International Arbitrations between States and Foreign Private Parties: the Libyan Nationalization Cases

Robert B. von Mehren; P. Nicholas Kourides

doi:10.2307/2200685

International Arbitrations between States and Foreign Private Parties: the Libyan Nationalization Cases

Published online by Cambridge University Press: 27 February 2017

Robert B. von Mehren and

P. Nicholas Kourides

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On November 29 and 30, 1971, Iran occupied three islands, which were nominally under British protection, in the Persian Gulf. As a result of Britain’s failure to prevent the occupation, the Government of the Libyan Arab Republic, on December 7, 1971, announced the nationalization of all of the interests and properties in Libya of BP Exploration Company (Libya) Limited (BP), a subsidiary of British Petroleum Company Limited. On September 1, 1973, on the fourth anniversary of the military takeover of Libya led by Colonel Muammar el-Qaddafi, the Government of Libya announced the nationalization of 51 percent of the interests and properties in Libya of nine international oil companies. Approximately 5½ months later, on February 11, 1974, on the eve of the opening of the Washington conference of major oil-importing nations, the Government of Libya announced the nationalization of the remaining 49 percent of the interests and properties in Libya of three of those nine companies: Texaco Overseas Petroleum Company (TOPCO), a subsidiary of Texaco Inc.; California Asiatic Oil Company (CALASIATIC), a subsidiary of Standard Oil Company of California; and the Libyan American Oil Company (LIAMCO), a subsidiary of Atlantic Richfield Company.

Type: Research Article
Information: American Journal of International Law , Volume 75 , Issue 3 , July 1981 , pp. 476 - 552

DOI: https://doi.org/10.2307/2200685 [Opens in a new window]
Copyright: Copyright © The American Society of International Law 1981

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Footnotes

Members of the New York Bar; Mr. von Mehren is a member of the Board of Editors. The authors were of counsel to TOPCO in the TOPCO/CALASIATIC v. Libya arbitration. All translations in this article, unless otherwise indicated, were made by or specifically for the authors.

References

1 BP Exploration Co. (Libya) Ltd. v. The Government of the Libyan Arab Republic. The BP/Libya Concession Tribunal Award (Merits), dated October 10, 1973 (hereinafter cited as BP award), relating to both jurisdiction and the merits of the case, was handed down in the English language and was published at 53 ILR 297 (1979).

2 Texaco Overseas Petroleum Co./California Asiatic Oil Co. v. The Government of the Libyan Arab Republic. The TOPCO/CALASIATIC Preliminary Award, dated November 27, 1975 (hereinafter cited as TOPCO/CALASIATIC Preliminary Award), relating solely to jurisdiction, was handed down in the French language. TOPCO and CALASIATIC prepared an authorized English translation of the Preliminary Award, which was privately published in August 1977 in a printed pamphlet. The English translation was also published at 53 ILR 389 (1979). The TOPCO/CALASIATIC Award on the Merits, dated January 19, 1977 (hereinafter cited as TOPCO/CALASIATIC Award on the Merits), relating solely to the merits of the case, was handed down in the French language. TOPCO/CALASIATIC also prepared an authorized English translation of the Award on the Merits, published in the printed pamphlet referred to above. A portion of the original French text was published at 104 J. Droit Int’l 350 (1977). The English translation was published at 53 ILR 389 (1979) and 17 ILM 3 (1978); references in this article will be to paragraph numbers of the Award on the Merits.

3 Libyan American Oil Co. v. The Government of the Libyan Arab Republic. The award of the arbitral tribunal in the LIAMCO arbitration, dated April 12, 1977 (hereinafter cited as LIAMCO award), relating to jurisdiction, the merits, and damages, was handed down in the English language and was published at 20 ILM 1 (1981).

4 For example, in 1969 petroleum accounted for 99.8% of Libya’s total exports. Zartman, & Buenda, , La, Politique étrangère libyenne, in La Libye Nouvelle 101, 108 (1975)Google Scholar. For a discussion of the development of the Libyan oil industry from various points of view, see, e.g., Ghanem, S. M., The Pricing of Libyan Crude Oil (1975)Google Scholar; Regnier & Talha, Les Problèmes de développement économique, in La Libye Nouvelle, supra, at 187; Farley, R., Planning for Development in Libya 106–31 (1971)Google Scholar; Heitmann, , Libya: An Analysis of the Oil Economy, 7 J. Mod. Afr. Stud. 249 (1969)CrossRef Google Scholar; The Oil Story, Libyan Rev., Oct. 1966, at 18; Oil: The Key to Sufficiency, id.; Feb. 1966, at 28; Kubbah, A. A. Q., Libya: Its Oil Industry and Economic System 98–166 (1964)Google Scholar.

5 Wren, , Libyans Awash in Oil Money, Technology and Foreigners,N.Y. Times, Oct. 20, 1979, at 2Google Scholar, col. 3. The International Bank for Reconstruction and Development in its World Development. Report of 1979 estimated Libya’s per capita income in 1977 to be approximately $6,680, reported in Middle East, Jan. 1980, at 55.

6 Schurr, S. H. & Homan, P. T., Middle Eastern Oil and the Western World 118 (1971)Google Scholar.

7 In addition to the obstacles caused by Libya’s lack of transportation and other utilities, shortage of equipment and skilled labor, and “inclement weather, one unique problem deserves mention. Libya had been a principal battlefield of World War II, and before exploration for oil could be undertaken, the oil companies had to clear live mines from many minefields.

8 For a detailed, but biased, discussion of the development of petroleum legislation in Libya through the mid-1960’s, see generally M. S. Maghribi, Petroleum Legislation in Libya (unpub. J.S.D. diss., June 1966, in George Washington University School of Law Library).

9 The Petroleum Law (Law No. 25 of 1955) was drafted under the direction of Dr. Anis Qasem, a Palestinian lawyer in the employment of the Libyan Ministry of Justice. It was considered one of the most progressive examples of petroleum legislation and was designed to protect the interests of the Libyan Government, while offering the necessary guarantees to the oil companies. See speech from the Throne read by Prime Minister Mustapha Ben Halim before the federal Parliament during its fourth session on Dec. 9, 1954, quoted in TOPCO/CALASIATIC Memorial on the Merits, dated Feb. 27, 1976, at 13 (unpub.) [hereinafter cited as TOPCO/CALASIATIC Memorial on the Merits].

The 1955 Petroleum Law was designed to protect Libya’s economic and political interests more fully than the petroleum legislation then prevailing in other Middle Eastern countries. The latter had established a legal pattern that contemplated one or perhaps a small number of large concessions covering either the entire national territory or a very substantial part of the national territory. By contrast, the Libyan law imposed limits on the number of concessions and the total areas that could be held at one time by a single concessionaire. The law also required that if numerous concessions were held by the same concessionaire, they could not all be located in one zone but had to be divided among the four zones into which, for purposes of oil concessions, Libya had been divided. Thus, the concessions held by a concessionaire were spread over wide and noncontiguous geographical areas, which not only greatly increased the costs of exploring and developing the areas but also forced the oil companies to contribute to unifying the country because of the necessity of developing supply, transportation, and communication networks in order to link their separate concession areas. Moreover, the Petroleum Law required that concession holders relinquish portions of each concession area within specified periods of time, beginning 5 years after the original grant. This requirement compelled the oil companies to explore the concession areas quickly, before making the mandatory relinquishments, and consequently assured Libya of rapid exploration of its petroleum resources.

10 Pursuant to the Petroleum Law, TOPCO and CALASIATIC between 1955 and 1966 were granted jointly 12 deeds of concession and in 1968 acquired a 75% interest in two others (hereinafter referred to collectively as the TOPCO/CALASIATIC deeds of concession). In 1960, BP acquired a 50% interest in one deed of concession held by Nelson Bunker Hunt Company (Bunker Hunt) (hereinafter referred to as the Hunt/BP deed of concession): The Hunt/BP deed of concession had originally been granted to Bunker Hunt in 1957. LIAMCO was granted seven deeds of concession in 1955, but voluntarily surrendered two and relinquished another two prior to the 1973 decree of nationalization. Only three of these deeds (hereinafter the LIAMCO deeds of concession) were the subject of the dispute in the LIAMCO arbitration. The deeds of concession relating to the disputes are herein referred to collectively as the deeds of concession.

11 For a general discussion of conditions of oil concessions, see Cattan, H., The Evolution of Oil Concessions in the Middle East and North Africa 27–120 (1967)Google Scholar.

12 For a more detailed discussion of the provisions in the Libyan deeds of concession, see the LIAMCO award, at 27–33.

13 TOPCO/CALASIATIC Award on the Merits, para. 3.

14 Dr. Qasem, Chairman of the Libyan committee of experts that drafted the Petroleum Law and former Chairman of the Libyan Petroleum Commission, characterized clause 16, which was modified by the December 1961 Royal Decree, as “a fundamental provision emphasizing the sanctity of contracts.” Qasem, , Libya’s New Oil Policy, World Petroleum, Sept. 1962, at 49Google Scholar, 90.

15 LIAMCO award, 20 ILM at 30.

16 Article 24 of the Petroleum Law confirmed the rights of the concessionaire:

The Minister may issue the following and other Regulations necessary for the implementation of this Law . . . provided, however, that these Regulations or any amendment thereto shall not be contrary to or inconsistent with the provisions of this Law or adversely affect the contractual rights expressly granted under any permit or concession in existence at the time the Regulations are issued or amended.

TOPCO/CALAS1ATIC Preliminary Award, 53 ILR at 396.

17 See generally Farley, R., Planning for Development in Libya 213–24 (1971).Google Scholar

18 See, e.g., Amendments to the Petroleum Law, Libyan Rev., Jan. 1966, at 26, 27. Prior to the takeover of the Libyan Government by Colonel Qaddafi, the Libyan Review represented the Libyan Government’s position on certain issues. The Government in the Libyan Review confirmed its respect for clause 16 when the deeds of concession were amended in 1966:

As the existing Petroleum Law provides that no changes may be introduced into the Law and the Regulations issued thereunder which may affect the contractual rights of the companies without their consent, the draft law, with its proposed provisions, seems to be the only way of securing the consent of the companies and their agreement to amend their concession contracts.

Out of its desire to respect the contractual rights secured by companies in accordance with the legislation in force and in order to reassure them and to secure equality between them, the Government has sought, through negotiation, to obtain acceptance by the companies operating in Libya of the proposed amendments.

Ibid.

19 Article 20 of the Libyan Petroleum Law prescribes arbitration pursuant to clause 28 as the means for settling disputes: “Any disputes between the Ministry of Petroleum and the concession holder arising from any concession granted under this law shall be settled by arbitration in the manner set out in the Second Schedule [the form of deed of concession] hereto.” Quoted in LIAMCO award, 20 ILM at 38.

