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Exxon’s rights to explore for, develop, and exploit petroleum
resources in the North Sea during the years in issue arose from
and were dependent upon licenses Exxon obtained from the United
Kingdom in prior years (before PRT was enacted) and on Exxon’s
payment to the United Kingdom of license fees and royalties due
under those licenses.
The United Kingdom’s purpose in enacting PRT in 1975 was to
take advantage of rising oil prices and to ensure that the United
Kingdom realize an appropriate share of excess profits to be
realized by Exxon and by other oil and gas companies from
exploitation of petroleum resources in the North Sea under the
licences granted to them.
License fees owed and paid by Exxon under terms of the
discretionary licenses (consisting of the up-front fees, annual
fees, and 12�-percent royalties) represented substantial and
reasonable compensation to the United Kingdom for the licenses.
As indicated, through 1992 the oil and gas companies have paid to
the U.K. Government more than �16 billion in royalties alone in
connection with the North Sea licenses.
Under its sovereign taxing power, the United Kingdom
intended to and did impose PRT as a tax, not as payment for
specific economic benefits. Respondent stipulates that PRT was
not negotiated but was imposed unilaterally, as a compulsory
payment, and that PRT was enacted and is administered as a tax
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