PUBLIC RECORD OFFICE
Reference :-
C.O.885
21 PUBLIC RECORD OFFICE, LONDON
ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH-NOT TO
CORRESPONDENCE
[December, 1910-August, 1911]
RELATING TO THE
DRAFTING OF STANDARD CLAUSES FOR INSERTION IN CONCESSIONS, CONTRACTS, &c.
37294
SIR,
No. 1.
CROWN AGENTS to COLONIAL OFFICE
(Received 5 December, 1910.)
[Auswered by No. 3.]
Whitehall Gardens, London, S.W., 3rd December, 1910. I HAVE the honour to state that in connection with two recent draft contracts (the Falkland Islands peat fuel concession and the British Guiana local steamer service contract) we have had to consider with our solicitors the question of drafting a clause to provide that the contract or concession should not be held by, or assigned to, any but British subjects or limited companies British in character and control
2. In drafting the clause in these two cases, we have adopted as a basis Section 15 of the Southern Nigeria Mining Regulation (Oil) Ordinance, No. 12 of 1907, which was, we understand, drafted at the Colonial Office, and which reads as follows:-
No licence or lease shall be granted under the provisions of this Ordinance to any firm, syndicate, or company, which shall not at all times be and remain a British Company, registered in Great Britain or in a British Colony, and having its principal place of business within His Majesty's dominions, and the chairman of the said Company and all the remaining directors shall at all times be British subjects, and the Company shall not at any time he or become a corporation directly or indirectly controlled by foreigners or foreign corporations.
In this section the expression foreigner' means any person who is not a British subject, and the expression foreign corporation' means any corpora- tion other than a corporation established under and subject to the laws of some part of His Majesty's dominions and having its principal place of business in those dominions. In the event of any alteration being made in the articles of association or constitution of the Company, previous notice thereof shall be given in writing to the Governor, who, if in his opinion the said alteration shall be contrary to the cardinal principle that the said company shall be and remain a British Company under British control, may refuse his consent to such alteration. If and whenever any such alteration shall be made without the written consent of the Governor, or if the Company shall at any time cease to be a British Company or shall become a corporation under foreign control or hall assign any of the licences, leases, powers, or privileges granted without the previous consent in writing of the Governor, the Governor may thereupon cancel and determine all the licences, leases, privileges, and powers granted to the said Company."
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3. In connection with the Trinidad oil fields similar provision is made in the case of licences by Section 56 of the Land Regulations, which states that no licence to search Crown Lands for petroleum, mineral oils, coal, asphalt, or other products shall be granted or assigned to any Syndicate or Company which is not British in its control and organisation "; and in the case of leases by a clause in the same terms
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as those of the Southern Nigeria Ordinance with the exception that "the Chairman and a majority of the other Directors are substituted for "the Chairman and all the remaining Directors."
4. The clauses submitted to the Secretary of State in the Falkland Islands and British Guiana contracts referred to above (which are still under consideration) follow the wording of the Southern Nigeria Ordinance without any alteration in sub- stance. A point, however, which our solicitors have raised is that in those clauses, while provision is made against any alteration of the memorandum or articles of association of a company in breach of the principle of the clause, there is no stipula- tion to secure that at the time of taking over the contract the company (whether the original contractor or an assignee) should have it provided in the terms of its con- stitution that it must be and remain a British Company. They have accordingly drafted the subjoined clauses for consideration :-
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"The lessees, their permitted assigns, or under lessees shall be and remain British subjects, and whilst and whensoever the lessees or such permitted assigns or under-lessees shall be a Company the memorandum or articles of association thereof shall provide that such Company shall be and remain a British Company registered in and having its principal place of business within His Majesty's Dominions, and that the Chairman of the said Com- pany and all the other Directors thereof shall at all times be British subjects and that the said Company shall not at any time be or become a Corporation directly or indirectly controlled by foreigners or foreign corporations. No such Company as aforesaid shall make any alteration in its memorandum or articles of association in contravention of the foregoing provision without the previous consent in writing of the Governor, and the Governor shall be at liberty to refuse such consent if such alterations shall, in his opinion, be contrary to the cardinal principle that the said Company shall be and remain a British Company under British control. If and whenever any such alteration as aforesaid shall be made without such consent as aforesaid, or if the lessees, permitted assigns, or under lessees (not being a Company) shall at any time cease to he British subjects, or if the lessees or their permitted assigns or under lessees (being a Company) shall at any time cease to be a British Company or shall become a Corporation under foreign control, the Governor may forthwith determine this lease as hereinafter provided. In this clause the expression foreigner 'means any person who is not a British subject, and the expression foreign corporation' means any corporation other than a cor- poration established under and subject to the laws of some part of His Majesty's dominions and having its principal place of business in those dominions."
"Without prejudice to the rights of the Government under any Ordin- ance, it is hereby expressly agreed that if the lessees
or if the lessees shall cease to be a British Company under British control within the meaning of clause hereof, or if
then the Government, notwith- standing that the Government may not take advantage of some previous default of a like nature, may re-enter on the demised premises or any part thereof in the name of the whole and peaceably hold the same thenceforth as if these presents had not been made."
This proposed amendment makes the provision more complete, but one difficulty in the way of accepting it is that a contract or a lease might be granted, or assign- ment permitted, to a company already established, whom the Government might not wish to call upon to incur the expense of altering its memorandum or articles of association.
...The clause provides that a company" shall not at any time be of become a corporation directly or indirectly controlled by foreigners or foreign corporations ” This is a wide expression, and the question might arise whether under it the Govern- ment would be entitled to take any action if, for instance, the majority of the com- pany's shares, and therefore the voting power, should fall into the hands of foreigners. That is, of course, a method very ordinarily adopted in practice in order to acquire control over a Company; but the Directors could not be held responsible in the matter, since anyone is free to buy or sell the shares. It would be an extreme step to provide specially that sale to any but British subjects should be void. If, however. it is stipulated (as is done in the Southern Nigeria Ordinance) that the Company is regis- tered and has its principal place of business within His Majesty's dominions and