Four years after the end of the war to end all wars, which had brought down four empires, impoverished a whole continent and enfeebled the world, the road to peace now lay through transnational trade; and foreign traders, both in the established capitals and the new, needed the security and confidence, derived from legal predictability and enforceable agreements, that only international commercial arbitration could provide to their transactions. To that end, from the Versailles Peace Conference onwards, via the 1922 Genoa and Hague Economic Conferences, the private vehicle for the reform of domestic arbitration laws was the International Chamber of Commerce in Paris. It led in August 1922 to the first draft of what became the League of Nations' 1923 Geneva Protocol on Arbitration Clauses, leading in turn to the 1927 Geneva Convention and eventually the 1958 New York Convention. It led also in July 1922 to the creation of ICC arbitration, with the first publication of ICC's institutional arbitration and conciliation rules. If international commercial arbitration has a birthday, its year was undoubtedly 1922. In practice, the most significant advance was the standard form ICC arbitration clause incorporating by reference ICC arbitration rules as a nearcomprehensive transnational procedural code. In a few short phrases, as an alternative to national procedures, foreign traders could readily apply the fuller wording of the ICC rules without the need to reinvent the wheel or, still worse, develop a new form of pathological arbitration clause. As has long been wellknown, negotiations on dispute resolution clauses tend to come at the end of the parties' commercial negotiations; and that is usually not the time, if there is any time, to introduce any elaborate drafting exercise.

This is the story of just such an untimely and awkward exercise taking place during the late summer of 1922, involving on one side the highest officers of Soviet Russia, including Lenin, Stalin and Krasin, and on the other, a Scottish mining engineer and financier, Leslie Urquhart of the RussoAsiatic Consolidated Company. Soviet Russia was not then a member of the League of Nations; nor were any of its organs affiliated to ICC. Although the Urquhart concession[Page881:]

agreement can stand as a model of how a State should not negotiate an arbitration clause, it also demonstrates that transnational arbitration provides, then as now, the only practical method of resolving certain contractual disputes. An arbitration agreement, like any contract, has to be agreed by both parties; and wherever one party advances an alternative procedure advantageous for itself but disadvantageous for its counterparty, it will usually not be agreed by that counterparty.

By the summer of 1922, Lenin was already ill, having suffered his first stroke on 25 May; but during that autumn, he personally determined Soviet Russia's refusal to confirm the concession agreement made with Urquhart's English company. This agreement had been signed in Berlin on 9 September 1922 by Urquhart and Leonid Krasin, the Soviet Commissar for Foreign Trade, subject to confirmation within one month by the Council of People's Commissars. Had that 'superconcession' been confirmed and implemented then, during Lenin's New Economic Policy and Soviet Russia's continuing penury, the consequences could have been hugely significant, not only for inward foreign investment in the form of numerous other 'superconcessions' and Soviet access to large foreign loans, but also for their indirect overall effect on Soviet Russia's national economy. Those lost economic and financial opportunities confirmed the political failures of the1922 Economic Conferences at Genoa and The Hague. The rest is history.

Negotiations with Urquhart had started in July 1921 in London and Moscow, with Lenin's active support and participation. Urquhart was a Scot, a mining engineer who had spent more than twentyfive years working in Czarist Russia, first in Baku, then in the Urals, the Altai and Eastern Siberia. He spoke fluent Russian and was familiar with the industrial and economic situation in Russia, having visited Moscow twice after the October Revolution. He had served on the boards of many Russian companies in Czarist times, including the Siberian Trade Bank; and he had worked closely with Kolchak's White regime in Siberia, until its demise in 1919 towards the end of the Civil War. The proposed Soviet concession would have restored to Urquhart many of the mines and other properties which had been the subject of his Czarist concessions in Siberia, extending over 3.5 million acres, twelve mining enterprises (with modern smelters, mills and refineries), four complete mining towns (with railway and river fleet) and offices in Petrograd, Moscow, Ekaterinburg, Omsk, Pavlodar and Semipalatinsk. These properties had been looted or sabotaged during the Civil War and, where undamaged, confiscated without compensation by the new Soviet regime. In return for the concession agreement, Urquhart was to abandon his companies' claims against Soviet Russia for the unlawful expropriation[Page882:] of their Czarist properties. By 1920, these claims amounted to £56 million (now equivalent to more than US$ 4 billion), being the largest single claim by a British company against Soviet Russia and about one third of the total for all such claims by all British companies.

From the outset, one of the principal questions which caused serious disagreement was Urquhart's insistence upon 'neutral' arbitration for disputes arising from the proposed concession. In October 1921, together with other commercial factors, it had led to the breakdown in negotiations, confirmed by Urquhart' s publication of his private letter to Krasin recording the Soviet Government's many (in his eyes) unreasonable demands. These had included successively, in place of neutral arbitration, first Urquhart's submission to the jurisdiction of the Soviet revolutionary tribunals and second 'arbitration' in Moscow with a guaranteed majority of Soviet Russian arbitrators. Krasin was stunned by Urquhart's public breach of trust; and Lenin was outraged, damning Urquhart as a blackmailer. However, Soviet Russia needed Urquhart; and by early 1922, informal contact was resumed.