20 TOPCO/CALASIATIC Preliminary Award, 53 ILR at 402–04. The remaining portion of the arbitration clause in the deeds of concession reads:

4. If the Arbitrators appointed by such parties fail to agree upon a decision within 6 months of the institution of Arbitration proceedings or any such Arbitrator becomes unable or unwilling to perform his functions at any time within such period, the Umpire shall then enter upon the Arbitration. The decision of the Arbitrators, or in case of a difference of opinion between them the decision of the Umpire, shall be final. If the Umpire or the Sole Arbitrator, as the case may be, is unable or unwilling to enter upon or complete the Arbitration, then, unless such parties otherwise agree, a substitute will be appointed at the request of either such party by the President or, in the case referred to in paragraph (1) above, the Vice-President, of the International Court of Justice.

5. The Umpire however appointed or the Sole Arbitrator shall not be either a national of Libya or of the country in which the Company or any Company which directly or indirectly controls it was incorporated nor shall he be or have been in the employ of either of such parties or of the Government of Libya or of any such Country as aforesaid.

The arbitrators or, in the event they fail to agree within 60 days from the date of appointment of the second Arbitrator, then the Umpire, or, in the event a Sole Arbitrator is appointed, then the Sole Arbitrator, shall determine the applicability of this Clause and the procedure to be followed in the Arbitration.

In giving a decision the Arbitrators, the Umpire or the Sole Arbitrator, as the case may be, shall specify an adequate period of time during which the party to the difference or dispute against whom the decision is given shall conform to the decision, and such party shall not be in default if that party has conformed to the decision prior to the expiry of that period.

6. The place of Arbitration shall be such as may be agreed by such parties and in default of agreement between them within 120 days from the date of institution of Arbitration proceedings as specified in paragraph (2) above, shall be determined by the Arbitrators or, in the event the Arbitrators fail to agree within 60 days from the date of appointment of the second Arbitrator, then by the Umpire or, in the event a Sole Arbitrator is appointed, then by the Sole Arbitrator.

8. The costs of the Arbitration shall be borne by such parties in such proportion and manner as may be provided in the decision.

Id. at 403–04.

21 Quoted in TOPCO/CALASIATIC Memorial on the Merits, at 34.

22 The 1961 amendment to the form of the choice-of-law provision read as follows:

This concession shall be governed by and interpreted in accordance with the laws of Libya and such rules and principles of international law as may be relevant but only to the extent that such rules and principles are not inconsistent with and do not conflict with the laws of Libya.

Ibid.

23 The final version is quoted in the text at note 20 supra.

24 Amendments to the Petroleum Law, supra note 18, at 27; see also text of note 18.

25 An English translation of the nationalization decree appears at Middle East Econ. Survey, Supp. to No. 7, Dec. 10, 1971, at 3, and at 11 ILM 380 (1972).

26 See generally Haight, Libyan Nationalization of British Petroleum Assets, 6 Int’l Law. 541 (1972). The BP nationalization was the first step in Libya’s policy of using oil as a political weapon, which it has not hesitated to use since. See also Retal, , La Libye républicaine face au cartel petrolier, 13 Annuaire de l’Afrique du Nord 39 (1974)Google Scholar; Talha, , Chronique économique, id. at 397, 400–01Google Scholar; Breton, , Le Pétrole libyen au service de l’unité arabe, 22 Rev. Française Sci. Politique 1256 (1972)CrossRef Google Scholar.

27 See Middle East Econ. Survey, Supp., supra note 25, at 1; id., No. 8, Dec. 17, 1971, at 2.

28 For Colonel Qaddafi’s and Minister Mabruk’s statements, see, id., Supp., supra note 25, at 1; for Representative Maghribi’s statement, see 26 UN SCOR (1610th mtg.), UN Doc. S/PV.1610, at 20 (1971).

29 In December 1972, Bunker Hunt requested arbitration under the Hunt/BP deed of concession in connection with some of the problems it was having with Libya in operating the concession area. Libya agreed to the arbitration and appointed as its arbitrator Kamal Maghur, a Tripoli lawyer and then Libyan Representative to the United Nations. Bunker Hunt had previously named former United States Secretary of the Treasury John Connally as its arbitrator. The three basic questions on which Bunker Hunt was seeking an arbitral ruling were: (1) whether Libya could force a government participation interest in Bunker Hunt’s share of the Hunt/BP deed of concession on terms, unacceptable to Bunker Hunt; (2) whether Libya could force Bunker Hunt to market the nationalized BP share of Sarir oil from the Hunt/BP deed of concession while there was no compensation to BP for the nationalization; and (3) whether Libya could harass Bunker Hunt for not complying with its demands—for example, by cutting back Bunker Hunt’s share of production, as it had done. Libya Accepts Arbitration on Oil for the First Time, Petroleum Intelligence Weekly, April 30, 1973, at 3–4. To the best of the authors’ knowledge, the arbitration never proceeded, as Bunker Hunt’s interests were nationalized a few months later.

30 For an extremely detailed discussion of Libya’s negotiations, from September 1970 through April 1971, with international oil companies holding concession contracts in Libya relating to increasing the price of oil per barrel, which culminated in the so-called Tripoli Agreement, see Schuler, The International Oil Negotiations, in The 50% Solution: How to Bargain Successfully with Hijackers, Strikers, Bosses, Oil Magnates, Arabs, Russians, and Other Worthy Opponents in This Modern World 124 (Zartman, I. W. ed. 1976)Google Scholar. For the role of the Organization of Petroleum Exporting Countries (OPEC) in encouraging these negotiations, see, in particular, the following resolutions of OPEC: (1) Res. XVI.90, Declaratory Statement of Petroleum Policy in Member Countries (June 24–25, 1968), reprinted in 7 ILM 1183 (1968); (2) Res. XXIV. 135, Resolution Concerning Member Countries’ Rights to Participate in Existing Oil Concessions (July 12–13, 1971), reprinted in 10 id. at 1082 (1971); and (3) Res. XXV. 139, Resolution on Effective Participation in Existing Oil Concessions (Sept. 22, 1971), reprinted in id. at 1293. For OPEC’s support of Libya’s nationalization on Sept. 1, 1973 of 51% of the operations of certain foreign oil companies, see OPEC Res. XXXV. 159, Resolution on Support of Libyan Government Actions (Sept. 16, 1973), reprinted in 13 id. at 221 (1973).

31 An English translation of the nationalization decree appears at 13 ILM 58 (1974).

32 Present at the ceremony were, among others, President Sadat of Egypt and former President Amin of Uganda. See Statement by the Department of State on Policy on “Hot” Libyan Oil, 13 ILM 767, 770 (1974); Tanner, , Libyan Chief, Citing U.S. Aid to Israel, Seizes Oil Concern, N.Y. Times, June 12, 1973, at 1Google Scholar, col. 3.

33 For an extensive discussion of TOPCO’s and CALASIATIC’s negotiations with Libya during this 4–month period, see the affidavits of Messrs. Folmar and Boucke submitted by TOPCO and CALASIATIC, respectively, to the sole arbitrator in the TOPCOICALASIATIC arbitration. The affidavits appear as Exhs. 15 and 16 to the TOPCO/CALASIATIC Memorial on the Merits.

34 Libya carried out some of these threats: e.g., on Aug. 11 or 12, 1973, Libya nationalized 51% of the properties and interests in Libya of Occidental of Libya, Inc., a subsidiary of Occidental Petroleum Corp. Occidental of Libya immediately acquiesced, transferred 51% of its assets in Libya to the Libyan National Oil Co., and entered into a settlement agreement. See Libya Takes 51 % of Oxy, Chops Amoseas, O IL & GAS J., Aug. 20, 1973, at 24; Libya Takes Over 51 % of Occidental Operations There, Wall Street Journal, Aug. 13, 1973, at 2, col. 2. A copy of the subsequent Exploration and Production Sharing Agreement between the Libyan National Oil Co. and Occidental of Libya, Inc. appears at 14 ILM 645 (1975).

35 An English translation of the nationalization decree appears at 13 ILM 60 (1974). In addition to TOPCO, CALASIATIC, and LIAMCO, six other concession holders were subject to this decree: Esso Standard of Libya Inc., Grace Petroleum Corp., Esso Sirte Co., Inc., Shell Exploratie En Productie Maatschappij, Mobil Oil of Libya Inc., and Gelsenberg A.G. (Libya). Among the concession holders not subject to the nationalization decree were Aquitaine-Libye and Elf-Libye (French) and Hispánica de Petróleos (Spanish).

36 Petroleum Intelligence Weekly, Spec. Supp., at 18, Sept. 10, 1973. See also Le Monde, Sept. 5, 1973, at 3.

37 An English translation appears at Middle East Econ. Survey, No. 19, March 1, 1974, at iv–vii.

38 An English translation appears in id. at i–iv, and in the TOPCO/CALASIATIC Memorial on the Merits, at Exh. 4.

39 Libya Taking Over 3 U.S. Oil Concerns, N.Y. Times, Feb. 12, 1974, at 1, col. 5.

40 Al-Fajr al-Jadid, Feb. 12, 1974, at 1 (in Arabic).

41 Quoted in the BP award, 53 ILR at 317.

42 Quoted in Statement on “Hot” Libyan Oil, supra note 32, at 771.

43 United States Government Note to the Libyan Arab Republic, Sept. 27, 1973, at 1–2 (unpub.), TOPCO/CALASIATIC Memorial on the Merits, Exh. 20.

44 United States Government Note to the Libyan Arab Republic, June 20, 1974, at 1–2 (unpub.), id., Exh. 21. On April 18, 1979, the United States Government through its Embassy in Paris reiterated this position in a note to the Tribunal de Grande Instance, Paris, in support of LIAMCO’s successful attempt to obtain exequatur of the LIAMCO award in France (see text at note 281 infra). The note stated in part:

[T]he actions of the Libyan Arab Republic entail its responsibility under international law not only with respect to the purpose of the taking of the property and the failure to provide prompt, adequate and effective compensation therefor, but also with respect to observance of Libya’s contractual commitments, in particular with regard to alteration of contract rights only by mutual agreement (Clause 16 of the concession agreement), and binding arbitration of disputes (Clause 28). It is the position of the United States Government that contracts validly concluded between foreign governments and nationals of other states should be performed by the parties to those contracts in accordance with their terms. Such contracts are binding under this applicable law. . . . Where the breach of such a contract by a foreign government is arbitrary or tortious or gives rise to a denial of justice, a violation of international law ensues. . . . . . .

. . . . . [T]he failure of a government to respect a contract with an alien to arbitrate disputes arising under that contract constitutes a denial of justice under international law. The availability of arbitration as a means of resolving disputes, and provision for enforcement of foreign arbitral awards, have been recognized by both France and the United States as important elements in promoting durable and impartial legal arrangements under which transnational commerce and investment may take place, and in enhancing the climate for foreign investment to contribute to economic development, particularly that of developing countries.

