1987

AT

Amoco International Finance Corp v Iran US v Iran Iran US CTR

The claimant Swiss company, a wholly owned subsidiary of Standard Oil, a US company, entered into a 1966 joint venture agreement with NPC, and Iranian company controlled by the Iranian government to process and sell Iranian natural gas. In 1980 the agreement, which by its terms was valid for 35 years, was declared null and void by the Iranian government following the 1979 Iranian revolution. The claimant sought compensation. Restitution Expropriation can be defined as a compulsory transfer of property rights, may extend to any right which can be the object of a commercial transaction, i.e. freely sold and bought and thus has a monetary value. A leading expression of these rules is Case concerning Certain German interest in Polish Upper Silesia 1926. The right to nationalise foreign property for public purpose is today unanimously accepted, even by states which reject the principle of permanent sovereignty over natural resources, considered by a majority of States as the legal foundation of such right Discrimination is widely held as prohibited by CIL in the field of expropriation. As observed by Aminoil (1982) a coherent policy of nationalization can reasonably be operated gradually in successive stages, the tribunal declines to find that the present expropriation was discriminatory A precise definition of public purpose has neither been agreed upon international law nor even suggested. As a result of the modern acceptance of the right to nationalise this term is broadly interpreted. An expropriation, the only purpose of which would have been to avoid contractual obligations of the state could not be considered as lawful under international law. Such an expropriation, indeed, would be contrary to the principle of good faith. Amoco’s rights and interests were lawfully expropriated by Iran.

Rules to be applied in determining the compensation. The leading case in this context is Chorzow, the first principle established the PCIJ is that a clear distinction must be made between lawful and unlawful expropriations. Such a principle has been recently and expressly confirmed by Aminoil According to the PCIJ in the Chorzow an obligation of reparation of all damages sustained by the owner of expropriated property arises from an unlawful expropriation. The rules of international law relating to international responsibility of states apply in such a case. They provide for restitution in integrum. On the other hand, a lawful expropriation must give rise to payment of fair compensation, the just price of what was expropriated. Obviously the value of an expropriation enterprise does not vary according to the lawfulness of the unlawfulness of the taking… in the traditional language of international law it equates the damnum emergents which must be compensated in any case … the difference is that if the taking is lawful the value of the undertaking at the time of the dispossession is the measure and the limit of the compensation, while if it is unlawful, this value is, or may be, only a part of the reparation to be paid. In any event, even in unlawful expropriation the damage actually sustained is the measure of the reparation, and there is no indication that punitive damages could be considered. Compensation would include two elements: value of the undertaking at the date of expropriation plus the profits that would have been earned after this date until the date of the judgement. Value of undertakings include three categories: corporeal properties (building), contractual rights and other intangible values (future prospects) Future prospect does not equal lost profit (lucrum cessans) those are two different concepts. The first one clearly refers to the fact that the undertaking was a ‘going concern’. The second relates to the amount of the earnings hypothetically accrued. For the purpose of compensation due, market value is the most commendable standard. However market value is ambiguous when no market exists.