As Krasin recorded in his later reports to the Politburo in August and September 1922, it had became 'crystal clear' by the time of the Genoa Conference in April-May 1922 that a concession agreement with Urquhart was an absolute necessity for Soviet Russia. Accordingly, even before the subsequent Hague Conference in June-July 1922, the issue of the Urquhart concession was discussed by the Central Committee. On Krasin's advice, the Central Committee decided in principle that a concession agreement should be agreed with Urquhart; and a corresponding instruction was sent to the head of the Soviet delegation gathering at The Hague, M.M. Litvinov (Deputy Commissar for Foreign Affairs). The Soviet Government's subsequent failure to reach any economic agreement with other Governments at The Hague made a concession agreement with Urquhart even more important, especially with the exceptional role that Urquhart played in the British delegation and at the Hague Conference in general. As recounted by Krasin, all the Soviet delegates to the Hague and Genoa Conferences, without exception, shared the same opinion that an Urquhart concession might be the easiest and fastest way of lifting the Entente's economic and financial blockade against Soviet Russia and that every effort should be made to buy this 'leading ram'. (These delegates had included Chicherin (Commissar for Foreign Affairs), Litvinov, G.M. Krzhizhanovsky (chairman of the State Planning Commission) and K.G. Rakovsky (member of the Central Committee) and Krasin himself). At Genoa, Soviet Russia had publicly rejected arbitration for interState disputes but accepted the principle[Page883:]

of arbitration for concession agreements and other foreign commercial transactions. For Krasin as Soviet Commissar for Foreign Trade, the Urquhart concession had been for over one year, in his words, 'the central issue in our international policy'; but a second public failure to conclude and ratify the concession agreement would now bring 'political suicide', with Litvinov also warning the Central Committee that failure would gravely damage relations with both England and the USA, both of which had still to recognise Soviet Russia de jure.

On 20 August, Litvinov and B.S. Stomonyakov (the Soviet trade representative to Germany) sent a message to the Central Committee from The Hague to the effect that Urquhart was ready to resume negotiations with the Soviet Government. In fact, Urquhart had made contact with Litvinov and Krasin at The Hague on 15 July; and at Krasin's request, at the end of the conference in August, Urquhart travelled to Berlin to meet Chicherin, Stomonyakov and N.N. Krestinsky (the Soviet ambassador to Germany). Krasin was required to return urgently, via London, to Moscow. On 24 August, the Politburo met to discuss the proposed Urquhart concession, attended by Krasin and L.M. Karakhan (Deputy Commissar for Foreign Affairs). Lenin was absent, still convalescing at Gorki.

In Krasin's account of this Politburo meeting, there was not a single vote against the proposed concession agreement. On the contrary, all participants unanimously recognised the necessity of concluding the agreement even at the cost of significant material sacrifices and compromises by the Soviet Government. Krasin indicated the principal terms to be agreed without which it was pointless to resume negotiations, namely: the scope of the concession (all Urquhart's former enterprises); the duration (ninetynine years); the profit share due to the Soviet Government (7.5 per cent); reduction in taxes and railway tariffs; duty free import and export by the concessionaire; an advance payment partly in cash and partly in State bonds in a total amount equal to actual losses incurred by Urquhart's enterprises 'as a result of actions of the Soviet Government' during and after the Civil War; exemption from local taxes; guarantees against confiscation and requisition; and arbitration to settle 'private law' disputes between the concessionaire and the Soviet Government.

The Politburo did not consider that the duration of the concession was an insuperable obstacle because, with a ninetynine year period, not only the concession 'but also capitalism itself will probably be gone without a trace'. The profit share was also acceptable; and the only matter that raised debate was the proposal for arbitration. It was strongly opposed by Trotsky who[Page884:] considered any arbitration agreement to be injurious to the State sovereignty of Soviet Russia. A curious compromise was reached whereby the Politburo decided, in Krasin's words, 'not to make any concessions or exceptions on publiclaw disputes but to be open to the concessionaire's requests for material concessions, to buy him'. The Politburo agreed to offer a cash sum to Urquhart of up to two million gold roubles and also to compensate him for losses to his properties caused by the actions of the Soviet Government during and after the Civil War, in an amount to be determined by an arbitration tribunal. The principle of arbitration as a method of assessing such compensation was treated as an issue distinct from and less contentious than the proposed arbitration clause in the concession agreement. The Politburo had already received a report from its Mikhailov commission concluding that damage to Urquhart's properties had been caused by Kolchak's White Armies and Urquhart's own engineers before the Red Army's arrival in mid1919; any dispute over such compensation would relate to past and not future events; and any claim would be decided by nonneutral arbitration in Moscow.

A Politburo commission was to be formed (comprising Krasin himself, with

A.A. Andreev and I.T. Smilga, respectively a Central Committee member and a senior member of the Supreme Council of National Economy, 'VSNKh') to finalise the terms of the proposed concession agreement; Krasin was personally authorised 'to continue further negotiations with Urquhart and conclude a preliminary agreement'; and the Politburo was to review the finalised version of the agreement which was also to be submitted to the Central Committee. In other words, Krasin was entrusted by the Politburo not only to conduct negotiations with Urquhart for the proposed concession agreement but also to sign that agreement, subject only to subsequent ratification by the Politburo and the Central Committee. However, arbitration remained a controversial issue; and Krasin sought clearer instructions from the Politburo before his departure for Berlin.

As to the proposed arbitration clause, on 24 August the Politburo commission concluded in its report to the Central Committee, as drafted by Krasin, that: 'if the concessionaire agrees to have final decisions on possible disputes between him and the Government made by the Russian Court, then, of course, that procedure would be preferable to arbitration. However, because the concessionaire and the Government are the two parties to the agreement, it is not likely that the concessionaire will agree to that. Experience of all negotiations concerning concessions show that entrepreneurs never abandon the requirement for arbitration. A number of different concession and trade agreements entered into by[Page885:]

the Soviet Government allow for arbitration, and the concessionaire can refer to the large number of precedents where the Soviet Government has accepted arbitration. The commission believes that since this concession is important, it is necessary to agree to arbitration, and the mode of selecting a superarbitrator

[i.e. the presiding arbitrator] should be the same as agreed last year during the negotiations with the same concessionaire [i.e. rejecting Soviet revolutionary tribunals but without addressing the issue of a Soviet majority on the arbitration tribunal, a proposal already vehemently rejected by Urquhart in 1921]'.

