British Petroleum v Libya Lagergren (Swedish) Arbitrator 53 ILR 297

Libya nationalised BP in which the British government had 49% of shares. GB contended that it was illegal because it was not made for public purpose and no prompt, adequate, and effective compensation was done. The reason for the nationalisation was the refusal of the UK shortly before the nationalisation to intervene to prevent Iran from forcibly occupying the Tunb Islands in the Persian Gulf (that was the Libyan justification before the SC). The islands were territory of the Trucial State of Ras Al-Khaymah (now within the United Arab Emirates) which at the time of the occupation was still a state entitle by treaty to protection from the UK. The treaty protection expired the day following the occupation. BP referred the dispute to arbitration under the contract.

(347) there is no explicit support for the proposition that specific performance and even less so restitutio in integrum, are remedies of public international law available at the option of a party suffering a wrongful breach by a co-contracting party While declaratory awards have been made the cases have never involved the total expropriation or taking by the state of the property or rights of the concessionaire. Responsibility incurred by the defaulting party for breach of an obligation to perform a contractual undertaking is a duty to pay damages, and the concept of restititio in integrum has been employed merely as a vehicle for establishing the amount of damages, not in its literal sense. It will include damnun emergens and lucrum cessans. So the declaratory awards come close to being equivalent to order for specific performance, but not comparable to order for physical restitution. The BP nationalisation law constitute a fundamental breach of the BP concession and they amount to a total repudiation of the agreement and the obligations of the respondent…the taking by the respondent of the property, rights and interest of the claimant clearly violates public international law as it was made for purely extraneous political reasons and was arbitrary and discriminatory in character. Nearly two years have now passed since the nationalisation, and the fact that no offer of compensation has been made indicates that the taking was also confiscatory.