British Government Criticised by League of Nations Mandates Commission for Giving Too Favourable Ter
Menu JTA Search

British Government Criticised by League of Nations Mandates Commission for Giving Too Favourable Ter

Download PDF for this date

The concession given by the British Government to the Iraq Petroleum Oil Company for conveying the oil pipeline through Palestine territory to the port of Haifa, was subjected to a great deal of criticism by the members of the Mandates Commission at the June session of the Commission, according to the minutes of the session now released here.

Several of the members of the Mandates Commission objected in the course of the discussion that the Government had given too favourable terms to the Company, and suggested that it had there by infringed the terms of the Mandate. M. Orts wanted to know whether these advantages and privileges accorded to the Iraq Petroleum Company were compatible with Article 18 of the Palestine Mandate, which provides that there should be no discrimination against the nationals of any State Member of the League of Nations, including Companies incorporated under its laws, as compared with those of the Mandatory, or of any foreign State, in matters concerning taxation, commerce or navigation, the exercise of industries or professions.

M. Rupple drew attention to a statement in the British Annual Report on Palestine which said that there was no economic discrimination in the fiscal regime or the customs regulations of the Palestine Government, with the exception of special privileges enjoyed by certain foreign charitable, religious and educational institutions granted prior to the war by the Turkish Government, but that no fresh privileges of the kind had been granted. He considered, he said, that this statement was in disagreement with the terms of the Convention with the Iraq Petroleum Company, which accorded preferential treatment to the Company.

Dr. Drummond Shiels, the British Accredited Representative, argued that the Iraq Petroleum Company was not a purely British Company, but was composed of national groups representing Great British, France, the United States of America and the Netherlands. The Convention referred to a transit concession, as the Company was solely engaged in conveying a commodity through Palestine. The position would be different for a company importing into Palestine. The Convention also did not create a monopoly and there was nothing to prevent similar concesions being granted to other companies under similar conditions, and he therefore thought that the Convention was not in disagreement with Article 18 of the Mandate.

M. Orts replied that the question of the nationality of the capital employed and of the Company itself was of secondary importance. He was also not arguing, he said, that the Convention created a monopoly in favour of the Government. Even if that were so, he would have no criticism to make, seeing that the Mandate did not prohibit the setting up of a monopoly. Again, the fact that the object of the Company’s activity was transit traffic was not important, seeing that the exemptions from import duties covered goods imported for local consumption and the exemptions from taxation applied to persons and immovable property in the territory. The point which arose was whether the advantages granted to the holders of the concession were not precisely those which were prohibited by Article 18 of the Mandate.

Dr. Drummond Shiels repeated that the Government saw no discrimination in the clauses of the Convention, as such privileges might be granted to any other Company.

M. Ruppel said that he was not satisfied with this reply. The Company was without doubt receiving preferential treatment in various respects.

M. Orts said that he also was not satisfied with the reply. The only question which arose was whether the benefits granted to the holders of the Concession were those which were permitted under the terms of the Mandate and not precisely those which were prohibited.


M. Rappard said that when the High Commissioner granted the Concession he was no doubt inspired solely by the interest of the territory. The granting of such privileges, however, was calculated to deprive the territory of considerable revenue received from taxation. Probably the High Commissioner considered that this price had to be paid in order that the pipe-line might go through Palestine, and that if he had refused this privilege to the Company there would have been a loss in total receipts from taxation. If, however, these favours were granted for the purpose of competing with another mandated territory in order to secure the installation of the pipe-line, the extraordinary position arose that the principle of fiscal equality had to be violated in order to allow one of these territories to compete with another.

Dr. Drummond Shiels said that it might be thought that the Company had received too generous terms, but in all countries it was a common custom for Governments and local authorities to give concessions for factories and new industrial undertakings as an inducement for them to be established in the country. He was firmly convinced that there was no discrimination in the sense of Article 18.

M. Orts replied that no doubt such privileges were given to companies in many other countries, although it was rare to grant exemption from land taxes, but there was a fundamental difference, because such countries were not under a mandate. Were any other tax-payers in Palestine, he asked, exempt from land taxes, income taxes, etc?

Dr. Drummond Shiels claimed that the Concession had been granted in the general interests of Palestine, and in other countries similar conditions were readily granted to public utility companies, such as this was. So far as he knew, he added, no other tax-payer had been exempted from the same taxes, as none was in the same position.

M. Rappard compared the granting of fiscal exemption by the High Commissioner of Palestine to the surrendering by a guardian of rights possessed by his ward, thereby reducing the revenue of the ward. In this case the guardian was of the same nationality as the ward and this created a very delicate position.

He asked whether Dr. Drummond Shiels could state that the High Commissioner in his negotiations with the Company was free to consider solely the interests of the territory, in spite of the fact that a British company was concerned.

Dr. Drummond Shiels again pointed out that with regard to the nationality of the Company, he had already mentioned that there were various national groups interested. They were represented in equal proportions, and the British share was by no means preponderant, so that M. Rappard’s point that privileges had been given to a party of the same nationality as the High Commissioner did not therefore hold good. Consultations had taken place on this subject between the High Commissioner and the Colonial Office, and both had been inspired entirely by the interests of Palestine. The charges made in this connection were therefore groundless.

M. Rappard claimed that prima facie the guardian’s action lowered the ward’s income. He thought that the correct answer was that if no concession had been granted, no pipe-line would have been constructed at Haifa, and future revenues would thereby be reduced.

Dr. Drummond Shiels again said that they believed that they had acted throughout in the interests of the territory under mandate.

M. van Rees, the Vice-Chairman of the Commission, intervened at this point to say that Article 18 of the Mandate did not refer to Concessions. At the time when the Article was drafted, he recalled, the British Government had for special reasons intentionally refrained from extending the principle of equality to Concessions of all kinds, and consequently this principle did not apply in Palestine to Concessions. So far as he was concerned, M. van Rees said, this fact alone did not settle the question under discussion, but it nevertheless seemed to him to be of such a nature as to give rise to doubts whether in this case Article 18 of the Mandate was infringed. The question was so complex, that it deserved more detailed study.

The Commission then agreed to a resolution moved by M. van Rees postponing the question for further consideration at a later meeting.


The Convention concluded with the Iraq Petroleum Company has been criticised before in several quarters, notably in the House of Commons by Mr. Will Thorne, a prominent Labour member and trade union leader, who wanted to know why there was no clause in the convention for safeguarding fair wages and labour conditions, and by Labour circles in Palestine. The Colonial Secretary is aware that there is no such clause in the agreement, Dr. Drummond Shiels replied to Mr. Thorne, and the point is engaging attention.

The Convention shows how anxious the British authorities in Palestine are to be as accommodating as possible to induce the Company to carry the pipe-line over Palestine territory and have it terminate in the Haifa Bay, Palestine Labour circles complained immediately the terms of the Convention became known. Palestine Labour is perturbed over the fact, it was stated, that the provision with regard to employment of Palestine Labour is not qualified by any demand for the protection of the labourer, such as a fair wage clause or insurance. If the Convention were one which required the ratification of the British Parliament, it was argued, the rights of the workers would not have been so disregarded.

Founding Funders

The digitization of the JTA Archive would not have been possible without the generous support of the following donors:
  • The Gottesman Fund
  • Righteous Persons Foundation
  • Charles H. Revson Foundation
  • Elisa Spungen Bildner and Robert Bildner, in honor of Norma Spungen
  • George S. Blumenthal
  • Grace and Scott Offen Charitable Fund