By letter dated 26 August to Stalin (for the Politburo), Krasin again pursued the broader question of an agreement to arbitrate future disputes arising from the proposed concession agreement: 'There is a large number of agreements going back to 1920 which contain articles on arbitration . . . The entire policy of our Main Concession Committee would collapse and the Committee itself would have to be closed as a useless organisation if arbitration clauses in agreements with foreigners are categorically rejected. Rejecting the arbitration clause in negotiations for this concession agreement would be interpreted abroad as a radical change of the Soviet Government's position and a refusal to enter into any business agreements with foreigners. . . . The decision of the Central Committee [i.e. its Politburo] of 24 August accepts arbitration in order to determine the amount of compensation for damage. However, besides the amount of such compensation, the agreement will include a number of issues which may require resolution not by the unilateral act of one of the parties but by an intermediary agency. For example, the issue of periodical and mandatory (for the concessionaire) review of the production program. Last year the concessionaire categorically rejected such review. This year there is a hope that he might concede this matter. However, he will never agree to accept a situation when norms of production are decided by the other party. He will accept this condition only if the minimum norm is decided by an arbitration commission. There are dozens of other instances where a dispute over various articles of the agreement can be resolved only through arbitration. In the area of private law, arbitration is a common practice in all capitalist countries; and it does not present any threat to State sovereignty. Having studied the concessionaire's views and the way he operates for more than a year, I categorically declare that completely refusing arbitration or limiting it only to the issue of compensation will turn these negotiations into a waste of time and will produce conflict which will be more severe than the termination of October 1921. I believe that if we limit arbitration to the area of private relations, we would risk nothing- especially because the entire enterprise, the capital invested by the concessionaire, the equipment, etc. all remain on our territory; and, if we want, we can always take any measures against the concessionaire.' [Page886:] This latter argument was, of course, brutally correct, as was later proved in 1929-1930 by the Soviet Government's conduct towards Lena Goldfields' concession: its assets were seized, its senior personnel arrested and imprisoned, and even with diplomatic pressure from the United Kingdom it was not possible for Lena Goldfields to enforce its arbitration award against the USSR.

Krasin was personally reluctant to resume negotiations with Urquhart; and he requested Stalin to replace him with Stomonyakov; but Stalin refused. It is apparent from Krasin's private correspondence at the time that he was tired- if not already ill-and that he suspected also that his authority was not as complete as it seemed. Before his departure for Berlin, Krasin continued to express the view that an arbitration clause in the concession agreement was unavoidable; and A.I. Rykov (acting chairman of the Council of People's Commissars) informed Krasin that he would send him later in Berlin clear instructions on the concession's arbitration clause.

Krasin left Moscow in the morning of 28 August and arrived in Berlin on 29 August, having flown from Moscow to Königsberg (now Kaliningrad) and then taken the train to Berlin. He there learnt that Urquhart had left for London in the absence of any news from Moscow that negotiations were to be resumed; and Stomonyakov in Berlin had received no instructions from Moscow to keep Urquhart in Berlin. Krasin persuaded Urquhart to return to Berlin, where he arrived on 30 August; and whilst thereafter their negotiations progressed swiftly, Krasin's dealings with Moscow did not. Within a day of their resuming negotiations, on 31 August, the Politburo decided to instruct Krasin to continue his negotiations with Urquhart 'but in no case to become entangled in the clause about arbitration prior to receiving the results of the work of the commission established by the Politburo'. This was the same Politburo commission whose members included Krasin, but it was now to be chaired by Rykov with the addition of D.I. Kursky (Commissar for Justice); and it was required to study not only the appropriateness of the proposed arbitration clause, including its scope and the tribunal's formation, but also to study 'all necessary legal materials on the practice of arbitration in other countries, the possibility of replacing arbitration with forms of guarantees and with special tribunals where representatives of concessionaires take part, similar to tribunaux de commerce'. The Politburo ordered the results of these studies to be completed by Tuesday, 5 September 1922. It was a late and impossible task. [Page887:]

On 4 September 1922, in Berlin, Krasin received a telegram from Rykov, informing him that, 'in accordance with the decision of the Central Committee, the commission again reviewed the issue of arbitration. It was decided to accept arbitration, determining as precisely as possible all issues which would be referred to the decision of the arbitration tribunal. We shall complete this work by Monday night [i.e. that same day] and let you know the results as soon as possible.' The telegram also requested Krasin to collect together and forward to Moscow all legal materials on the organisation and practice of arbitration tribunals. There is no record that Krasin received in Berlin any further instructions on arbitration from Rykov at any time prior to the conclusion of the negotiations with Urquhart and the signing of the concession agreement on 9 September. More significantly, also on 4 September, Stalin received a short note from Lenin, still in Gorki, which was drafted as a directive to the Politburo: 'To grant concession to Urquhart only on condition of granting us a large loan. All

Politburo members must review the report of the Mikhailov commission which inspected the enterprises to be affected by the Urquhart concession. Enemies expect that our transport and industry is totally ruined. It is critical to raise capital in order to restore these assets by taxing all commodities, imposing maximum taxes on such commodities as sugar and beer. Consider mandatory domestic bonds and income tax.' Lenin was turning against the Urquhart concession, before seeing the final text of the agreement; but for the time being nothing more was said to Krasin in Berlin.

