Clause 28 was a binding arbitration agreement between the parties possessing the capacity to conclude such agreement. The law of its place of incorporation, Delaware, supports LIAMCO’s capacity. Libyan government is empowered to arbitrate by an explicit legislative text, art 20 of the Petroleum Act, complemented and amplified by clause 28 annexed to the law. According to international law and Islamic law, the clause survived even if the concessions had been terminated. The dispute arising from the nationalisation concerned the interpretation and execution of the concessions and was thus an arbitrable issue under clause 28
The sovereign right to nationalise was recognised in State practice and several GA Resolution 1803 and 1974 Charter ‘if not a unanimous source of law’ both were ‘evidence of the recent dominant trend of international opinion concerning the sovereign of states over their natural resources’
Although concessions were a form of property entitled to respect, their premature termination by nationalisation was not an international delict so long as it was not discriminatory or accompanied by some other wrongful act. Such nationalisation did, however, give rise to a duty to pay compensation. International law no longer inquires into the motives for the nationalisation to see if they involved a legitimate public purpose, unless those motives were discriminatory.
Public utility principle is not a necessary requisite for the legality of a nationalisation, mentioned by Grotious, no international authority supports its application. Non-discrimination is a requisite for the validity of a lawful nationalisation. This is a rule well established in International legal theory and practice.
Nationalisation was not discriminatory (requirement easy to met) because Libya’s motive for nationalize was its desire to preserve the ownership of its oil, the political motive was not the predominant one.
Considering against the due respect to the sovereignty of the nationalising state, restitutio in integrum was generally imposible in IL. Since restitutio amounted to an order to revoke nationalisations measures which were not in themselves unlawful and had the character of ‘act of state’. The declaratory award request by LIAMCO would also be contrary to the notion of sovereign right to nationalise.
The holder of the concession was entitled, at least to the value of any corporeal property and expenses, danmnun emergens. In case of wrongful taking he may also be entitled to compensation for value of concession and loss of profits, lucrum cessans. The award gave an equitable measure in the middle.