CONCESSIONS. The term concession covers a wide range in time, space and variety of forms and uses. Many of the types of grant, franchise, contract, charter and license embraced within its meaning have been known f or centuries in widely separated parts of the globe. It is, however, only since about 'goo that the word has come to have an interest for the general reader. In the discussions preceding, during and subsequent to the World War, the subject of concessions came to more general public notice. They were revealed as the legal means, the forms of con tract and agreement, under which the industrial development of large parts of the world, especially those parts known as back ward countries, has recently been accelerated. Hostile critics have described them as instruments for "economic penetration," devices for control of markets and raw materials, disguises for ag gression, means for undermining the sovereignty of weak States, and even—instancing the Baghdad railway concession—as the ultimate cause of the World War. So grandiose and sinister a conception serves only to illustrate the Protean and fascinating character of concessions.
Origin and History.—Though concessions have a long his tory, their origin is obscure. A concession meant at first a grant from prince or king; the older form of grant usually reading, in royal phrase, "concessimus" or "damus et concedimus." They may be said to have existed in one f orm or another from time immemorial; but they seem to have appeared first in Europe during the middle ages and since that time their history can be traced in nearly all parts of the civilized world. That history breaks into three divisions: The first or feudal period was con fined largely to grants of land and runs from the early middle ages apparently down to the time of the discovery of America. In this period those concessions were granted upon which the great landed estates of western Europe and of England were founded. Some authorities maintain that the greater part of the landed estates in France under the ancien regime were based upon concessions from the Crown, and the English law writer Coke, referring in the year 166o to the great English estates, remarked, "and so . . . their estates, which were nothing but concessions from the Crown." The second period is that of the early char tered companies such as the East India company, the London company, the Massachusetts company, the Hudson Bay com pany, and of various individual adventurers who received grants of land and a greater or less measure of sovereign power over the territories they were to develop and their inhabitants. The third period in the history of concessions runs parallel with the modern industrial era. In this period concessions have taken in creasingly the form of franchises with which during most of the period they have gone step by step and side by side on a similar course. Both alike have undergone an evolution, proceeding from an agreement, permission, license, or title, more or less secret, in which favour, privilege, grant, grace or gift was the predominant element, to a form of contract in which the chief element is bargain, exchange and open competition, and from which the elements of privilege, favour and secrecy have practically dis appeared.
Concessions partake of the charac ter of franchises, permits, charters, licenses and contracts, and vary with the industries and conditions which call them into being. In Latin American countries concession covers a very wide latitude. A writer summing up the situation says, "a con tract to lay sewers, to lay a pipe line, to sell mules, to build a factory, or a hospital, or a school, to buy timber tracts on the public domain, to explore a given section for mineral or water, to supply beef or coal or oil to any public institution, is called a concession." During a period of more than three years' duration the bulletin of the Pan American union recorded an average of 3oo conces sions per year and the list was not exhaustive. Some of these concessions are mere permits—police or administrative formali ties; such are water permits. Some have a traditional quality as if they were survivals or inheritances from an early period; such are certain land grants for colonization. Some are licenses exist ing for the preservation of governmental authority over certain spheres of business; such are banking concessions. Some are ar rangements for economy; such are concessions of a portion of a tract of land in return for the surveying of the whole tract. Some are reciprocal contracts for the development of resources, for improvement of communications and for increased control of territory; such are concessions for building railroads. Some are business contracts in which the Government offers inducements to capital, usually foreign, for the development of industries or natural resources; such are the oil concessions. It is this last type of concessions which most of those who have written or spoken upon the subject have in mind; it is concessions of this type which constitute concessions par excellence. Such conces sions are issued under general provisions of laws and are in a broad sense open on similar terms to all applicants. It is in this type that we find the predominant motive for concessions both in Latin America and elsewhere. That motive on the part of the grantor is the desire on the part of undeveloped or partially de veloped countries to bring in outside capital and industrial skill for the establishment or extension of industries and for the ex ploitation of natural resources. On the part of the concessionaire the motive is twofold—to secure favourable conditions for the adventure of capital, and to secure protection from injury by new or unfair impositions after the capital has been adventured and a prospect appears of a return. The chief specific benefit sought through concessions is exemption from taxation—first from local or import taxes, secondly from export taxes. Such exemptions are not unusual in the United States: municipalities seeking the establishment of new industries, or the erection of new plants within their limits, frequently offer exemption from local taxation for a given period; export taxes, on the other hand, are expressly prohibited under the Constitution, which states that "no tax or duty shall be laid on articles exported from any State." The geographical range of concessions is as wide as its range in time. Not only are they numerous in Latin America but also in Europe, Africa and Asia. They are frequent in France, Spain, Italy, Bulgaria, Turkey, Russia, Persia, the Dutch East Indies, the Philippine islands and China. They occur in British colonial possessions and are not unknown in the United States. Numbers of concessions were issued in the former South African republic and on the annexation of that country were the subject of an inquiry instituted under a commission, appointed by the British Government. The report of this commission is among the most authoritative and illuminating sources available to the student of the subject.
