LENA GOLDFIELDS CASE

Hokitika Guardian, 24 November 1930, Page 7

LENA GOLDFIELDS CASE

AN . AWARD OF £12,000,000. LESSON TO THE WORLD. LONDON, October 9. What may be considered a complete condemnation of the business methods to-day is the judgment delivered by the Court of Arbitration in London ‘this week in the dispute between the Lena Goldfields, Ltd., and the- Soviet- Government. The Court found that the Lena Company had been prevented by the - Soviet Government from carrying, out'the concession agreement signed.. in 1925; it declared the agreement dissolved and directed the Soviet-Government to pay the company £12,965,000.

Professor', Otto Stutzer, of Freiberg Mining Academy, who was elected by both parties, “super-arbitrator,” and Sir Leslie .-'Scott, K.C., the nominee of

the formed the Court. The arbitrator nominated by the Soviet Government - had been withdrawn before th'e. v’first- sitting in Berlin. The Soviet Government contended that the agreement . had been cancelled by certain* actions of the company, but as one .of the agreement tiie agreement could he cancelled’ only by a Court of Arbitration this(contention was rejected. Another article of the agreement provided that refused to take part in the';^m^i;tthe n the. matter in dispute was. to' 7&e-; : settled by the super-arbi-trator and,-the other members of the Court on-‘ condition. that its decision was The Court therefore proceeded with the case. Sir Leslie Scott) at the request of Dr. Stutzer, / read the whole of the judgment, -a document which took over an hour •to yrhhtl. Court declared that although .(the , Soviet Government had thus refused it's assistance to.the Court, it still remained bound by the conditions under; "the Concession Agreement. The broad - agreement was that Lena Goldfields,' .although a capitalist enterprise, /was/to enjoy certain privileges and hot/be/penalised for being capitalist in afSocialist State.

Successful Three Years. finds, as a fact” (Sir Leslie jjSljcpft , continued) “that if the concession (.agreement liad been carried out by vthef Government the company would have had credit to obtain financial assisfance from all the money centresjof J Europe, and would have been far advah.cgd ,on the road to very great prosperity;) 1 Even as it is, and in spite of many ; /preaches of agreement by the Government,;■ Lena succeeded in the first three) year of the concession in making, -n -net profit of £271,000, £117,000 . and £391,000 .respectively. “By thei middle of 1929 a radically differentpolicy had been adopted by the Government—a so-called five-years’ plan. Thfs; meant the development of the Union-of Soviet Socialist Republics and , all its industries, commerce, banking, , agriculture, transport, etc.,

indeed, -idle,whole economic life, on purely Communistic principles, and brought with it a bitter class war against capitalist enterprise and all connected with those enterprises.”

This complete reversal in 1929 of the official policy of 1925 towards Lena necessarily meant, when measured in terms of contractual obligation, tile breach by the Government o; many of the fundamental provisions, express and implied, of the concession agreement. Open markets ceased to exist. The Government became the only buyer of the company’s production. The Government became the only seller of the company’s supplies —and Lena had under the contract, inter alia, to feed and clothe all its employees and workmen. Difficulties with labour organisations and authorities became in-

cessant and overpowering, and Leila s workmen becqpie in the words of its counsel “untouchables.” The official I Press incessantly assailed the company’s I representatives as “dirty capitalists.” Banking and exchange facilities were denied it! Difficulties with Government departments and local authorit- . ies multiplied in intensity. The end | was inevitable; how it was brought j about .is explained , in the latter part of this award. Soviet and Company. The Court rejected the Government’s claim against Lena, and had reached the conclusion that the Government was the'cause of Lena’s financial difficulties. For the total gold production by Lena the Government ought to have j paid about £3,250,000 sterling. The ' Government, in fact, insisted, although it . was'a breach "of the concession agreement, in paying in' roubles at an exchange rate' which was officially fixed by itself. As a result the company appeared to have received during those four years and a half for its gold at least £1,000,000 sterling less than they should have received. The company’s right to sell gold freely was effectively nullified by the Government’s decree that the buyer would be shot. Between 30 and 40 per c°nt. of the gold was being stolen. This would have been reduced to very much smaller dimensions if the Government had carried out its obligations by police protection. The Court considered that' the Government wrongrefused to Lena valuable concessions; which, according to evidence, were discovered’by'Lena in 1927. Those gold-bearing areas were to-day being worked by the Government; which stated officially that it expected to employ there next year 5,000 workers. No Espionage. The : Soviet Government took away the political rights of the workers, and in 1929 fomented a class war against all persons employed by Lena on the ground that- the company was a capitalist enterprise, and it became impossible to get the necessary qualified men to carry on. So far as the employers of Lena were concerned there was nothing in the evidence before the Court to suggest that they had been guilty of espionage or any other offence

against the Government, Sir Leslie declared.

Sir Leslie mentioned that the total amount of the award was £12,965,000. The Court directed that all moneys due to the company should be paid in British sterling and, in .pursuance of the terms of Article 82, carry interest at the rate of 12 per cent, from the date of the award. It was also directed bv the Court that tile Soviet Government should pay to Lena- one-half of the expenses and costs of the Chairman and Secretariat of the Court. The

Court announced that the concession agreement was dissolved. A copy of the award would be sent to the Russian Government in England and German.