Diplomatic Note No. 139 of the United States Embassy in Paris (April 18, 1979), reprinted in Brief of Appellant Libyan American Oil Company (June 16, 1980), App. B, at B–5–B–7, filed with the United States Court of Appeals for the District of Columbia Circuit in Libyan American Oil Co. v. Socialist People’s Libyan Arab Jamahirya, Nos. 80–1207 and 80–1252.

This position of the United States was affirmed earlier on Dec. 30, 1975, in a press release by the United States Department of State, which stated in part:

[T]he policy of the United States concerning expropriatory acts includes the position that: “Under international law, the United States has a right to expect:

— That any taking of American private property will be nondiscriminatory;
— That it will be for a public purpose; and
— That its citizens will receive prompt, adequate, and effective compensation from the expropriating country.”

With regard to current or future expropriations of property or contractual interests of U.S. nationals, or arrangements for participation in those interests by foreign governments, the Department of State wishes to place on record its view that foreign investors are entitled to the fair market value of their interests. Acceptance by U.S. nationals of less than fair market value does not constitute acceptance of any other standard by the United States Government.

Reprinted in 15 ILM 186 (1976).

45 On the appointment of arbitrators by the ICJ, see generally Khan, , The Appointment of Arbitrators by the President of the International Court of Justice, 14 Communicazioni e Studi 1021 (1975)Google Scholar. See also Johnson, , Constitution of an Arbitral Tribunal, 30 Brit. Y.B. Int’l L. 152 (1953)Google Scholar.

46 BP award, 53 ILR at 303–05.

47 TOPCO/CALASIATIC Preliminary Award, id. at 398–400; TOPCO/CALASIATIC Award on the Merits, para. 9. The Libyan memorandum is unpublished and appears as Exh. 22, TOPCO/CALASIATIC Memorial on the Merits.

48 TOPCO/CALASIATIC Award on the Merits, para. 9.

49 LIAMCO award, 20 ILM at 3–5.

50 Id. at 5.

51 See generally Statement on “Hot” Libyan Oil, supra note 32, and note 56 infra.

52 On the importance of counsel’s decisions relating to bifurcation of the proceedings and the presentation of issues, see generally MacCrate, , International Arbitration in a New Climate of Foreign Investment, in Private Investors Abroad—Problems and Solutions in International Business in 1975, at 1Google Scholar, 37–39 (1976).

53 BP award, 53 ILR at 306.

54 Id. at 306–07.

55 Id. at 323.

56 The issue of title to, or a property right in, oil extracted from a concession area nationalized by the host state has been considered and struggled with by national courts and international scholars. The decisions and opinions are sharply divided. The issue of title, if decided at all, is usually determined as a consequence of whether the act of nationalization was valid or invalid and whether such act was contrary to the public policy of the state in which the action is being brought. In this respect, many national courts will not sit in judgment of the acts of foreign states and will apply the act of state doctrine or the theory of sovereign immunity. For a recent decision refusing to rule on the issue of whether title to the oil extracted from a concession area granted to a concessionaire passes to the government upon nationalization of that area, see, e.g., Hunt v. Coastal States Gas Producing Co., 583 S.W.2d 322, 324–26 (Sup. Ct. Tex. 1979) (applying the act of state doctrine); but see the extensive dissenting opinion at 327–37. See also BP Exploration Co. (Libya) Ltd. v. Astro Protector Compañía Naviera S.A., Civ. Action No. 2852/71, Civil Court of Siracusa, Italy (Feb. 15, 1973), reprinted m 13 ILM 106, 114–16 (1974) (applying the act of state doctrine); Sociedad Minera el Teniente S.A. v. Aktiengesellschaft Norddeutsche Affinerie, Superior Court of Hamburg, Germany (Jan. 22, 1973), reprinted in 12 id. at 251, 271–84 (1973); Anglo-Iranian Oil Co., Ltd. v. S.U.P.O.R. Co., Civil Court of Rome, Italy (Sept. 13,1954), reprinted in 22 ILR 23,30–37, 42–43 (1955); Anglo-Iranian Oil Co., Ltd. v. S.U.P.O.R. Co. (The Miriella), Court of Venice, Italy (March 11, 1953), reprinted in id. at 19,21; Anglo-Iranian Oil Co., Ltd. v. Indemitsu Kosan Kabushiki Kaisha, District Court and High Court of Tokyo, Japan (1953), reprinted in 20 id. at 305, 315–16 (1953) (applying the act of state doctrine).

For decisions supporting the position that title to the extracted oil (or other natural resource) does not pass to the government upon illegal nationalization, see, e.g., Banco Nacional de Cuba v. Farr, 243 F. Supp. 957 (S.D.N.Y. 1965), aff’d, 383 F.2d 166 (2d Cir. 1967), cert, denied, 390 U.S. 956 (1968); N.V. de Bataafsche Petroleum Maatschappij v. The War Damage Commission, Court of Appeal, Singapore (April 13, 1956), reprinted in 23 ILR 810, 812 (1956); Anglo- Iranian Oil Co., Ltd. v. Jaffrate (The Rose Mary), Supreme Court, Aden (Jan. 9, 1953), reprinted in 20 id. at 316, 317, 328 (1953).

See generally scholarly writings in the area, e.g., Mann, The Consequences of an International Wrong in International and National Law, 48 Brit. Y.B. Int’l L. 1, 28–39, 46–57 (1976–1977); Glos, The Effect of Foreign Decrees of Expropriation in the Courts of the Forum, 19 S. Tex. L. J . 241, 241–58 (1978); Weil, Le Contrôle par les tribunaux nationaux de la licite Internationale des actes des états étrangers, 23 Annuaire Français Droit Int’l 1 (1977); Brower, The Future for Foreign Investment-Recent Developments in the International Law of Expropriation and Compensation, in Private Investors Abroad, supra note 52, at 93, 164–75; Boulanger, F., Les Nationalisations en Droit International Privé Comparé 61–128 (1975)Google Scholar; Seidl-Hohenveldern, , Chilean Copper Nationalization Cases before German Courts, 69 AJIL 110 (1975)CrossRef Google Scholar; Benton, , The Libyan Expropriations: Further Developments on the Remedy of Invalidation of Title, 11 Houston L. Rev. 924 (1974)Google Scholar; Sperduti, , Des actions judiciaires intentées dans un état du chef de nationalisations et d’expropriations opérées dans un autre état, in Mélanges Offerts À Charles Rousseau 249 (1974)Google Scholar; Jennings, , Nullity and Effectiveness in International Law, in Cambridge Essays in International Law: Essays in Honour of Lord McNair 64, 65–81 (1965)Google Scholar; Münch, , Les Effets d’une nationalisation à l’étranger, 98 Recueil des Cours 411, 427–73 (1959 III)Google Scholar; O’Connell, , A Critique of the Iranian Oil Litigation, 4 Int’l & Comp. L.Q. 267 (1955)CrossRef Google Scholar.

For the position of the United States Department of State with respect to nationalized Libyan oil, see Statement on “Hot” Libyan Oil, supra note 32; and more recently, for its position on foreign expropriation decrees, see generally Letter from Legal Adviser, U.S. Department of State, to Clerk, U.S. Court of Appeals for the Second Circuit, Dec. 8, 1977, reprinted in part in 72 AJIL 375, 398 (1978) (“foreign policy interests do not require U.S. courts to refrain from reviewing acts of foreign states”).

57 BP award, 53 ILR at 329–31. Lagergren reduced BP’s requested declarations to two basic questions: whether the Hunt/BP deed of concession survived or continued in spite of the Libyan nationalization and whether specific performance and restitutio in integrum were the appropriate remedies. Specifically, he linked BPs requested declarations 2, 3, and 6, and determined that the question of survival or continuity of the deed of concession was fundamental to all three. He also linked declarations 4 and 5, and concluded that he would have to find both that BP was entitled to be restored to its rights under the deed of concession and that BP was the owner of the oil extracted from the concession area in order to issue an award granting specific performance (on the politically sensitive question of right to ownership, see note 56 supra). Linking the property issue with the remedy issue was unfortunate for BP. Lagergren ultimately combined declarations 2 through 6 under the heading “Is the Claimant entitled to damages, and how should they be determined?” and proceeded to consider to what remedy BP was entitled.

58 In effect, BP requested that it be made whole and restored to its rightful position under the Hunt/BP deed of concession. Lagergren discussed the remedy in the context of both specific performance and restitutio in integrum. Specific performance is a remedy in municipal law requiring a party to perform an obligation rather than merely to pay damages for failure to perform it. Restitutio in integrum, literally “restitution in whole,” is associated more with international law and requires making the injured party whole; it might require not only specific performance but other action as well, if necessary to make the injured party whole. However, this distinction has not always been made and it is unclear whether Lagergren distinguishes between the terms. He said, “Generally speaking, . . . it is probably true to say that the discussion about restitutio in integrum in public international law and that concerning specific performance in the field of the general principles of law, in fact has reference to the same problem.” BP award, 53 ILR at 350–51.

59 BP challenged certain aspects of the award as being invalid on the grounds of procedural and substantive errors in a memorandum filed with Lagergren, reprinted in 53 ILR at 358 (1979). In response to BP’s request, the BP arbitral tribunal met in Copenhagen on May 8, 1974 to consider whether it was competent to reopen the proceedings in order to examine BP’s complaints. On Aug. 1, 1974, Lagergren delivered a subsequent award, the BP/LIBYA Concession Tribunal Award (Competence to Re-Open First Stage of Proceedings), holding that the tribunal was not competent to reopen the arbitral proceedings. Id. at 375. The minutes of the May 8, 1974 meeting of the BP arbitral tribunal, certain expert opinions delivered on reopening the proceedings, and excerpts from the oral arguments are reprinted in 2 J. G. Wetter, The International Arbitral Process: Public and Private 559–609 (1979).

60 TOPCO/CALASIATIC Memorial on Jurisdiction of the Sole Arbitrator, at 28–29 (June 16, 1975, unpub.) [hereinafter referred to as TOPCO/CALASIATIC Memorial on Jurisdiction].

61 TOPCO/CALASIATIC Memorial on the Merits, at 6–7.

62 See discussion in the text at notes 230–240 infra.

63 TOPCO/CALASIATIC Award on the Merits, para. 17.

64 Id., sec. V.

65 LIAMCO award, 20 ILM at 44–45.

66 Id. at 64.

67 TOPCO/CALASIATIC Preliminary Award, 53 ILR at 404.

68 BP Memorial on the Merits, at 16–18 (March 26, 1973, unpub., on deposit in Columbia University School of Law Library) [hereinafter referred to as BP Memorial on the Merits].

69 Id. at 19.

70 BP award, 53 ILR at 329.

71 Id. at 332.

72 Id. at 349.

73 Id. at 352.

74 The expert opinions (hereinafter cited as the Morcos opinion and the Jessup opinion) appear as Annexes 5 and 6, respectively, to the TOPCO/CALASIATIC Memorial on the Merits.

