1977

AT

Texaco Overseas Petroleum Co and California Asiatic Oil Co. v. Libya Texaco v Libya TOPCO case Dupuy (French) arbitrator

This case arose out of Deeds of Concessions concluded by Libya and American companies. The wording of the Deeds was taken from the text of a model annexed to the Libyan Petroleum Act. Clause 16 ‘the contractual rights expressly created by this concession shall not be altered except by mutual consent of the parties’ Clause 28 (1) If at any time during or after the currency of this concession any difference or dispute shall arise… if fail to settle it by agreement, the case will be referred to two arbitrators and an umpire. (3) If a party fails to appoint it, the other party may request the president of the ICJ to appoint it (7) Concession shall be governed by law of Libya common to the principles of IL, in absence by GIL, including such principles as applied by International tribunals. In 1973 and 1974 Libya nationalised all the property of two claimants. Two arbitrators should have been appointed, but Libya did not participate in proceedings, just objected by a letter. ICJ president appointed Dupuy. Since Libya did not appear but sent a letter there was a preliminary award on jurisdiction. Resolution Jurisdiction: clause 28 did not make it obligatory for the parties to have recourse to friendly negotiations before starting arbitration; in any event, negotiations have taken place. The ministry of petroleum, in entering into Deeds concessions acted as the organ duly qualified and authorised to do so and Libya thus became bound by the acts of its organs (16) The autonomy or independence of arbitration clause permits the arbitration clause to escape the fate of the contract it contains

[Proper law: International law] Treaties are not more the only type of agreements governed by international law [against Serbian loans 1929] Reference to the general principles of law is always regarded to be a sufficient criterion for the internationalisation of a contract. (Abu Dhabi arbitration 1951) A clause providing international arbitration is another process for internationalisation of a contract (Sapphire 1963) A third element of internationalisation result from the fact of the new dimension of agreements between states and private persons: ‘economic development agreements’ Elements characterising these agreements: 1. subject matter particularly broad, they tend to bring to developing country investments and assistance 2. long duration that implies co-operation between state and contracting party 3. investor must be protected against legislative uncertainties. The insertion of stabilisation clauses tends to remove all or part of the agreement from the internal law and to provide for its submission to sui generis rules or to IL (Aramco 1958). To say that IL governs contractual relations between state & foreign private party neither means that the latter is assimilated to a State nor that the contract is assimilated to a treaty; it only means that for the purposes, interpretation and performance of the contract, it should be recognized that a private contracting party has specific international capacities. But unlike a State, the private person has only a limited capacity and his quality as a subject of IL does enable only to invoke the rights which derives from the contract. It is clear from the international point of view that it is not possible to criticise a nationalisation, on the assumption that the nationalising state has concluded with a foreign company a contract which stems from the municipal law of that state and is completely governed by that law IL recognise the right to nationalise, but it is not sufficient ground to empower a State to disregard its commitments because the same law also recognises the power of a State to commit itself internationally, accepting stabilisation clauses in a contract with a private party. Res 1083 XVII, 1969, seems to reflect the state of CIL existing in this field. Nationalization according to IL. GA res 3281, Charter ERDS 1974 is lege ferenda Charter of Economics Rights and duties of States, GA res 3281, 1974, art 2, does not establishes any connection between procedure of compensation and IL, and it subjects this procedure solely to municipal law, its purpose as codifying or developing IL was deleted by the opposition of several states. As Libya had no justification for its acts the appropriate remedy was restitution in integrum, Libya was legally bound to perform the contracts. Later compensation in full was accepted by negotiations