In a letter dated 6 September 1922 to the Politburo, sent by airmail to Moscow three days before signing the agreement, Krasin described the state of his negotiations with Urquhart in regard to the concession agreement's arbitration clause: 'There was no chance to avoid the issue of arbitration during the very first meeting with the concessionaire. The concessionaire has always put this issue on the top of his priorities and to avoid discussing it would be interpreted as a lack of serious commitment to reach agreement in a speedy manner. This is why even before receiving the Politburo's decision of 31 August we had to formulate the relevant article of the agreement. The jurisdiction of the arbitration tribunal covers exclusively the interpretation and implementation of the concession agreement. Since there are no provisions having the character of public law in the agreement itself, the arbitration tribunal will consider only privatelaw issues in the relationship between the concessionaire and the Government. All cases where the concessionaire does not comply with general decrees of the State or local government or has a dispute with a third party would fall within the jurisdiction of the [Soviet] general judicial bodies. The[Page888:] place of the arbitration tribunal will be Moscow and can be moved abroad only by decision of the president. The most difficult question as to the president can be solved in the following manner: the Soviet Government will present the concessionaire with a list of several candidates of its choice (six to ten) selected from public figures recognised in Europe: jurists, technical specialists and administrators, and the concessionaire will select one of them as a superarbitrator [president and third arbitrator]. Thus, the main challenge will be to search the entire globe to find ten persons whom we could trust to chair the tribunal. The parties make their own choice of the two arbitrators; and they are allowed to bring in experts and jurists. In this way, the interests of the RSFSR are protected in the best possible way.The concessionaire will in no way agree to abandon arbitration under current conditions. We had to accept arbitration under conditions much less favourable to us in a dozen cases and we cannot enter into any serious contract abroad without an article about arbitration. The Treaty with Germany of 6 May 1921 makes arbitration obligatory for the Soviet Government. All my intelligence is insufficient to convince the concessionaire that arbitration is not acceptable in this particular case when it is being accepted in many similar cases and is validated by the SovietGerman Treaty. . . . I repeat, rejecting arbitration in this case meant rejecting the negotiations; and I have every reason to believe that this is how it would have been interpreted by the concessionaire.' (Krasin later insisted his letter was sent on 5 September; but it clearly bears the later date: it is possible that he was then anxious to show that the Politburo had more than ample time to instruct him not to sign the agreement on 9 September but had chosen not to do so).

On 7 September 1922, the Politburo decided 'to charge Comrade Krasin with responsibility to procrastinate over the issue of arbitration during his negotiations with Urquhart'. The Politburo had received materials from Rykov's commission but declared them 'inadequate'; and it now required further studies into the use of arbitration by Western countries specifically in concession agreements granted by a sovereign State and publiclaw issues raised by the granting of such State concessions. The Politburo also charged the Main Concessions Committee to consider the organisation of 'commercial tribunals in Russia which would allow for internal resolution of issues arising from concession contracts'. This was a still more untimely and impossible task, given the negotiating position already taken by Krasin.

Moreover, the Politburo's instruction was belatedly received by Krasin in Berlin on 11 September, two days after he and Urquhart had signed the concession agreement. Krasin later justified his signature on the basis of his earlier[Page889:]

instructions from Moscow: 'Following precisely the instructions from Rykov of 4 September that arbitration should be accepted, provided that the exact jurisdiction [of the arbitration tribunal] is determined, I made a request and managed to receive Urquhart's consent for the following formula: "Issues outside the area of private law between the Government and the Concessionaire are not subject to the jurisdiction of the arbitration tribunal." According to the opinion of all jurists whom I consulted, this formula absolutely removes any danger of subjecting to arbitration any publiclaw issues which are within the jurisdiction of the people's courts and revolutionary tribunals, as well as of any civil law claims and disputes between the concessionaire and third parties, and even between the concessionaire and the Government, with the exception only of those civil law disputes which involve the concession agreement itself where the Government acts not as a Government but as a party, that is like any owner of leased property [i.e. not in the exercise of puissance publique]. If you add to this the fact that I managed to have the concessionaire agree that the superarbitrator [president] is to be selected from six candidates nominated by the Soviet Government, it will appear that this is the limit of any conceivable compromise [by Urquhart] in our favour in the area of arbitration.' Krasin's important qualification on the scope of disputes referable to arbitration subsequently took the form of an agreed note to the arbitration clause's first paragraph (see the appendix below).

As Krasin wrote on 7 September to his wife, then on holiday in Italy with their three daughters: 'All these days I have been persistently continuing these difficult negotiations with the help of Stomonyakov, while Moscow brings one or another stupid surprise every day, which clearly does not make it easier. Nevertheless, there is some hope of signing an agreement shortly. To complete this business, which is probably the most important matter among today's foreign affairs, I will have to take all materials to Moscow and to stay there seven to ten days to make sure that the same thing does not happen [to this agreement] as it did to the Italian trade agreement. Therefore, I will be back in Berlin on or about 20 September and only then will be able to start my vacation. . . . I would like to spend it in the South, to catch some sun and do some swimming, but by now you must have become sick and tired of Italy. The Lido will be even more boring than Genoa; there is nothing there except sand and sea. I will leave for Moscow, perhaps as soon as next Monday [11 September], it depends on the signing of the agreement.'