75 TOPCO/CALASIATIC Award on the Merits, sec. V.

76 LIAMCO award, 20 ILM at 34.

77 Id. at 35.

78 BP award, 53 ILR at 308.

79 See note 2 supra.

80 TOPCO/CALASIATIC Preliminary Award, 53 ILR at 404–06. In addition to the case law, rules of arbitration procedure of international institutions, and writings of scholars referred to in the Preliminary Award, see Interpretation of the Greco-Turkish Agreement (Advisory Opinion), [1928] PCIJ, ser. B., No. 16, at 20; Derains, Note, 103 J. Droit Int’l 997,998 (1976); Mann, State Contracts and International Arbitration, 42 Brit. Y.B. Int’l L. 1, 25–26 (1967); Fouchard, P., L’Arbitrage Commercial International 135–51 (1965)Google Scholar; Simpson, J. L. & Fox, H., International Arbitration, Law and Practice 68–69 (1959)Google Scholar; Carlston, K. S., The Process of International Arbitration 74 nn.1 & 2 (1946)Google Scholar.

81 TOPCO/CALASIATIC Preliminary Award, 53 ILR at 407.

82 Id. at 406–07. This view is confirmed by former ICJ President Muhammad Zafrulla Kahn. Kahn, supra note 45, at 1029–31.

83 TOPCO/CALASIATIC Preliminary Award, 53 ILR at 407.

84 Id. at 408–10. In addition to the extensive references in the Preliminary Award, see Sanders, , Procedures and Practices under the UNCITRAL Rules, 27 Amer. J. Comp. L. 453, 462–64 (1979)Google Scholar; Loquin, Note, 106 J. Droit Int’l 128, 133 (1979); 2 Delaume, G. R., Transnational Contracts, Applicable Law and Settlement of Disputes §13.06, 34–41 (Booklet 6, 1978)Google Scholar; Derains, , Note, 105 J. Droit Int’l 985, 987 (1978)Google Scholar; Sanders, , L’Autonomie de la clause compromissoire, in Hommage à Fréderic Eisemann 31, 33–42 (1978)Google Scholar; de Aréchaga, Jiménez, State Responsibility for the Nationalization of Foreign Owned Property, 11 N.Y.U. J . Int’l L. & Pol. 179, 191 (1978)Google Scholar; Derains, , Note, 104 J. Droit Int’l 936, 937 (1977)Google Scholar; Loquin, , Note, id. at 106, 108, 111–14Google Scholar; Fouchard, Note, [1977] Rev. Arbitrage 147, 149–50; Oppetit, , Note, 65 Rev. Critique Droit Int’l Privé 507, 513–14 (1976)Google Scholar; Lalive, P., L’Influence des clauses arbitrates, 11 Rev. Belge Droit Int’l 570, 573–74 (1975)Google Scholar; Sortais, Note, [1975] D.S. Jur. 537, 540; Francescakis, , Le Principe jurisprudentiel de I’autonomic de Vaccord compromissoire après l’arrêt Hectit de la Cour de cassation, [1974] Rev. Arbitrage 67Google Scholar; Robert, J., Arbitrage Civil et Commercial en droit interne et droit International Privé 6, 364–65 (4th ed. 1967)Google Scholar; P. Fouchard, supra note 80, at 67–68, 148–50; Rubellin-Devichi, J., L’Arbitrage, Nature Juridique, droit interne et droit International Privé 109–11 (1965)Google Scholar; Kahn, , Problèmes juridiques de l’investissement dans les pays de l’ancienne Afrique française, 92 J. Droit Int’l 338, 376 (1965)Google Scholar; Klein, , Du caractère autonome de la clause compromissoire, notamment en matiére d’arbitrage international (Dissociation de la nullité de cette clause et de celle du contrat principal), 50 Rev. Critique Droit Int’l Privé 499 (1961)Google Scholar; Nussbaum, , The “Separability Doctrine” in American and Foreign Arbitration, 17 N.Y.U. L.Q. Rev. 609, 610–11 (1940)Google Scholar. As Professor Prosper Weil has stated:

Consequently, the State cannot modify unilaterally the mechanism established for the settlement of disputes in a direct way by dictating through its authority a change in the arbitration clauses, or in an indirect way through refusing to accept the arbitral procedure as it is provided in the contract, or by putting obstacles in the way of its operation; by such actions, the State would be committing an unlawful act. Furthermore, it would be less acceptable for a State to revoke the contract in its entirety in order to claim that the arbitration clause has become inoperative and thus to evade its effects by such a device. Indeed, it is unanimously recognized that arbitration clauses are autonomous in relation to the other provisions of the contract and that the invalidity or the termination of the contract remains without influence on them.

Weil, , Problèmes relatifs aux contrats passes entre un état et un particulier, 128 Recueil des Cours 95, 222 (1969 III)Google Scholar. The concept of the independence of the arbitration clause from the principal contract is also reflected in the 1976 Arbitration Rules of the United Nations Commission on International Trade Law, Art. 21, para. 2:

an arbitration clause which forms part of a contract and which provides for arbitration under these Rules shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.

Reprinted in 1 International Commercial Arbitration 181, 190 (Schmitthoff, C. M. ed., pt. I, 1979)Google Scholar.

85 TOPCO/CALASIATIC Preliminary Award, 53 ILR at 408–12. In addition to the authorities referred to and quoted at length in the Preliminary Award, including the Losinger case and the Lena Goldfields arbitration, and the writings of Weil, Lalive, P., de Aréchaga, Jiménez, and Kojanec, see Sapphire Int’l Petroleums Ltd. v. National Iranian Oil Co. (1963)Google Scholar, 35 ILR 136, 166 (1967); Rudloff case, 9 R. Int’l Arb. Awards 244, 247, and 258 (1903); Delagoa Bay Railroad case (1900), in La Fontaine, H., Pasicrisie Internationale 398, 401 (1902)Google Scholar; P. Lalive, supra note 84, at 572; Dupuy, R.-J., The Law of the Sea 157 (1974)Google Scholar; 2 D. P. O’Connell, International Law 990 (2d ed. 1970); Kojanec, , Problèmes de l’arbitrage entre états et compagnies privées étrangères, 37/38 Annuaire de l’A.A.A. 99, 107 (1967/1968)Google Scholar; White, G., Nationalization of Foreign Property 172 (1961)Google Scholar; Scelle, , Draft on Arbitral Procedure Adopted by the Commission at its Fifth Session, in [1958] 2 Y.B. Int’l L. Comm’n 1, 3Google Scholar, UN Doc. A/CN.4/SER.A/1958/ Add.1.

86 TOPCO/CALAS1ATIC Preliminary Award, 53 ILR at 412.

87 Id. at 413–15. See also note 33 supra.

88 For a detailed analysis of the relevant international decisions and writings of legal scholars, which almost without exception confirm this principle, see the comprehensive reports and references of the International Law Commission in Report of the International Law Commission on its 25th session, 28 UN GAOR, Supp. (No. 10) 29–32, UN Doc. A/9010/Rev.1 (1979); and see [1971] 2 Y.B. Int’l L. Comm’n 238–42, UN Doc. A/CN.4/SER.A/1971/Add.1. It is also clear that the position of an organ of the state in the organization of the state is irrelevant in determining whether the responsibility of the state is engaged by the conduct of the organ. Report of the International Law Commission on its 26th session, 29 UN GAOR, Supp. (No. 10) 116, UN Doc. A/9610/Rev. 1 (1974); for a thorough analysis of this point, see the ILC’s Report on its 25th session, supra, at 32–36; and see [1971] 2 Y.B. Int’l L. Comm’n, supra, at 243–53.

89 TOPCO/CALASIATIC Preliminary Award, 53 ILR at 415–16.

90 See the cases referred to by Dupuy in id. at 417–18.

91 Id. at 416 and 418.

92 Id. at 418–19.

93 LIAMCO award, 20 ILM at 39–40.

94 Mahmassani stated:

It is widely accepted in international law and practice that an arbitration clause survives the unilateral termination by the State of the contract in which it is inserted and continues in force even after that termination. This is a logical consequence of the interpretation of the intention of the contracting parties, and appears to be one of the basic conditions for creating a favorable climate for foreign investment.

Id. at 40.

95 Id. at 40–41.

96 Id. at 41–42.

97 For a discussion of the problems connected with both schools of thought, see generally, e.g., Lew, J., Applicable Law in International Commercial Arbitration 245–72 (1978)Google Scholar; Hecke, van, Réflexions sur l’arbitrage au point de vue de son intégration dans les divers ordres juridiques, in 2 Multitudo Legum—Ius Unum (Mélanges en l’Honneur de Wilhelm Wengler) 357 (1973)Google Scholar.

98 BP award, 53 ILR at 308–09.

99 Arbitration between The State of Saudi Arabia and The Arabian American Oil Co. (1958), 27 ILR 117, 155–56(1963).

100 BP award, 53 id. at 309–11. See Sapphire Int’l Petroleums Ltd. v. National Iranian Oil Co., 35 id. at 169; Alsing Trading Co., Ltd. & Svenska Tandsticks Aktiebolaget v. The Greek State (1954), 23 id. at 633,639 (1956); Mann, Lexfacitarbitrum, in International Arbitration, Liber Amicorum for Martin Domke 157, 159––61, 164––68 (Sanders, P. ed. 1967)Google Scholar; Schwebel, , The Alsing Case, 8 Int’l & Comp. L.Q. 320, 328 (1959)Google Scholar. For criticism of choosing the law of the place of arbitration as the procedural law, especially in economic development agreements, see, e.g., J. Lew, supra note 97, at 252––55; Fouchard, , L’Autonomic de l’arbitrage commercial international, [1965] Rev. Arbitrage 99, 103––05Google Scholar; Suratgar, , The Sapphire Arbitration Award, the Procedural Aspects, 3 Colum. J. Transnat’l L. 152, 176––87, 199––203 (1965)Google Scholar; Goldman, , Les Conflits de lois dans I’arbitrage international de droit privé, 109 Recueil des Cours 347, 413––14 (1963 II)Google Scholar; see also note 108 infra.

101 BP award, 53 ILR at 309––10.

102 The effect of Libya’s nonparticipation in the TOPCOICALASIATIC and UAMCO arbitrations was handled similarly by Sole Arbitrators Dupuy and Mahmassani. See TOPCO/ CALASIATIC Award on the Merits, para. 10; LIAMCO award, 20 ILM at 43. Accord, Convention on the Settlement of Investment Disputes between States and Nationals of Other States, 17 UST 1270, TIAS No. 6090, 575 UNTS 159, Art. 45, reprinted in 1 International Commercial Arbitration, supra note 84, at 35, 50. It is widely acknowledged that the arbitral tribunal has authority to proceed to determine the merits of the dispute even upon the default of one of the parties. For references to rules of arbitration providing such authority and arbitrations that have proceeded in spite of governmental parties’ refusal to participate, see MacCrate, supra note 52, at 42–45.