The various types of concessions al ready referred to are chiefly if not wholly of the industrial or commercial type. There is another type of concession—the po litical—which has the essential character of a treaty, both parties being Governments and the documents constituting international agreements. ExaMples of this type of concession are found as early as 1557 when China granted to Portugal the concession of Macao, which has remained in the control of Portugal ever since. They include the famous Chinese concessions: to Russia for the Chinese Eastern railway (1896) ; to Germany for the Shantung railway (1897) ; to Germany the city, port and environs of Kiauchau (1898) ; to Great Britain Weihaiwei (1898) ; to Bel gium, part of the port of Tientsin (1902). Of the same general type are the concessions of Guantanamo bay made by Cuba to the United States in 1899, that of Fonseca bay granted by Nica ragua to the United States in 1916, and that for the Baghdad rail way granted to Germany by Turkey in 191 i.
Similar to these in one respect—that the grantor surrenders certain prerogatives of sovereignty to the concessionaire—is the famous concession granted by the sultan of Borneo to Sir James (Rajah) Brooke in 1842 under which the principality of Sarawak has been governed by the Brooke family ever since. Other con cessions of the kind are those made by the sultan of Zanzibar to the British East Africa company and the German East Africa Association and those granted by the sultans of Brunei and Sulu in 1877 to Alfred Dent and Baron de Overbeck. As a rule con cessions of this type are conditional upon payment of a nominal annual rent.
To this type of concessions is due a development of some in terest—that of "concessions within concessions." These are found in the chartered companies which sprang up about the end of the 19th century, such as the Royal Niger company, the Imperial British East Africa company, the British South Africa company, and the British North Borneo company. Some if not all of these companies were originally based upon concessions made by chiefs or tribes of the various regions described, and they in turn granted concessions for the development of industries and of the natural resources within their boundaries.
Concessions have provided the cus tomary basis for development in the mining industry through many centuries and over the greater part of the world. Since the year 1256, mining has been conducted under concessions in Spain; it has been so conducted in France since feudal times, and in portions of Germany from the earliest records. Concessions have afforded and still afford the customary basis of mining operations not only in those countries, but also in Latin America, in Turkey, and the Balkan States, in the East Indies, in portions of China, and in considerable portions of Africa. Under the law of 1791 in France mining operations can be conducted only by virtue of an act of concession from the State, and the law of France has established legal forms for such concessions—the most recent adopted in 1882—which are models for such regulations in all French colonies and possessions, and have been much used in drawing similar forms and regulations in other portions of the globe.
One of the most ancient, most numerous and most widely distributed types of concession and one that has been prolific of controversy is the concession for oil. A concession for the collection of petroleum, which was then used, it appears, chiefly for medicinal purposes, was granted in the district of Miano de Medisano by the ducal chamber of Parma, Italy, in the year 1400. Since that time petroleum concessions have in creased in number and have spread over nearly all of the known world. There are few countries however remote where they have not appeared and their number is beyond computation. The rapid industrial development of the first quarter of the loth cen tury, however, with its new applications of petroleum for power and fuel, particularly to automotive engines, has given the oil concession a fresh and fateful importance. Statesmen and en gineers have declared that oil is the chief factor in progress and that the nation which controls the oil supply will control the future of the world. Great Governments have striven to secure a share in oil fields and oil concessions. The Government of the United States has interposed to prevent concessions in the Carib bean region being granted to transatlantic companies and to se cure to her citizens a share in the oil-fields of Mesopotamia. The British Government has meantime become an actual partner in one great oil corporation and has a voice in the management of at least two others. The situation recalls that of the 16th and 17th centuries when bullionism was the prevalent economic doc trine and the possession of the precious metals and the mines thereof was regarded as the chief end of individual and govern mental effort.