The concession agreement was finalised and signed on 9 September by Urquhart and Krasin in Berlin. Its duration was ninetynine years over much of Urquhart's former properties, on conditions not materially more onerous for Soviet Russia[Page890:] than those briefly described by Krasin to the Politburo on 24 August. The news, seen as a unique and major development in trade between Soviet Russia and a Western company, went around the world. As for neutral arbitration, so desired by Urquhart, clause 22 provided for the arbitration of privatelaw disputes arising from the concession agreement before four partyappointed arbitrators and a president of 'worldwide or European fame' as a learned man, lawyer, engineer or public figure, together with the explanatory note sought by Krasin excluding publiclaw disputes (see the full arbitration clause set out in the appendix below). By clause 4, this arbitration clause was also to apply to Urquhart's claim for compensation, which was limited to 20 million gold roubles with an advance of £150,000 payable in cash within two months of the agreement's ratification. By clause 30, fatally, the agreement was signed subject to ratification within one month by Soviet Russia's Council of People's Commissars, i.e. by 8 October.

Urquhart was highly satisfied with the agreement as a commercial transaction and also with Krasin's conduct of the negotiations. As he later reported to his company's shareholders in October (after the agreement's nonratification), the concession agreement gave the company everything it could hope for; and he had not a word of criticism for the steps which Krasin had taken to meet him halfway: they were business people trying to work out a business contract, without politics. In private discussions with the British Foreign Office, Urquhart estimated that his company's liability to the Soviet Government for royalties and taxation would be about £100,000 per annum, whereas payments to the Czarist Government had amounted to something like £360,000 per annum; and the agreement's minimum production norms were set at only onetenth of the properties' prewar output. Krasin, despite his outward show of confidence to Urquhart, knew now that ratification in Moscow had become problematic. On 12September, Krasin left Berlin, taking the train to Königsberg and then the plane to Moscow, via Smolensk. As he wrote to his wife from a small shack at the Smolensk aerodrome on 13 September, surrounded by German pilots, he left Berlin 'feeling pretty low.After difficult negotiations with Urquhart I signed the agreement, but it still needs to be approved by Moscow and for this essentially useless, albeit unavoidable, procedure under our regulations, I am going to Moscow; and only after I complete this important matter will I be able to think of a vacation.' Krasin still hoped the procedure would be completed in time for his family holiday in Italy. He was utterly mistaken.

By this time, Lenin had received the text of the signed concession agreement, and it confirmed his growing hostility to the proposed concession, as expressed[Page891:]

in his letter to Stalin of 12 September 1922 (with his own emphases): 'Comrade Stalin, Having read the agreement signed by Krasin with Urquhart, I am expressing my opinion against its ratification. Promising us profits in two or three years, Urquhart makes us pay now. It is absolutely unacceptable. Mikhailov, the chairman of the commission, made a special trip to the location to examine Urquhart's concession and concluded that it is not we who are responsible for destruction but the foreigners. And now we have to pay. Allegedly we will receive some relief after x number of years, but we have to pay now. I propose the rejection of this concession. It is slavery and robbery. I would like to remind you of the conclusion of Mikhailov's commission. He was against this concession. There is not a single serious argument for it which has been added since then. We must reject it. I would like to ask you to make this known to the members of the Politburo. . . . [PS] It is a treacherous trick that this concession allegedly would not serve as a precedent. It certainly will become a precedent. In reality, it will inevitably happen, regardless of any words and assurances. And in general, nothing that was uncovered by Mikhailov's commission has been taken into account. There is a whole number of arguments against such concession.' In a letter dated 19 September to G.E. Zinoviev (a Politburo member), although indicating that his opinion had temporarily wavered, Lenin strongly criticised the concession's vast size and long duration and, more ominously, blamed Krasin for exceeding the Politburo's instructions. In a further letter to Zinoviev dated 4 October, Lenin again described having second thoughts; but having seen Mikhailov, he was now again against the Urquhart concession.

On arriving in Moscow on 14 September, Krasin was not yet aware of Lenin's growing, if vacillating, opposition to ratification. In his letter of 17 September to his wife, he still attributed such opposition to 'a lot of clever persons who, sometimes from ignorance and sometimes, perhaps, from a Christian desire to play a dirty trick on their neighbour, are hatching up something, wincing and generally turning their noses away'. He knew, however, that his Italian holiday was now substantially at risk: 'My vacation has already been approved, but it's hard to tell when I will go because of the Urquhart matter. I brilliantly concluded the agreement in Berlin, but it still needs to be ratified by Sovnarkom [the Council of People's Commissars] . . . I shall have to wait for two or three decisive meetings and wage the final battle. I believe nevertheless that on 20-23 September I will be able to leave and join you not later than 10 October. If you are in a hurry to go to England, it means that I will not have much time in Italy; and once back in London it will not be much of a vacation, they won't let me rest there. However, if I differ here with our people about Urquhart's agreement, [Page892:] then it very well may happen that I will have a very long vacation, up to my complete resignation. Well, we'll see . . .' Over the next few days the position grew worse; and on 21 September, Krasin wrote despairingly to his wife and daughters: 'I have signed an agreement which, according to the world's press, exceeds in importance all the agreements signed hitherto, including even Genoa and The Hague; but the local wise men here, who on 24 August insisted on my rushing to Berlin and back by aeroplane, are now turning their snouts away. The situation is so serious that I am contemplating giving up this job altogether. So gross is the leadership's ignorance and so unbusinesslike are their methods that I am losing all hope . . . I have firmly resolved to resign from the Government if I do not succeed in carrying this business through, but so long as I do not lose all the points on the agreement, I must stick it out to the end . . .'