103 BP award, 53 ILR at 311–13.

104 Two authors have emphasized the importance of attaching an arbitral award to a national legal system and questioned Dupuy’s approach. See 2 J. G. Wetter, supra note 59, at 409–10, and Mann, supra note 56, at 65.

105 TOPCO/CALASIATIC Award on the Merits, para. 12.

106 27 ILR at 154–56.

107 TOPCO/CALASIATIC Award on the Merits, paras. 13–14.

108 Id., paras. 15–16. Accord, Sanders, , Aspects de I’arbitrage international, 53 Rev. Droit Int’l & Droit Compare 129, 137–38 (1976)Google Scholar; Eisemann, , La Situation actuelle de l’arbitrage commercial international entre états ou entilés étatiques et personnes physiques ou morales étrangères de droit privé, [1975] Rev. Arbitrage 279, 287–91 (1975)Google Scholar. See also note 100 supra.

109 LIAMCO award, 20 ILM at 42.

110 Convention on the Settlement of Investment Disputes between States and Nationals of Other States, supra note 102, Art. 44:

Any arbitration proceeding shall be conducted in accordance with the provisions of this Section and, except as the parties otherwise agree, in accordance with the Arbitration Rules in effect on the date on which the parties consented to arbitration. If any question of procedure arises which is not covered by this Section or the Arbitration Rules or any rules agreed by the parties, the Tribunal shall decide the question.

See, e.g., Broches, , The Convention on the Settlement of Investment Disputes between States and Nationals of Other States, 136 Recueil des Cours 331, 386 (1972 II)Google Scholar.

111 Swiss Intercantonal Arbitration Convention, Art. 24, para. 1: “The arbitral rules of procedure shall be determined by agreement between the parties, or in default of such agreement by decision of the arbitral tribunal.” Concordat Suisse Sur l’arbitrage 85 and commentary at 85–86 (1974).

112 Draft Convention on Arbitral Procedure, Art. 13, para. 2: “In the absence of any agreement between the parties concerning the procedure of the tribunal, the tribunal shall be competent to formulate its rules of procedure.” Commentary on the Draft Convention on Arbitral Procedure Adopted by the International Law Commission at its fifth session, UN Doc. A/CN.4/92, at 52, and commentary at 55 (1955).

113 LIAMCO award, at 82.

114 Id. at 83. Mahmassani could also have referred to the Rules of Arbitration of the International Chamber of Commerce (in force on June 1, 1955), Art. 11:

The rules governing the proceedings before the arbitrator shall be those resulting from these Rules and, where these Rules are silent, any rules which the parties (or, failing them, the arbitrator) may settle, and whether or not reference is thereby made to a municipal procedural law to be applied to the arbitration.

Reprinted in 15 ILM 395, 402 (1976). See Derains, Note, 106 J. Droit Int’l 989, 991–92 (1979).

115 LIAMCO award, 20 ILM at 43.

116 2 J. G. Wetter, supra note 59, at 409–10. Wetter was the secretary in the BP arbitration.

117 United Nations (New York) Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958), 21 UST 2517, 2520, TIAS No. 6997, 330 UNTS 3, 9, U.S.C. §201 et seq.

118 See, e.g., Higgins, , Brown, , & Roach, , Pitfalls in International Commercial Arbitration, 35 Bus. Law. 1035, 1046 n.42 (1980)Google Scholar; Derains, supra note 114, at 992; Gaja, G., International Commercial Arbitration: New York Convention §I.C, at 3Google Scholar, and the extensive references at §I.D., at 22–23 n.67 (pt. I, 1978); J. Lew, supra note 97, at 250–52; J. Robert, supra note 84, at 414–19; P. Fouchard, supra note 80, at 145–46, 326. Interestingly, in opposing LIAMCO’s action to enforce the award in the District Court for the District of Columbia (see note 277 infra) and LIAMCO’s efforts to attach Libya’s assets in Switzerland (see note 285 infra), Libya neither challenged the validity of the LIAMCO award nor argued that Article V(l) (d) of the New York Convention could be used to refuse enforcement because the arbitral procedure was not the law of the situs, i.e., the law of the Canton of Geneva. Libyan American Oil Co. v. Socialist People’s Libyan Arab Jamahirya, 482 F. Supp. 1175, 1177 (D.D.C. 1980), appeal docketed, Nos. 80–1207 and 8 0–1252 (D.C. Cir., Feb. 15, 1980), vacated (D.C. Cir., May 6, 1981); Socialist People’s Libyan Arab Jamahiriya v. Libyan American Oil Co. (LIAMCO), Decision of the Swiss Federal Supreme Court (First Public Law Department, June 19, 1980) (All-Language Services, Inc. trans, from original German text), reprinted in 20 ILM 152, 154 (1981). For a discussion of the legislative history of this provision, see, e.g., Contini, , The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 8 Amer. J. Comp. L. 283, 301–03 (1959)Google Scholar.

119 For a discussion of potential difficulties in the United States, see von Mehren, R., The Foreign Sovereign Immunities Act of 1976, 17 Colum. J. Transnat’l L. 33, 57–65 (1978)Google Scholar. For the problems encountered by LIAMCO in its attempt to enforce the award, see notes and text at notes 276–285 infra.

120 See discussion in text at notes 234–239 infra.

121 See generally Statement on “Hot” Libyan Oil, supra note 32; MacCrate, supra note 52, at 24–26, referring extensively to “pursuit” cases.

122 In the LIAMCO arbitration Mahmassani was not able to find a common principle applicable to one aspect of damages (loss of profits, lucrum cessans) and, accordingly, he turned to the second portion of the choice-of-law provision, the general principles of law as applied by international tribunals. He specifically chose the general principle of equity, which he found to be unanimously recognized as a supplementary source of law in Libyan law, Islamic law, and international law, and adopted the formula of “equitable compensation” to measure the extent of damages. LIAMCO award, 20 ILM at 76–77. See the more detailed discussion at note 272 infra.

123 TOPCO/CALASIATIC Award on the Merits, para. 25; LIAMCO award, 20 ILM at 32–34. See, e.g., J. Lew, supra note 97, at 71 -102; Fischer, P., Die Internationale Konzession 347 (1974)Google Scholar; Rashed, , Vers un droit international privé des investissements dans les pays en vote dé developpement, 29 Rev. Egyptienne Droit Int’l 137, 167 (1973)Google Scholar; Böckstiegel, K.-H., Der Staat als Vertragspartner Auslöndischer Privatunternehmen 85 (1971)Google Scholar; Weil, supra note 84, at 174; Hambro, , Autonomy in the International Contract Law of the Nordic States, 6 Int’l & Comp. L.Q. 589, 591 (1957)Google Scholar.

124 TOPCO/CALASIATIC Award on the Merits, paras. 29–34. For authorities confirming that parties to a contract between a state and a private foreign party may subject their contractual relationship, or some aspects of it, to international law, see, e.g., Resolution of the Institut de Droit International (Athens Sess., Sept. 1979), Art. 2, reprinted in 70 Rev. Critique Droit Int’l Privé 427 (1980); J. Lew, supra note 97, at 405–19; Sanders, supra note 108, at 137; Mann, , Contrats entre états et personnes privées étrangères, 11 Rev. Belge Droit Int’l 562, 564–65 (1975)Google Scholar; Eisemann,supra note 108, at 291–95; 1 G. R. Delaume, supra note 84, §1.01, at 3–6 (Booklet 2, 1980); Cattan, H., The Law of Oil Concessions in the Middle East and North Africa 68–72 (1967)Google Scholar.

125 TOPCO/CALASIATIC Award on the Merits, paras. 46–50. For three recent articles discussing from various points of view the “internationalization” aspect of the TOPCOICALASI ATIC arbitration, see Verhoeven, , Droit international des contrats et droit de gens, 14 Rev. Belge Droit Int’l 209, 213–21 (1978–1979)Google Scholar; Rigaux, , Des dieux et des héros, 67 Rev. Critique Droit Int’l Privé 435, 444–52 (1978)Google Scholar; Cohen-Jonathan, , L’Arbitrage Texaco-Calasiatic contre gouvernement libyen, 23 Annuaire Français Droit Int’l 452, 454–66 (1977)Google Scholar.

126 TOPCO/CALASIATIC Award on the Merits, para. 48.

127 Dupuy has discussed these criteria for internationalization of a contract in an earlier study. R.-J. Dupuy, supra note 85, at 153–56.

128 TOPCO/CALASIATIC Award on the Merits, para. 45. In Revere Copper & f Brass, Inc. v. OPIC, the arbitrator confirmed this reasoning and found it persuasive:

A traditional international law approach has been to leave questions of breach of contract to the municipal law governing the contract. . . . In recent years, however, a series of decisions by Arbitration Tribunals, applying the view of outstanding international jurists, has developed an exception to this narrow approach where contracts fall within a category known as long term economic development agreements. In such cases, the question of breach is not left to the determination of municipal courts applying municipal law. The reason for this is that such contracts, while not made between governments and therefore wholly international, are basically international in that they are entered into as part of a contemporary international process of economic development, particularly in the less developed countries. The very reason for their existence is that the private parties entering into such agreements and committing large amounts of capital over a long period of time require contractual guarantees for their security; governments of developing countries in turn are willing to provide such guarantees in order to promote much needed economic development.

Reprinted in 17 ILM 1321, 1331 (1978). See also, e.g., Sapphire Int’l Petroleums Ltd. v. Nat’l Iranian Oil Co., 35 ILR at 171.

129 TOPCO/CALASIATIC Award on the Merits, para. 44. See, e.g., Goldman, , La Lex mercaloria dans les contrats et farbitrage internationaux, 106 J. Droit Int’l 475, 481 (1979)Google Scholar; J. Lew, supra note 97, at 82–83; Weil, supra note 84, at 153–56; H. Cattan, supra note 124, at 96–98; Lalive, J.-F., Contracts between a State and a Foreign Country, 13 Int’l & Comp. L.Q. 987, 996–97 (1964)Google Scholar; Domke, , Foreign Nationalizations: Some Aspects of Contemporary International Law, 55 AJIL 585, 596 (1961)Google Scholar; Fragistas, , Arbitrage étranger et arbitrage international en droit privé, 49 Rev. Critique Droit Int’l Privé 1, 14–17 (1959)Google Scholar; Farmanfarma, , The Oil Agreement between Iran and the Oil Consortium, 34 Tex. L. Rev. 259, 287 (1955)Google Scholar; Sapphire Int’l Petroleums Ltd. v. Nat’l Iranian Oil Co., 35 ILR at 172.

