Kuwait v American Independent Oil Co AMINOIL Case Sultan, Fitzmaurice (members)

1948 AMINOIL, Delaware corporation) was granted by Kuwait an oil concession of 60 years of duration Art 17, 1948. The Shaikh shall not by general or especial legislation or by administrative measures or by any other act whatever annul this Agreement except as provided in Art 11. No alteration shall be made in terms of this agreement by either the Shaikh or the company [except by agreement between them] 1977 Kuwait terminated the concession by Decree Law AMINOIL contested the legality of the Decree. 1979 AMINOIL and Kuwait signed an arbitration agreement to settle the dispute, Art III (2) law governing the substantive issues shall be determined by the Tribunal, having regard of the quality of parties, trans-national character of their relations, principles of law and practice prevailing in the modern world [applicable law] The tribunal was going to seat in Paris IV,3,ii, and was subject to mandatory provisions of the law of the place IV,1. [lex arbitri] [This case does not accept the theory that a State may surrender its power to nationalize by stabilisation clause. This award is more balanced that the Texaco. The stabilization clause may, however, be important in the compensation]

By referring (III,2 arbitration agreement) to the trans-national character of relations with the concessionaire and to the general principles of law, this article brings out the wealth and fertility of the set of legal rules that the tribunal is called upon to apply. Art 17 is a stabilization clause. Basically this kind of clauses prohibits nationalization. Kuwait claimed permanent sovereignty over natural resources as a rule of jus cogens. This contention lacks all foundation. Even if res 1803 reflects CIL; it is not possible from this to deduce the existence of a rule of International law prohibiting a State from undertaking not to proceed to nationalize during a period of time. Contractual limitations on the State’s right to nationalise are juridically possible, but must be 1. expressly stipulated for 2. within the regulations governing the conclusion of State contracts; and it is to be expected that is should cover only a relatively 3. limited period. [The stabilisation clause was in] ‘general language’ and it cannot be interpreted as absolutely forbidding nationalisation. Notwithstanding, the contract of concession has undergone great changes since 1948, changes conceded by the Company. The contract changed its character and became one in which the state, while remaining bound to respect the equilibrium, enjoys special advantages. The take over in 1977 was Not contrary to the contract. Compensation: ‘appropriate compensation’ (Res 1803) the determinations must enquire ‘all the circumstances’ relevant to the concrete case, and not an abstract theoretical discussion. The stabilization clause, prohibiting confiscatory measures, creates ‘legitimate expectations’ in a long-term contract.