Lenin remained in Gorki, absent from the Politburo meetings of 14, 21 and 28 September in Moscow. On 14 September, the Politburo decided to request Lenin's assessment of the agreement, to commission advice from the Commissariat for Foreign Affairs and the Commissariat for Justice and also-attentive to Lenin's instructions-to suggest that all Politburo members familiarise themselves with the report of the Mikhailov commission. On 21 September, the Politburo decided to postpone for one week any further consideration but to appoint a new Politburo commission (comprising L.B. Kamenev, Andreev and Bogdanov) to prepare a draft statement in the event that a decision was made rejecting the agreement's ratification. On 28 September, the Politburo decided to refer the whole matter to the plenum meeting of the Central Committee, instructing Krasin, Bogdanov and Karakhan to prepare and distribute the materials to the members of the Central Committee. The issue of ratification was therefore left entirely unresolved until the Central Committee's meeting on 5 October, which was to be attended by Lenin. Outside the Politburo, however, the debate continued, with the most senior officers directly responsible for Soviet Russia's foreign trade, foreign affairs and economic planning expressing strong approval for the concession agreement's ratification, notwithstanding the 'neutral' arbitration clause.

In a letter dated 20 September to Stalin, as instructed by the Politburo, L.M. Karakhan (Deputy Commissar for Foreign Affairs) summarised, inter alia, the issue over the arbitration clause: 'By the Politburo's decision of 24 August arbitration was allowed for the purpose of determining the amount of damage suffered by Urquhart from the actions of the Soviet Government. However, in the agreement the jurisdiction of the arbitration tribunal is broadened to all[Page893:]

disputes arising from the interpretation and implementation of the agreement. Arbitration is objectionable in principle because it expresses the concessionaire's mistrust of the Russian Court; and it validates that mistrust. In a practical sense, however, the creation of this arbitration tribunal does not present any danger to us; and if we do not make any hopeless formal mistakes, it will produce an arbitration tribunal with our majority or the transfer of the dispute to our [Soviet] Court. During the current domestic and international situation agreeing to arbitration is objectionable in general. However, there is no danger that based on the principle of preferential status it would spread to others, because this agreement grants this benefit to Urquhart individually and not to all British citizens in general.' Karakhan concluded his report: 'the political significance of the agreement with Urquhart and its role in resuming economic relations with Europe is colossal. Even now, before its ratification by the Soviet Government, this agreement has caused much excitement among financial and industrial leaders in Europe. This agreement means that "friendly" relations with the City of London are restored. Urquhart has already given several interviews in which he spoke with almost love and admiration for Soviet Russia and the charms of Soviet power . . .'This was true. On his return to London, Urquhart had also spoken privately to Klyshko, Krasin's deputy at the Soviet Trade Delegation. As reported to Krasin on 14 September, clutching a pile of congratulatory telegrams and letters on the successful conclusion of his negotiations, Urquhart had said that he was confident that the concession agreement would change European public opinion favourably towards the Soviet Government and that, not being motivated by monetary considerations, he was 'happy and proud' to be a pioneer for the rebirth of Russian industry: 'I love the Russian people and developing Russian industry is my life's mission. And now I am pursuing one goal only, to help my Russian motherland. I trust the Soviet Government fully and believe that it will give me an opportunity to do productive work . . .' This language was not wholly typical of the Scots financier; and perhaps Krasin's deputy found it difficult to avoid all embellishments helpful to Krasin's cause in Moscow.

Also on 20 September, as instructed by the Politburo, the Deputy Commissar for Justice (N.V. Krylenko) reported to Stalin on legal aspects arising from the concession agreement, particularly as to whether 'the sovereignty of the Government's rights was protected'. He objected, inter alia, to the principle of arbitration, both for the purpose of assessing compensation for Urquhart's losses during and after the Civil War and for disputes arising from the concession agreement. The arbitrators would be 'private persons', deciding upon the actions[Page894:] of the Soviet Government; and in the case of the Soviet Government's default under the arbitration clause, the English High Court would exercise jurisdiction over Soviet Russia, 'which is inadmissible for ideological reasons and because it made no sense since the London Court could hardly force the Government to comply with its orders'. Krylenko concluded his advice, with a masterful lack of timing not unusual even in legal advisers today, by recommending that the wording of the concession agreement should now be carefully reviewed, excluding all provisions that 'do not follow from the agreement but infringe upon the Government's rights as a public legal authority'. Whilst no recommendation for the agreement's ratification, it was a lukewarm condemnation of the principle of neutral arbitration.

On 21 September, the new Politburo commission reported its conclusions on the ratification of the Urquhart concession agreement. In a short document, Kamenev and Andreev recommended rejecting it on economic grounds; whilst Bogdanov advised in favour. Neither majority nor minority commented on the arbitration clause. On 3 October, the further report of the Mikhailov commission noted the arbitration clause without adverse comment, advising only that the arbitration tribunal was to be organised 'in the usual manner'. This commission included Professor V.N. Shreter, who was a wellknown legal specialist on Soviet concession agreements, including arbitration. Whatever Mikhailov's opposition to the Urquhart concession, it was not based on the concession agreement's arbitration clause.

