Foreign Relations of the United States, 1952–1954, Iran, 1951–1954, Volume X

888.2553/6–754: Telegram

No. 474
The Ambassador in the United Kingdom (Aldrich) to the Department of State¹

secret
priority

London, June 7, 1954—11 a.m.

5559. Limited distribution. From Hoover.

1. At meeting with US company principals in London afternoon June 6, it apparent that difficulties re acceptance of agency type agreement revolve largely around accepted legal definition of “agent”.

2. Lawyers for all consortium companies state definition of “agent” as used by Iranians in their May 16 “memorandum on agency”² (namely relationship “principal to agent” or “master to servant”), also generally accepted definition in legal sense in all other countries.

3. Such term, in absence of specific qualification to contrary, would in itself be incompatible with kind of effective management control Iranians apparently willing give to consortium, and which consortium regards as one of “indispensable minimums” in any agreement. Otherwise use of word “agent” would undoubtedly lead to conflict in later years on entire validity of provisions granting such management control.

4. Lawyers advise that if effective management to be assured, use of terms “agent” or “agency” would have to be specifically defined in terms contrary to legally accepted usage. Question becomes, therefore, if such qualification would be acceptable to Iranians as a prerequisite to granting effective management, otherwise such grant could become meaningless.

5. Final document would therefore have to say expressly and plainly that consortium would act as agent for Iran, but only in sense and to extent specifically provided for in contract, and that provisions for management by consortium and for supervision by Iranians (as already set forth during negotiations) would be unaffected by such “agency” relationship.

6. Inasmuch as above concept may not be compatible with nine-point law, from strictly legal standpoint, it considered essential by consortium that all understandings be embodied in final document, and that entire document be ratified by parliament, unequivocally approved by Shah, and be made public.

7. Consortium will therefore authorize negotiators to go to Iran and to accept agency type agreement, but only with proviso that above qualifications included. It my feeling that much depends upon final wording used, and while consortium will make every effort to preserve Iranian sensibilities, consortium will not depart from principles involved.

8. Ambassador Henderson’s comments re (a) desirability of consortium negotiators returning to Tehran with above qualifications upon right to accept agency type agreement and (b) probable acceptability by Iranians of above points urgently desired. Consortium, of course, feel that clear-cut grant of effective management control is matter of overriding importance.³

9. Department please pass soonest to Secretary Humphrey and Secretary Anderson for discussion probably taking place June 7 or 8 with company principals now in US.

Aldrich

1. Also sent to Tehran.
2. The record copy of the Iranian document entitled “Memorandum on Agency”, dated May 16, is in the folder entitled “Documents Relating to Negotiations With Iran Apr. 14, 1954 to May 18, 1954,” in file 888.2553/4–1454.
3. On June 7 Ambassador Henderson responded that he feared it would be extremely difficult if not impossible for the Iranian negotiators to agree to wording exactly like that set forth in paragraph 5 of telegram 5559. The Iranians would probably believe that such phrasing would, in essence, nullify the statement that the consortium would act as agent. If the Iranians agreed to the proposed consortium wording, Henderson did not believe the Majlis would ratify it. Henderson also thought it would be preferable for the consortium negotiators not to be saddled before their arrival in Tehran with hard and fast wording, but that they should be given a degree of flexibility which would make it possible for them together with the Iranians to find expressions acceptable to both sides. (Telegram 2490; 888.2553/6–754)