130 TOPCO/CALASIATIC Award on the Merits, para. 45.

131 BP award, 53 ILR at 329.

132 LIAMCO award, 20 ILM at 54–57.

133 Id. at 58–60 and 85.

134 W. at 62 and 85.

135 The sole arbitrator referred to the famous precept of Islamic law (a source of Libyan law) found in the Koran: “O ye believers, perform your contracts,” and to Articles 147 and 148 of the Libyan Civil Code, which confirm that contracts must be performed in good faith in accordance with their terms. TOPCO/CALASIATIC Award on the Merits, para. 51. See, e.g., Morcos opinion, supra note 74, at 9–11; Arbitration between The State of Saudi Arabia and The Arabian American Oil Co., 27 ILR at 165; Kourides, , The Influence of Islamic Law on Contemporary Middle Eastern Legal Systems, 9 Colum. J. Transnat’l L. 384, 394–97, 408–12, 420–28 (1970)Google Scholar; Habachy, , Property, Right and Contract in Muslim Law, 62 Colum. L. Rev. 450, 459, 463–67 (1962)Google Scholar; Siksek, S., The Legal Framework for Oil Concessions in the Arab World 79–82 (1960)Google Scholar; Schacht, , Islamic Law in Contemporary States, 8 Amer. J. Comp. L. 133, 139 (1959)Google Scholar; Anderson, & Coulson, , The Moslem Ruler and Contractual Obligations, 33 N.Y.U. L. Rev. 917, 929–30 (1958)Google Scholar; Opinion of Abou Zahra, in Arbitration Between The State of Saudi Arabia and The Arabian American Oil Company, Memorial of Arabian American Oil Company, Ann. 16, 345, 367 (specially pub. ed., at Columbia University School of Law Library, 1958); Mahmassani, , Transactions in the Shari’a, in Law in The Middle East 179, 191 (Khadduri, M. & Liebesny, H. J. eds. 1955)Google Scholar; 1 K. Moursi, Commentary on the New Egyptian Civil Code, para. 291, at 554 (in Arabic, 1954); 2 A. H. Higazi, The General Theory of Obligations in Egyptian Law 153–54(in Arabic, 1953); 2 D. Santillana, Istituzioni di diritto Musulmano Malichita 83–85 (1943).

136 TOPCO/CALASIATIC Award on the Merits, para. 51. See, e.g., Jessup opinion, supra note 74, at 7–10 and 71; Gormley, , The Codification of Pacta Sunt Servanda by the International Law Commission, 14 St. Louis U. L.J. 367, 371–75 (1970)Google Scholar; Fawcett, J., The Law of Nations 33–34 (1968)Google Scholar; Ray, , Law Governing Contracts between States and Foreign Nationals, in Selected Readings on Protection by Law of Private Foreign Investments 453, 483–88 (1964)Google Scholar; Waldock, , General Course on Public International Law, 106 Recueil des Cours 1, 159–60 (1962 II)Google Scholar; McNair, A., The Law of Treaties 493 (1961)Google Scholar; Wehberg, , Pacta Sunt Servanda, 53 AJIL 775 (1959)CrossRef Google Scholar; Whitton, , La Régle “Pacta Sunt Servanda,” 49 Recueil des Cours 147, 151 (1934 III)Google Scholar.

137 35 ILR at 181.

138 TOPCO/CALASIATIC Award on the Merits, para. 51.

139 A number of works point out the differences between administrative contracts and oil concession agreements. See, e.g., Toriguian, S., Legal Aspects of Oil Concessions in the Middle East 244–45 (1972)Google Scholar; Kronfol, Z., Protection of Foreign Investment—A Study in International Law 80 (1972)Google Scholar; H. Cattan, supra note 124, at 76–82; 3 A. de Laubadère, Traité Élémentaire de droit Administratif, para. 1157, at 712 (3d ed. 1963–1966); Verdross, , The Status of Foreign Private Interests Stemming from Economic Development Agreements with Arbitration. Clauses, in Selected Readings, supra note 136, at 117Google Scholar, 122–27.

140 TOPCO/CALASIATIC Award on the Merits, paras. 54–55.

141 Id., paras. 55–56.

142 Id., paras. 56 and 72. Because two essential elements of administrative contracts are (1) the ability of the public authority to alter unilaterally the terms of the contract, and (2) the jurisdiction of a municipal administrative court over disputes arising under the contract, and because such elements are removed by the stabilization-of-rights and international arbitration clauses, some writers have concluded, on this basis alone, that international contracts containing these provisions cannot be characterized as administrative contracts. Professor Toriguian of the Lebanese University supports this position:

[T]he typical Middle Eastern oil contract is a different type of agreement [from an administrative contract]. Here the parties chose to treat each other as equal partners and expressly or by implication excluded the application of the municipal law of either party and opted instead for an independent judicial machinery. To argue in these cases about the sovereign rights of a State is to defeat the very purpose of the contract.

S. Toriguian, supra note 139, at 244–45. See also, e.g., H. Cattan, supra note 124, at 82 and 86; Bourquin, , Arbitration and Economic Development Agreements, 15 Bus. Law. 860, 867 (1960)Google Scholar; García-Amador, , International Responsibility, [1959] 2 Y.B. Int’l L. Comm’n 32, UN Doc. A/CN.4/ SER.A/1959/Add.1 (1960)Google Scholar.

143 TOPCO/CALASIATIC Award on the Merits, para. 57. See also Arbitration between The State of Saudi Arabia and The Arabian American Oil Co., 27 ILR at 215–16. A few authors have drawn comparisons between administrative contracts and international economic development agreements and have suggested that rules of administrative law may be helpful in the future in providing guidelines for the development of legal principles governing the relations between foreign investors and governments of developing countries. See Weil, , Un Nouveau Champ d’influence pour le droit administratif français, in Etudes et Documents 1970 (Conseil d’Etat) 13, 20–25 (1971)Google Scholar; Weil, , Droit international public et droit administratif, in Mélanges offerts À Louis Trotabas 511 (1970)Google Scholar; Fatouros, , The Administrative Contract in Transnational Transactions, in Ius Privatum Gentium: Festschrift für Max Rheinstein 259 (1969)Google Scholar; Friedmann, , The Uses of “General Principles” in the Development of International Law, 57 AJIL 279, 290–95 (1963)Google Scholar. An extreme view taken by certain persons of the developing world is that oil concession agreements should be treated as administrative contracts and be subject to the absolute and unlimited regulation of the state. Their reasoning is based on political rather than legal considerations. See, e.g., Sultan, , Legal Nature of Oil Concessions, 21 Rev. Egyptienne Droit Int’l 73 (1965)Google Scholar.

144 TOPCO/CALASIATIC Award on the Merits, para. 57. The sole arbitrator also found that the theory of administrative contracts cannot be regarded as a “general principle of law.” Ibid.

145 Id., paras. 58 and 79. Dupuy also emphasized that nationalizations which are invalid under international law do not produce extraterritorial effects and cannot alter the legal existence of companies that do not have the nationality of the nationalizing state. Id., para. 58. For an extremely broad and contrary view of the extraterritorial effects of nationalizations, see El-Kocheri, , Les Nationalisations dans les pays du tiers monde devant le juge occidental, 56 Rev. Critique Droit Int’l Privé 249, 263–74 (1967)Google Scholar.

146 TOPCO/CALASIATIC Award on the Merits, paras. 59–62. See, e.g., Arbitration between The State of Saudi Arabia and The Arabian American Oil Co., 27 ILR at 168; The S.S. Wimbledon, [1923] PCIJ, ser. A, No. 1, at 5; P. Lalive, Réflexions Sur l’Etat et ses Contrats Internationaux 21–25 (1976); Weil, , Les Clauses de stabilisation ou d’intangibilité insérées dans les accords de développement économique, in Mélanges Offerts À Charles Rousseau 301, 324 (1974)Google Scholar; Z. Kronfol, supra note 139, at 85; Nwogugu, E., The Legal Problems of Foreign Investment in Developing Countries 174 (1965)Google Scholar; Wadmond, , The Sanctity of Contract between a Sovereign and a Foreign National, in Selected Readings, supra note 136, at 139, 143–44Google Scholar; Waldock, supra note 136, at 160; Abdel-Wahab, , Economic Development Agreements and Nationalization, 30 U. Cincinnati L. Rev. 418, 440–41 (1961)Google Scholar; Kissam, & Leach, , Sovereign Expropriation of Property and Abrogation of Concession Contracts, 28 Fordham L. Rev. 177, 224 (1959)Google Scholar; De Visscher, C., Théories et Réalités en Droit International Public 244 (2d ed. 1955)Google Scholar; Memorial Submitted by the Government of the United Kingdom of Great Britain and Northern Ireland, Anglo-Iranian Oil Co. Case, ICJ Pleadings 64, 80–81 (1951); see also Kahn, , Les Investissements étrangers dans les pays en voie de développement, 81 Rev. Droit Pays Afr. 163, 185–86 (1971)Google Scholar.

147 TOPCO/CALASIATIC Award on the Merits, paras. 64–69.

148 Id., paras. 64–65. Schacht, supra note 135, at 144; Anderson & Coulson, supra note 135, at 929–30 and 932; Opinion of Abou Zahra, supra note 135, at 367; 3 Ibn Taimiya, Majmu’at Fatawa 331 (in Arabic, 1911); Arbitration between The State of Saudi Arabia and The Arabian American Oil Co., 27 ILR at 163–64. As Ibn Taimiya, an eminent Muslim jurist, said:

For everyone who has committed a breach of faith there shall be a flag [of disgrace]. On the day of judgment it will be hoisted. Its height will be in proportion to the enormity of his breach of faith. No breacher of faith is more unjust than an amir [prince] who breaks his covenant.

Majmu’at Fatawa, supra, at 331.

149 TOPCO/CALASIATIC Award on the Merits, para. 65.

150 Ibid.

151 LIAMCO award, 20 ILM at 56–57.

152 TOPCO/CALASIATIC Award on the Merits, paras. 67–68. For the general principle that a state cannot invoke its municipal law as an excuse for failure to comply with an international obligation, see, e.g., Report of the International Law Commission on its 25th session, supra note 88, at 23–24.

153 17 ILM at 1342–43.

154 LIAMCO award, 20 ILM at 56.

155 TOPCO/CALASIATIC Award on the Merits, paras. 70–71. For authorities confirming the effect of stabilization clauses, see, in particular, Weil, supra note 146, at 308, 326–27; P. Fischer, supra note 123, at 379; S. Toriguian, supra note 139, at 240–41; Z. Kronfol, supra note 139, at 85–87; Weil, supra note 84, at 229–34; H. Cattan, supra note 124, at 47–48; G. Cohen-Jonathan, Les Concessions en droit international public 450, 496–99 (unpub. thesis, 1966); Fatouros, A., Government Guarantees to Foreign Investors 63 (1962)Google Scholar; Wetter, , Salient Clauses in International Investment Contracts, 17 Bus. Law. 967, 973, 977–78 (1962)Google Scholar; Domke, supra note 129, at 591–94; de Visscher, P., Les Aspects juridiques fondamentaux de la question de Suet, 62 Rev. Générale Droit Int’l Public 436, 439 (1958)Google Scholar.