Lenin's opposition was based on broader grounds. The diplomatic Chicherin, the Soviet Commissar for Foreign Affairs, in his handwritten letter dated 23 September 1922 to Stalin, intended for Lenin, expressed his opinion that rejection of the concession would be a 'catastrophe for Soviet Russia. It would stop the inflow of foreign capital. Signing the agreement would mean that a major businessman works with us; rejecting the agreement would mean that it is premature to work with Russia. Urquhart has close ties with English and French capital; Hoover [later the US President Hoover] is one of his shareholders and he himself is a shareholder in major German companies. He has great influence on both the English and German Governments. If he comes, others will follow. If he does not, only small traders will come. Our position will be weakened and our enemies will have their hands untied. We not only will be thrown back for several years, but an active hostile atmosphere against us will prevail. . . . It would be the greatest disaster . . .'Stalin noted its receipt without comment and forwarded it to Lenin on the same day. Krasin also wrote personally[Page895:]

to Lenin on 26 September, enclosing a long memorandum on the political importance of the Urquhart agreement which also traced the difficult history of the lengthy negotiations beginning in July 1921, followed by the breakdown in October 1921 and their formal resumption in August 1922, all in conformity with instructions from the Politburo. Krasin was here not only advocating ratification of the agreement but also defending himself as the Soviet negotiator who had finalised and signed that agreement, indicating that he could not continue as a member of the Soviet Government if the agreement was now rejected by the Central Committee.

Those favouring ratification of the Urquhart concession now tried once more collectively to support Krasin. In a letter to Stalin dated 26 September, all the economic arguments were vigorously restated by senior officers from VSNKh, the Main Concessions Committee, the State Planning Commission and the Commissariat for Foreign Affairs (Bogdanov, M.I. Frumkin, G.Y. Sokolnikov, Karakhan, Smirnov and Professor I. Gubkin). After warning of the grave consequences to Soviet diplomatic and economic policies if the concession agreement were not ratified, the letter finished: 'Based on these considerations we come to the conclusion that ratification of Urquhart's concession is an absolute necessity for us. It goes without saying that having ratified the concluded agreement the Council of People's Commissars can commission its representative to clarify certain clauses of the agreement and make certain amendments to it that will be acceptable to the concessionaire.' From the Soviet embassy in Berlin, by letter dated 28 September, Krestinsky wrote to the Politburo imploring it to ratify the Urquhart concession, warning of the grave diplomatic repercussions of disavowing Krasin and concluding: 'even if the agreement were poor and disadvantageous, ratification would cause less damage to us than refusal to approve the already signed agreement'.

On 2 October, Lenin returned from Gorki to the Kremlin, and over the next few days he attended the meetings of the Central Committee and Council of People's Commissars. At its plenum meeting on 5 October, at Lenin's insistence, the Central Committee rejected the Urquhart concession; and on 6 October, in Lenin's presence as chairman, the Council of People's Commissars officially declined to ratify it, thereby confirming its legal demise. The vote was almost unanimous, with only Bogdanov abstaining and Krasin voting for ratification. The Soviet press announced the concession's rejection on 7 October. The adverse reaction from abroad was as dire as Chicherin, Litvinov, Krasin and Krestinsky had predicted. Publicly, as the London Times reported from a Russian source, Lenin had championed ratification against the scruples of his Soviet[Page896:] colleagues; but privately the decision was widely attributed to Lenin's personal veto; and it was said that Lenin had changed his mind at least three times. At the Central Committee meeting, Lenin's opposition was apparently rooted in economic grounds only: the concession would grant to Urquhart a monopoly in nonferrous metals in Siberia; and how many roubles would the Soviet Government be required to pay Urquhart for current expenditure compared to how many pounds sterling actually invested by him as capital from abroad? There was also the issue of local opposition from the regional authorities, as originally addressed by the Mikhailov commission, arising from loss of control of major economic assets to a foreign concessionaire, who could also pay higher wages than local Soviet enterprises. There was, it seems, no overt objection based on the concession agreement's arbitration clause. Although it was to form a pretext later, there was nothing also about Britain's failure to invite Soviet Russia to the Lausanne peace conference on Turkey.These extraneous political motives were invented to avoid further public humiliation for Krasin; and although Soviet Russia was later invited to attend the Lausanne Conference in November 1922, it did not change Lenin's position on the Urquhart concession.

Lenin's decision shocked Krasin profoundly, as it did many within the Soviet Government, and the rejection of the concession left him bitterly disappointed. He sought to resign his post as Foreign Trade Commissar; but Lenin refused his request. As he wrote from Moscow on 8 October 1922 to his wife in London: 'Once again all my work, energy, efforts and ability have been wasted, and a small group of mules and imbeciles have undone all my work, just as a boy might destroy the thin web of a spider with one blow.' His wife, in her later memoirs of these events, quoted the French politician, WaldeckRousseau: 'le succès n'est après tout qu'une question de date'. In Krasin's case, within the thirty days prescribed by the concession agreement, he had been transformed from superhero to neartraitor.

For present purposes, what lessons can be derived from Lenin's refusal to confirm the Urquhart concession on its merits, regardless of the arbitration clause? First, Lenin's intransigence proved fatal to the economic success of the Soviet policy on 'superconcessions' even before the termination of the New Economic Policy; and although there were eventually to be three major foreign concessions agreed after Lenin's death (Lena Goldfields, Harriman and Tetiuhe in 1925), none were on the scale of the Urquhart concession, with each eventually foundering under Stalin's First FiveYear Plan; and of course there were to be no large foreign loans to the USSR until much, much later. [Page897:]

The lesson is starkly obvious: a nation seeking foreign trade and investment can ratify the New York and Washington Conventions; it can enact the UNCITRAL Model Law; and it can sign on every presidential State visit numerous bilateral investment treaties with provisions for investorState arbitration; but without firm evidence of a strong and consistent political will favourable to inward investment and foreign trade, foreign investors and traders will shy or be shooed away. At this point, arbitration is irrelevant; and by itself the arbitral process cannot generate any significant foreign trade and private inward investment. Conversely, where there is such a will, foreign trade and investment will be severely stunted without the transnational process of neutral arbitration. Even more than in 1922, it is now an uncompromising precondition for investors and foreign traders; and developing countries that deliberately thwart the arbitral process pay inevitably a very high price. For the host State, it also requires an understanding that the price of a lost arbitration or 'bad' award may be relatively small when measured against the corresponding benefit of inward capital investment over a longer period.

