Coll 28/16 ‘Persia; Imperial Bank of Persia; relations with the Persian Government.’ [‎35v] (70/247)

2
Enclosure 2 in No. 1.
Memorandum on the Mode of Computation of the Dues Payable by the Imperial
Bank of Persia to the Persian Government.
(a) THE General Revenue Department, in its letter dated the 5th April,
1932, requested the Imperial Bank of Persia to send to it certain information in
order that it might be able to a certain extent to probe into the accounts submitted^K
by the bank’s experts in determining the dues payable by the bank. No reply
has, however, been received on this subject. It will be necessary, before the account
of the said dues is definitely closed, to obtain a clear and detailed answer in this
respect.
In the above-mentioned letter it was pointed out that, by virtue of the terms
of the concession, the bank should have had its centre and registered office (“ siege
social ”) in Tehran and that, therefore, the bank cannot exempt from Persian dues
a part of its net profits which it pays to the British Government as income tax
because of its British nationality and its domicile in London. Further, the
Revenue Department had stated that the bank had at least impliedly admitted
that the dues payable to the Persian Government had priority, inasmuch as the
said dues had been debited to the profit and loss account before British income tax
was taken into account. It was also pointed out that the Anglo-Persian Oil
Company (Limited), whose concession was similarly worded, had never raised any
objection in this respect and had always paid the dues out of net profits before
deducting British income tax.
(b) The Imperial Bank of Persia contested the above interpretation, and in
the course of its memorandum dated the 8th June, 1932, advanced certain argu
ments which, briefly stated, are as follows :—
Bank’s Arguments.
(1) As the bank had to work partly in Persia and partly abroad, and as it
had to be constituted in accordance with the laws of a foreign country, and seeing
that disputes between the contracting parties had to be referred to arbitration,
the concession must, therefore, be considered as an international agreement and
without reference to either Persian or English law, the concession must be inter
preted and construed in accordance with the surrounding circumstances and the
intention of the contracting parties at the time. The Persian Government, by
approving the bank's statutes, has obviously taken full cognisance of the matter,
and has also admitted that the bank must comply with the laws of the country
where it is constituted and, particularly, pay British income tax so that it may
continue its operations and make profits. Therefore, by ‘ ‘ net profits ’ ’ is meant
profits remaining in Persia after payment of British financial and other duties.
Refutation of above A rguments.
The concession granted to the Imperial Bank of Persia has no international
agreement aspect whatsoever. It is merely an agreement concluded in Persia
between the Persian Government and a foreign national laying down the terms
under which the concessionnaire should work on Persian territory (without for
bidding him from extending and expanding his operations abroad). It is not,
therefore, so important or effective if the Persian Government has not objected
against the constitution of the bank, the establishment of which it had sanctioned,
as a British company. Moreover, an implied agreement on a question of
appearance (form) cannot be considered as proof that the Government has waived
some of the rights explicitly assured (reserved) to itself in the concession, nor can
it prove that the Government has permitted the deduction of a portion of the net
profits due to it by virtue of the concession.
The Imperial Bank of Persia must have its registered office (“siege social ”—
“Markaz-i-Asli ”) and its centre of operations (“Markaz-i-Amaliyat”) in Persia.
In justice and equity the bank should centralise in Persia all its profits derived
in Persia and abroad and pass same to the royalty account. From these should
be deducted only such expenditures as are in reality necessary for the carrying out
of the operations mentioned in the concession. British income tax should on no
condition be debited to this account, because it represents a part of the net profits
derived in Persia and abroad which the concessionnaire company freely pays to
the British Government by reason of its having selected British nationality.