the 1954 oil contract. Concession contract of 1933. On November 26, 1932, during the Council of Ministers, the Shah, accompanied by Finance Minister Sayyed Ḥasan Taqizādeh (Taqi-zāda), arrived and reprimanded Teymurtāš for failing to reach an agreement with apoc. The Shah then dictated a letter revoking the concession agreement before leaving his ministers surprised. Prime Minister Mehdi-qolli Hedāyat recalled that Reza Shah, in his anger, demanded the file on the oil negotiations and had them thrown into the oven.
The unilateral cancellation of the concession by the Iranian government was officially published on November 27, 1932 (text in the League of Nations, Official Gazette, December 13, 1932). Mr. Thomas Jacks, the company`s representative in Tehran, received the cancellation letter signed by Taqizādeh on November 27. The Iranian government complained that the concession was contrary to national interests, arguing that it was not legally and logically bound by concessional terms granted prior to the establishment of a constitutional government in Iran, given the manner in which the concession had been obtained at that time. Although the letter argued that cancellation was the only way to protect their sovereign rights, it stated that the Iranian government would not fundamentally refuse to grant a new concession. The British government, for its part, rejected Iran`s right to cancel the concession and referred the dispute to the League of Nations in Geneva on December 19, 1932. The case of the Anglo-Iranian oil dispute within the League of Nations was eventually handed over to Czech Foreign Minister Dr Eduard Beneš for mediation and dismissed the case to give the parties to the dispute time to reach a new settlement. Five months later, in April 1933, Cadman himself went to Tehran to try to save the day, and met with the Shah for the second time on April 24. It was a decisive event in which Cadman and the Shah, men from quite opposite backgrounds, came together with the common knowledge that everyone had the undisputed authority and ultimate responsibility to reach an agreement.
They made their breakthrough. (3) In the area of taxation, the Agreement provided that the First Party, the Second Party and any commercial company would be subject to tax under the laws of Iran with respect to their net income from the transaction approved under the Agreement, as they may from time to time take precedence. . . .