Though oil concessions are operated in different lands and couched in different languages, they are surprisingly alike in character. If one examines the texts of a hundred or more, rang ing from China to Peru, he will find them essentially similar. They are true, bilateral contracts with obligations upon the con cessionaire always substantial and often onerous. The conces sionaire is usually obliged to make an investment or do a pre scribed amount of drilling within a certain time and, in the event of finding oil, to pay a royalty upon each ton or barrel obtained. A typical example is afforded by the Tabasco contract—one of the Pearson concessions of Mexico. The terms required S. Pear son and Son to deposit in advance the sum of $20,000, to invest within seven years the sum of $35o,00o and to pay a royalty to
of the profits. Though it was at one time denounced by politicians and others as an iniquitous contract, draining the natural wealth of Mexico for the benefit of foreigners, the fact is that after considerable expenditure no production was obtained. The terms of many concessions are less onerous than these, yet as a rule concessions are burdensome to all but very wealthy holders.
The terms of concessions may be illustrated by the royalties required in typical cases in different parts of the world:— Burma, Yomah Oil Co. Ltd., 16c per barrel; Egypt, Anglo-Egyp tion Oil Co. Ltd., 36c per,ton; Germany, the Allgemeine Erdoel gesellschaft, 5% of gross production; Italy, Anglo-Italian Pe troleum Co. Ltd., 5% of the net product ; Mexico, Sres. Flores and Loaeza, 1 o% of the net profit; Panama, Lincoln G. Valen tine, 5% of gross production; Persia, Anglo-Persian Oil Co. Ltd., 16% of the net profits plus £3,00o per annum; United States, Ed win B. Foster (Osage Indian Lease), io% of the gross produc tion; Venezuela, General Asphalt Co., 5% of gross production; Caribbean Petroleum Co., 4oc per ton, also rent of 8c per acre; West Indies, United British West Indies Petroleum Syndicate, Ltd., 48c per ton.
The payment of royalty is often the least onerous obligation to be met by the holder of an oil concession. More burdensome are the requirements of investment and of performance of drill ing, etc., within a given period. For example, the Valentine con cession in Panama required an investment of $5,000,000, and the Pearson concessions in Mexico required an investment of
The difficulties of conducting engineering operations in remote and tropical countries such as Colombia, Panama, Persia, China, where natural conditions are adverse and means of transportation are lacking, are very great.
Because of the enormous economic and financial interests in volved and because of the ease with which the popular imagina tion can be inflamed over international competition, oil conces sions contain many possibilities of friction. Recent events in Iraq, in Colombia, in Persia, in Venezuela, in Mexico, show what explosive political material they conceal. In the course of time, as the present furore for possession of oil reserves dies down, to be replaced by other prizes of international competition, oil concessions will lose their present prominence. Meanwhile it may be hoped that that competition, which has often been pursued with a zeal worthy of a better cause, may be tempered with mod eration and so guided as to prevent it from imperilling the peace of the world.
and Foreign State Papers; Recueil InterBibliography.-British and Foreign State Papers; Recueil Inter- national de Legislation Coloniale (191 I-14) ; Texts of Concessions (Diarios oficiales of S. American republics, Gacetas, etc,) ; A. Picard, Traite des Chemins de Fer (1887) O. Walmesley, Guide to the Mining Laws of the World (1894) ; A. Giron, Dictionnaire de Droit Admin istratif (1895) ; Report of Transvaal Concessions Commission (19oI) ; Hertslet, Treaties (1908) ; N. D. Harris, Intervention and Coloniza tion in Africa (1914) ; J. Jastrow, The Baghdad Railway and the War (1917). (W. B. P.)
