Page 247 - Records of Bahrain (7) (ii)_Neat

Petroleum affairs 637

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bo reasonable.
In discussing this Decree with the Company it has been
pointed out that this is a Bahrain Law, and therefore con-
struablo as such and by reference only to its own terms.
This boing the case, it appears difficult to determine with
any precision what is intended to be deductable under the
Article in question, on its present wording.
Disputes: Articles Q and 12.
His Highness does not wish there to be any reference to
Arbitration or to Courts in His Decree, but wishes merely to
extend in a letter the existing arrangement as to Arbitration
contained in Article XXII of the Mining Lease of 1934, to
cover any disputes which may arise with the Company in x'espect
of Income Tax. In consequence, He has proposed to delete
entirely the last sentence of Article 8, and the whole of
Article 12 of His Decree. As a result of this the letter
providing for Arbitration has been extended. [
The Company's representatives have agreed to these changes
subject to the proviso that in protecting their U.S. Income
!
Tax position it may be necessary for there to be some provision
in the Decree for the settlement of disputes by agreement or
otherwise. While it is not appreciated how this can be so ,
word is awaited from the Company's London office on the point.
Prices.
His Highness has informed the Company that lie does not
wish the Company's selling price of Bahrain crude to be fixed
at the price paid for imported crude.
Firstly - as a basic principle, the Taxpayer must sell at
a fair price taking into account open market conditions and
assuming seller and buyer to be at arms length.
Secondly - even assuming a fixed price, His Highness
would not be in aagreement with the principle of such price
being fixed by reference to an intra-company price between
parents and subsidiary.
Thirdly- it has to be considered also that not only does
the Company purchase from its parent companies, but that