Saudi Arabia v Arabian American Oil Company Aramco 27 ILR 117

1933 concession between Saudi Arabia and Aramco, which the exclusive right to transport the oil extracted from its concession. 1954 concession between Saudi Arabia and Saudi Arabian Maritime Tankes, Satco, owned by Aristotles Socrates Onassis, by which they have the ‘right of priority’ for transport ‘Saudi Arab oil’. The dispute was whether there was any conflict between the two concessions. The tribunal was to decide: In accordance with the Saudi Arabian law In accordance with the law deemed by the arbitration tribunal to be applicable in matters beyond the jurisdiction of Saudi Arabia Place of arbitration Geneva Resolution (144p) It is important to note that neither of the parties claims damages for an alleged injury, the dispute relates to the meaning of 1933 concession, to its interpretation and not to its validity, whether Aramco can be compelled to use for the transportation of oil on the highs seas, tankers which they have not freely chosen. (145p) Competence of the present tribunal to render a declaratory decision is indisputable, all the more so since such competence is in complete conformity with the test of the Arbitration agreement and with the concordant statements of the parties during the arbitral proceedings.

(155) the principle par in parem non habet jurisdictionem excludes the possibility for the judicial authorities of the country of the seat of exercising their right of supervision and interference in the arbitral proceedings which they have in certain cases. Considering the jurisdictional immunity of foreign states recognised by IL in a spirit of respect for the essential dignity of sovereign power, the tribunal is unable to hold that arbitral proceedings to which a sovereign state is a party could be subject to the law of another state. (156) In considering that the arbitration as such is governed by the law of nations the tribunal does not intend to apply this law to the merits of the dispute, since the law governing the merits is independent of the law governing the arbitration itself (166) Since the parties themselves declared that the concession was not to be governed by a single law, the tribunal can justifiably split the contract into parts to be governed by several laws. The tribunal must resort to objective criteria in order to connect certain matters regulated by the contract with a specified place and a specified legal system (167) The law in force in Saudi Arabia should be applied to the content of the concession because this state is a party to the agreement, as a grantor, and because it is generally admitted that a sovereign state is presumed to have subjected its undertakings to its own legal systems (Serbian Loans) For matters which are not governed by the law chosen it will apply the law of the country with which the contract had the closest natural and effective connection. So some effects of the concession cannot be governed by the law of Saudi Arabia (228) Article IV of Onassis agreement is in conflict with the Aramco concession and is not effective as against Aramco.