Second, that understanding is not easily acquired, even by States able urgently to commission large studies into the comparative law and practice of arbitration. It requires the international arbitral process to be properly accepted by government officers, State judges and regulators on a continuous basis. There needs to be confidence that neutral arbitration can produce fairness and justice for both sides, without State or judicial interference, and an awareness that there is in fact no better alternative for the final resolution of transnational commercial privatelaw disputes. Here, ICC has profoundly influenced the development of international commercial arbitration over the last eighty years. The ICC arbitration clause and ICC's itinerant preachers have encircled the earth; and as the Chairman of the ICC International Court of Arbitration can prove with his multistamped passport, the task of persuasion requires many miles to be travelled to all points of the compass, including Moscow. But the last and most important lesson from 1922 is that it is perhaps better for a party, after negotiating, agreeing and signing a contract, not then to rethink or redraft its arbitration clause. [Page898:]

Appendix: the Urquhart concession's arbitration clause 22

'For the settlement of disputes which may arise between the Government and the Concessionaire on questions of interpretation or fulfilment of the present Concession Agreement and of any additions or further agreements hereto, a special arbitration tribunal shall be formed.

Note: Issues outside the area of privatelaw between the Government and the Concessionaire are not subject to the jurisdiction of the arbitration tribunal.

1.The arbitration tribunal shall consist of five arbitrators. Within one month of the receipt of written notice from one of the parties, both parties shall appoint two arbitrators who must give their acceptance in writing. Within the same period their representatives shall mutually communicate to one another the names, professions and addresses of the arbitrators appointed by them. Within one month more, the four appointed arbitrators shall elect, by mutual consent, a fifth arbitrator who will act as president of the arbitration tribunal. If during this month no agreement be come to between the parties as to the election of a president, the nomination of the president shall be made as follows:The Government shall communicate to the Concessionaire the names of six candidates of worldwide or European fame as learned men, lawyers, engineers or public men from whom the Concessionaire has the right to select at its discretion a candidate who will be acknowledged by both parties as president of the arbitration tribunal.

2.In the event of death of one of the arbitrators, or of continued illness preventing him from fulfilling his duties, or of resignation, such arbitrator shall be replaced by another elected as provided above.

3.The arbitration tribunal shall have two secretaries, one appointed by each side. In the event of one resigning he shall be replaced by another secretary appointed in the same way. The arbitration tribunal may appoint its other personnel on terms at its discretion.

4.The arbitration tribunal shall sit at Moscow, but by decision of the president meetings in case of necessity may be held elsewhere, including abroad. The arbitration tribunal shall fix the time of its meetings. [Page899:]

5.The side which wishes to refer any question for decision to the arbitration tribunal must give written notice to the other side, after which a session of the arbitration tribunal is called. The notice of complaint together with all documents and papers and also an exposition of all other evidence which the side considers necessary for supporting its demands, shall be sent, with certified copies of the notice and all documents in duplicate for the other side, to the secretariat of the arbitration tribunal. Within one month from the receipt of the copy notice of complaint, the other side must present to the arbitration tribunal a reply to the complaint, together with all documents and papers and all other evidence which that side considers necessary for refuting the complaint, together with certified copies thereof and of all documents in duplicate for the other side.

6.On the expiry of a fortnight from the date of receipt of the reply, the arbitration tribunal shall fix a date for hearing, sending both parties notice thereof.

7. The decisions of the arbitration tribunal are obligatory and must be fulfilled immediately.

8.If the Concessionaire, on receiving a request from the Government to form an arbitration tribunal within the period provided, refuses to do so or if the parties do not agree on a president and the Concessionaire refuses to appoint a president from the six candidates submitted by the Government, the Government has the right to refer the question in dispute to the People's Court in Moscow, to whose jurisdiction the Concessionaire shall in such case submit. In the same way, if the Government for its part refuses to form an arbitration tribunal, or does not present a list of candidates for the selection of a president, the Concessionaire has the right to refer the question in dispute to the London Courts, to whose jurisdiction the Government shall in such case submit.

Note: Reference to a national court on a certain matter in the event of refusal to form the arbitration tribunal does not relieve the parties from the obligation to form an arbitration tribunal in accordance with this agreement and to submit to its jurisdiction.' [Page900:]

Selected bibliography

Soviet Archives held by RGASPI (the Russian State Archive of Social Political History, formerly the Central Party Archive), 5/O1/D2954, 5/O2/D23, 5/O2/D4 & 5/O2/D452 (here translated from Russian into English, for which I am much indebted to my colleague, Dr Ylts).

K.H. Kennedy, Mining Tsar: The Life and Times of Leslie Urquhart (Sydney, 1986).

T.S. Martin. 'The Urquhart Concession and AngloSoviet Relations 1921-1922' (1972) 20 Jahrbücher für Geschichte Osteuropas 551.

V.A. Shishkin, Sovietskoe Gosudartsvo i Strany Zapada 1917-1923 [The Soviet State and Western Countries 1917-1923] (Leningrad, 1969).

Lubov Krassin, Leonid Krassin: His Life and Work (London, 1929).

Yu. G. Felshtinsky, G.I. Chernyavskii & F. Markiz, eds., L.B. Krasin, Letters to His Wife and Children 1917-1926 (2003), held by the International Institute of Social History in Amsterdam and available at <www.iisg.nl/enquiries.html>.

Private Papers of Leslie Urquhart. [Page901:]