The controlled utilization of the natural resources of South Georgia may have been precipitated by a request from Dr. Severo Salcedo to the Falkland Islands government in February 1900 for a twenty-year lease to the island. In return, the Crown would receive two percent of net profits from his proposed sheep farming, mining and sealing operations. Demonstrating its lack of knowledge of the island, the government considered these activities appropriate. Nonetheless, it rejected the application, preferring to give Falkland residents the first opportunity to implement such initiatives. On 2 October 1900 twenty-one-year renewable leases at a £10 annual fee backed by a £200 security deposit to ensure compliance with the lease terms were advertised locally.

Nobody was interested, and it was not until 1905 that the first lease was awarded to the South Georgia Exploration Company of Punta Arenas. It was also required to buy annual sealing licences. Its vessel, Consort, entered Cumberland Bay on 14 August 1905 where the crew found that a whaling station, Grytviken, had been established the previous November by the Compania Argentina de Pesca of Buenos Aires (see figures 8.1 and 8.2). In November 1905 Consort left for home and put into Port Stanley where a protest about this unknown and unlicensed operation was laid before the Falkland Islands government. It asked the Admiralty to investigate, and HMS Sappho (Capt. M.H. Hodges) was despatched from Montevideo in January 1906 to assess the situation. Subsequently, its commander recommended that the Compania Argentina de Pesca be allowed to remain. The Falkland Islands government agreed and granted a twenty-one-year lease to 500 acres of land effective from 1 January 1906 at £250 per annum. The South Georgia Exploration Company was told that it could establish its station anywhere else on the island, but it refused this offer.

Until this time the Compania Argentina de Pesca had operated without any regulatory framework, since the Seal Fishery Ordinance 1899 and its 1904 Amendment in force on the Falkland Islands had not been extended to the Dependencies.