156 TOPCO/CALASIATIC Award on the Merits, para. 71. Weil has suggested that by agreeing to the insertion of a stabilization-of-rights clause in an international contract the host state engages its international responsibility towards the foreign investor. Hence, under international law, Libya is obliged under the doctrine of state responsibility to perform the terms of the contract. Weil, supra note 146, at 321. Contra, Jimenez de Arechaga, supra note 84, at 192, and International Law in the Past Third of a Century, 159 Recueil des Cours 1, 307 (1978 I). Relying on the Charter of Economic Rights and Duties of States, Jiménez de Aréchaga proposes that breach of stabilization clauses gives rise only to a special right to compensation, e.g., “a duty to compensate for the prospective gains (lucrum cessans) to be obtained by the private party during the period that the concession still has to run.” Ibid.

157 LIAMCO award, 20 ILM at 30–31.

158 Another argument that may be made in support of the oil companies’ position is based on the principle of estoppel. If Libya were to argue that it cannot be held to its international agreements because of contrary domestic legislation, a tribunal should reject Libya’s claim also on equitable grounds of estoppel. Two aspects of estoppel would be applicable: the rule that a state cannot rely on its own wrong to excuse failure to fulfill its international obligations; and the rule that prior recognition of and agreement to a condition (as reflected by a stabilization-of-rights clause) should bar a state from subsequently challenging what it has recognized or agreed to. See, e.g., the statement of G. Fitzmaurice for the United Kingdom in Interpretation of the Peace Treaties, ICJ Pleadings 362, 374–75 (1950); Shufeldt Claim (United States v. Guatemala), 2 R. Int’l Arb. Awards 1079, 1094 (1930), reprinted in 24 AJIL 799, 813–14 (1930); Weil, supra note 146, at 305–06; Z. Kronfol, supra note 139, at 87–88; Dominice, , A propos duprincipe de I’estoppel en droit des gens, in Recueil d’Études de droit International (En Hommage A Paul Guggenheim) 327 (1968)Google Scholar; MacGibbon, , Estoppel m International Law, 7 Int’l & Comp. L.Q. 468, 480–82 (1958)Google Scholar. But see, for a more limited view, Pazarci, , La Responsabilite internationale des états à l’occasion des controls conclus entre états et personnes Privées étrangères, 79 Rev. Générale Droit Int’l Public 354, 411–12 (1971)Google Scholar.

159 TOPCO/CALASIATIC Award on the Merits, paras. 68 and 71. The British Government made a similar argument and took a similar position before the International Court of Justice in 1952 after the Iranian expropriations:

The Government of the United Kingdom does not dissent from the proposition that a State is entitled to nationalize and, generally, to expropriate concessions guaranteed to foreigners to the same extent as other property owned by foreigners. The exercise of that right, with regard to concessions and other property rights, is, however, subject to limitations clearly established by international practice and resting on well-recognized principles of international law. These limitations include, in particular, the principle that a State is not entitled to nationalize a concession if, by . . . a provision in the contract of concession, it has expressly divested itself of the right to do so. . . .

Anglo-Iranian Oil Co. Case, ICJ Pleadings at 85 (1951).

160 Jus cogens can be translated literally as “compelling law” and is usually used to indicate peremptory norms of international law. Article 53 of the Vienna Convention on the Law of Treaties defines a peremptory norm of general international law as “a norm accepted and recognized by the international community of States as a whole as a norm from which no derogation is permitted and which can be modified only by a subsequent norm of general international law having the same character.” UN Doc. A/CONF.39/27 (1969), reprinted in 63 AJIL 875 (1969), 8 ILM 679 (1969). See generally, e.g., Whiteman, , Jus Cogens in International Law, with a Projected List, 7 GA. J. Int’l & Comp. L. 609 (1977)Google Scholar; Schwelb, , Some Aspects of International Jus Cogens as Formulated by the International Law Commission, 61 AJIL 946 (1967)CrossRef Google Scholar; Verdross, , Jus Dispositivum and Jus Cogens in International Law, 60 id. at 55 (1966)Google Scholar; Schwarzenberger, , International Jus Cogens?, 43 Tex. L. Rev. 455 (1965)Google Scholar; Fitzmaurice, , The General Principles of International Law Considered from the Standpoint of the Rules of Law, 92 Recueil des Cours 1, 120 (1957 II)Google Scholar.

161 TOPCO/CALASIATIC Award on the Merits, paras. 74–77.

162 Id., para. 77.

163 Id para. 79.

164 See generally Feuer, , Les Principes fondamentaux dans le droit international du développement, in Pays en voie de Développement et Transformation du droit International 191, 215–18 (Colloque d’Aix-en-Provence, 1973)Google Scholar.

165 Traditionally, in order to establish a rule of customary international law, it has been necessary to demonstrate that the consistent practice of states supports a certain rule and that those states believed (held the opinio juris) that they were legally obligated to follow that rule. For an excellent recent study of customary international law, see Akehurst, , Custom as a Source of International Law, 47 Brit. Y.B. Int’l L. 1 (1974–1975)Google Scholar. See also, in general, Charpentier, , Tendances de l’élaboration du droit international public coutumier, in L’Elaboration du droit International Public 105 (Colloque de Toulouse, 1974)Google Scholar.

166 GA Res. 1803, 17 UN GAOR, Supp. (No. 17) 15, UN Doc. A/5217 (1962), reprinted in 57 AJIL 710 (1963), 2 ILM 223 (1963).

167 TOPCO/CALASIATIC Award on the Merits, para. 81. See generally Banerjee, , The Concept of Permanent Sovereignty Over Natural Resources, 8 Indian J. Int’l L. 515, 533–35 (1968)Google Scholar; Gess, , Permanent Sovereignty Over Natural Resources, 13 Int’l & Comp. L.Q. 398, 411 (1964)Google Scholar; Seidl-Hohenveldern, , International Organizations and the Protection of Private Property, 90 J. Droit Int’l 627, 631–50 (1963)Google Scholar; Fischer, , La Souveraineté sur les ressources naturelles, 8 Annuaire Français Droit Int’l 516 (1962)CrossRef Google Scholar. For a discussion of earlier consideration of related issues by the United Nations, see Hyde, , Permanent Sovereignty over Natural Wealth and Resources, 50 AJIL 854 (1956)CrossRef Google Scholar.

168 GA Res. 3171, 28 UN GAOR, Supp. (No. 30) 52, UN Doc. A/9030 (1973), reprinted in 68 AJIL 381 (1974), 13 ILM 238 (1974).

169 GA Res. 3201 (S-VI), 28 UN GAOR, Supp. (No. 1) 3, UN Doc. A/9559 (1974), reprinted in 68 AJIL 798 (1974), 13 ILM 715 (1974).

170 TOPCO/CALASIATIC Award on the Merits, para. 82.

171 GA Res. 3281, 29 UN GAOR, Supp. (No. 31) 50, UN Doc. A/9631 (1974), reprinted in 69 AJIL 484 (1975), 14 ILM 251 (1975).

172 TOPCO/CALASIATIC Award on the Merits, para. 82.

173 Id., paras. 83–84.

174 Id., para. 85. The sole arbitrator also considered Resolution 3201, which was adopted by the General Assembly without a vote. However, the statements of many delegates indicated that the most important Western countries again opposed giving up the approach to nationalization embodied in Resolution 1803. Ibid.

175 See text at notes 192–194.

176 TOPCO/CALASIATIC Award on the Merits, para. 85. For general background on the voting pattern, see Rozental, , The Charter of Economic Rights and Duties of States and the New International Economic Order, 16 Va. J. Int’l L. 309, 318–19 (1976Google Scholar).

177 For authorities who generally do not recognize General Assembly resolutions as having a binding legal nature, see, in particular, Arangio-Ruiz, , The Normative Role of the General Assembly of the United Nations and the Declaration of Principles of Friendly Relations, 137 Recueil des Cours 419, 434–518 (1972 III)Google Scholar, for the most comprehensive and thorough work in the area; and see, e.g., Schwebel, , The Effect of Resolutions of the U.N. General Assembly on Customary International Law, 73 ASIL Proc. 301, 302 (1979)Google Scholar; Stone, , Conscience, Law, Force and the General Assembly, in Jus et Societas (Essays in Tribute to Wolfgang Friedmann) 297, 333–37 (Wilner, G. M. ed. 1979)Google Scholar; Suy, , Innovations in International Law-Making Processes, in The International Law and Policy of Human Welfare 187, 190 (Macdonald, , Johnston, , & Morris, eds., 1978)Google Scholar; Bos, , The Recognized Manifestations of International Law, a New Theory of “Sources” 20 Ger. Y.B. Int’l L. 9, 68–69 (1977)Google Scholar; Sinha, , Identifying a Principle of International Law Today, 11 Can. Y.B. Int’l L. 106, 116–20 (1973)Google Scholar; Virally, , The Sources of International Law, in Manual of Public International Law 116, 160–62 (Sørensen, M. ed. 1968)Google Scholar; Bishop, , General Course of Public International Law, 115 Recueil des Cours 147, 241–45 (1965 II)Google Scholar; Petren, , La Confiscation des biens etrangers et les reclamations intemationales auxquelles elle pent donner lieu, 109 id. at 492, 563 (1963 II)Google Scholar; Brierly, J., The Law of Nations 110 (6th ed. 1963)Google Scholar; Vallat, , The Competence of the United Nations General Assembly, 97 Recueil des Cours 203, 230–31 (1959 II)Google Scholar; Galino, , Las Resoluciones de la asamblea general de las Naciones Unidas y su fuerza legal, 11 Rev. Española Derecho Int’l 96, 115–16, 121, 127–28 (1958)Google Scholar; Virally, , La Valeur juridique des recommendations des organisations intemationales, 2 Annuaire Francais Droit Int’l 66 (1956)CrossRef Google Scholar; Johnson, , The Effect of Resolutions of the General Assembly of the United Nations, 32 Brit. Y.B. Int’l L. 97, 121–22 (1955–1956)Google Scholar; Sloan, , The Binding Force of a “Recommendation” of the General Assembly of the United Nations, 25 id. at 1, 31–32 (1948)Google Scholar; see also note 183 infra. Erik Suy, Under Secretary-General and Legal Counsel of the United Nations, recently concluded:

The General Assembly’s authority is limited to the adoption of resolutions. These are mere recommendations having no legally binding force for member states. Solemn declarations adopted either unanimously or by consensus have no different status, although their moral and political impact will be an important factor in guiding national policies. Declarations frequently contain references to existing rules of international law. They do not create, but merely restate and endorse them. Other principles contained in such declarations may appear to be new statements of legal rules. But the mere fact that they are adopted does not confer on them any specific and automatic authority. The most one could say is that overwhelming (or even unanimous) approval is an indication of opinio juris sive necessitatis; but this does not create law without any concomitant practice, and that practice will not be brought about until states modify their national policies and legislation. It may also arise, however, through the mere repetition of principles in subsequent resolutions to which states give their approval. The General Assembly, through its solemn declarations, can therefore give an important impetus to the emergence of new rules, despite the fact that the adoption of declarations per se does not give them the quality of binding norms.

Suy, supra, at 190.

178 For authors inclined to find normative legal value in certain circumstances in General Assembly resolutions, see the informative discussions in Schachter, , Towards a Theory of International Obligation, in The Effectiveness of International Decisions 9, 11–31 (Schwebel, S. M. ed. 1971)Google Scholar; Castañeda, , Valeur juridique des résolutions des Nations Unies, 129 Recueil des Cours 205, 211–26 (1970 I)Google Scholar; Castañeda, J., Legal Effects of United Nations Resolutions 1–21 (1969)Google Scholar; Bleicher, , The Legal Significance of Re-citation of General Assembly Resolutions, 63 AJIL 444 (1969)CrossRef Google Scholar; Asamoah, O., The Legal Significance of the Declarations of the General Assembly of The United Nations 19–25, 46–62, 68–75 (1966)Google Scholar; Falk, , On the Quasi-Legislative Competence of the General Assembly, 60 AJIL 782 (1966)CrossRef Google Scholar; Schachter, , The Relation of Law, Politics and Action in the United Nations, 109 Recueil des Cours 165, 169–200 (1963 II)Google Scholar; Higgins, R., The Development of International Law Through the Political Organs of the United Nations 1–10 (1963)Google Scholar.

179 Jiménez de Aréchaga confirmed Dupuy’s approach to assessing the legal value of resolutions of the General Assembly. Jiménez de Aréchaga listed three possible effects they could be given with respect to developing customary international law:

Thus in a General Assembly declaration rules of customary law may be recognized as pre-existing norms and declared to be so; an emerging rule of customary law in status nascendi may crystallize thanks to a unanimously adopted General Assembly declaration; a resolution by the General Assembly which is clearly de lege ferendae may however provide the basis for a subsequent and concordant practice of States which will transform the resolution into a rule of customary international law.

Jiménez de Aréchaga, supra note 156, at 31. He emphasized, however, that determining when each effect occurs requires careful analysis of all die provisions of a resolution and the circumstances surrounding its passage, including among other things, “the drafting of the text; the voting strength it obtained; the statements made by members during the process of deliberation and the subsequent conduct of States (and of the United Nations itself) in respect of each resolution.” Ibid.

Akehurst confirms the importance of looking at the voting figures and at the reasons given by states for casting their votes in order to determine whether a General Assembly resolution is evidence of customary law; see Akehurst, supra note 165, at 6–7.

180 TOPCO/CALASIATIC Award on the Merits, para. 86.

181 The Canadian delegate articulately expressed the views of the developed nations that voted against the Charter:

Even among states which, like Canada, hold the view that there are principles of customary international law which are relevant to the treatment of foreign investment, there is disagreement about the precise content of those principles. Where the old law is unjust or ineffective, it must be changed to reflect the present economic interdependence of States and the need for development of the developing countries, which are the two most important facts of economic life in our generation. It had been the hope of my delegation that this charter would command the consensus necessary to enable it to contribute to the codification and progressive development of law in this area; unhappily, this is not the case.

29 UN GAOR (2315th plen.) 57–58, UN Doc. A/PV.2315 (1974).

182 TOPCO/CALASIATIC Award on the Merits, para. 86.

183 For articles discussing the nonbinding legal effect of the Charter, see, e.g., Petersmann, , The New International Economic Order, in The International Law and Policy of Human Welfare, supra note 177, at 449Google Scholar, 462–63; Carreau, , Le Nouvel Ordre économique international, 104 J. Droit Int’l 595, 596 (1977)Google Scholar; Martin, , Le Nouvel Ordre économique international, 80 Rev. Générale Droit Int’l Public 502, 529–35 (1976)Google Scholar; White, , A New International Economic Order? 16 Va. J. Int’l L. 323, 330 (1976)Google Scholar; McWhinney, , The International Law-Making Process and the New International Economic Order, 14 Can. Y.B. Int’l L. 57, 67 (1976)Google Scholar; Feuer, , Réflexions sur la charte des droits et devoirs économiques des états, 79 Rev. Générale Droit Int’l Public 273, 298–306 (1975)Google Scholar; Salem, , Vers un nouvel ordre économique international à propos des travaux de la 6eme session extraordinaire des Nations Unies, 102 J. Droit Int’l 753, 799 (1975)Google Scholar; Haight, , The New International Economic Order and the Charter of Economic Rights and Duties of States, 9 Int’l Law. 591, 596–97 (1975)Google Scholar; Brower, & Tepe, , The Charter of Economic Rights and Duties of States, id. at 295, 300–09Google Scholar; Committee on Inter-American Affairs, The UN Charter of Economic Rights and Duties of States, 30 Rec. A. B. City N.Y. 409,411–13(1975); Virally, La Charte des droits et devoirs économiques des états, 20 Annuaire Français Droit Int’l 57 (1974). See generally Schreuer, , Recommendations and the Traditional Sources of International Law, 20 Ger. Y.B. Int’l L. 103, 116 (1978)Google Scholar.

184 M TOPCO/CALASIATIC Award on the Merits, para. 88. See, e.g., Virally, supra note 183, at 59.

185 Dupuy said:

Resolution 1803 (XVII) seems to this Tribunal to reflect the state of customary law existing in this field. Indeed, on the occasion of the vote on a resolution finding the existence of a customary rule, the States concerned clearly express their views. The consensus by a majority of States belonging to the various representative groups indicates without the slightest doubt universal recognition of the rules therein incorporated, i.e., with respect to nationalization and compensation the use of the rules in force in the nationalizing State, but all this in conformity with international law.

TOPCO/CALASIATIC Award on the Merits, para. 87. See also O. Asamoah, supra note 178, at 98–100; Schwebel, The Story of the United Nations’ Declaration on Permanent Sovereignty over Natural Resources, in Selected Readings, supra note 136, at 699, 704–13.

186 TOPCO/CALASIATIC Award on the Merits, para. 88.

187 Ibid. Piper, , New Directions in the Protection of American-Owned Property Abroad, 4 Int’l Tr. L.J. 315, 328 (1979)Google Scholar, confirms Dupuy’s conclusion. Dupuy’s creative and reasoned discussion of the nonbinding effect of the Charter was the logical outgrowth and development of ideas the sole arbitrator had expressed in writings a few years earlier. In the Colloque de Toulouse sponsored by the Société Française pour le Droit International in 1974, Dupuy distinguished between resolutions purporting to declare existing law and those proposing new law. Although resolutions proposing new law are not legally binding, they have some juridical value, depending on their scope and application. Dupuy suggested three criteria to determine their effect: “the conditions governing the vote which adopted them, the degree of precision of the terms of the resolutions, and the types of pressure which could be brought to bear in support of them.” Dupuy, Droit déclaratoire et droit programmatoire: de la coutume sauvage à la “soft law,” in L’Elaboration, supra note 165, at 132, 144–45; a condensed version of this article in English appears as Declaratory Law and Programmatory Law: From Revolutionary Custom to “Soft Law,” in Declarations on Principles 247, 254–55 (Akkerman, van Kreiken, & Pannenborg eds., 1977).

188 White reasoned as follows:

The phrase “codify and develop rules for” was replaced by the co-sponsors with “to promote”. The subsequent obligatory language was amended to read “. . . peace-loving States which are willing to carry out the provisions of this Charter!”]. The removal of the word “obligations”, together with the other amendments to these passages, clarifies the intentions of the States proposing the resolution that one should not subjectively regard it as having the force of a treaty codifying and developing legal rules. Instead, the Charter represents only a collection of policy prescriptions supported by the overwhelming majority of U.N. members. How else can one explain the retention of the word “willing” in the preamble? If an instrument creates or restates legal norms, a State’s “willingness” to fulfill the provisions is legally irrelevant. This term indicates the exhortatory nature of the document.

White, supra note 183, at 329–30.

189 Id. at 330.

190 Feuer, supra note 183, at 300–01.

191 Id. at 301–04. Feuer wrote:

It is difficult, moreover, to claim “that the Charter represents the beginning of a new customary law. . . . But die same draft of the text . . . and the preparatory works show that the States which had supported the Charter considered it only as a. declaration on the law which they regarded as desirable to establish in international economic relations. Only subsequent practice (frequency and precedential nature, facts showing affirmation that States had accepted the rule insofar as the rule was law) would permit one to say whether a customary law is in the process of formation.

Id. at 302–03 (emphasis in original). For earlier consistent views, see, e.g., Bastid, Observations sur une “étape” dans le développement progressif et la codification des principes du droit international, in Recueil d’Études, supra note 158, at 132, 145.

192 For a general discussion of the developing countries’ position, and an analysis of the history and evolution of this position in the United Nations as ultimately reflected in the Charter, see García-Amador, The Proposed New International Economic Order, 12 Law. Americas 1, 24–44 (1980).

193 TOPCO/CALASIATIC Award on the Merits, para. 90. Compare Brownlie, , Legal Status of Natural Resources in International Law (Some Aspects), 162 Recueil des Cours 245, 268–71 (1979 I)Google Scholar.

194 Castañeda, , La Charte des Droits et Devoirs Economiques des Etats, 20 Annuaire Français Droit Int’l 31, 54 (1974)Google Scholar. Jiménez de Aréchaga adds support to this view:

It follows that it is not entirely accurate to say that international law has been “utterly rejected” by the Charter of Economic Rights and Duties of States. Though expelled through the door because of its alleged identification with the doctrine of “adequate, prompt and effective compensation”, it has come back through the window in the garb of an equitable principle which takes into account the specific circumstances of each case. . . .

Jiménez de Aréchaga, supra note 156, at 305, and supra note 84, at 188. Contra, Piper, On Changing or Rejecting the International Legal Order, 12 Int’l Law. 293, 301–07 (1978).

195 See Schwebel,supra note 177, at 305–06; Verhoeven,supra note 125, at 225–26; Raman, , Transnational Corporations, International Law, and the New International Economic Order, 6 Syracuse J. Int’l L. & Comm. 17, 60–71 (1978)Google Scholar; Goldie, , State Responsibility and the Expropriation of Property, 12 Int’l Law. 63, 78–79 (1978)Google Scholar. The importance and potentially controversial nature of Dupuy’s conclusions are best illustrated in two recent articles discussing the TOPCO/CALASIATIC arbitration. In Confrontation, Consensus and Codification in International Law, in [1979–1980] International Law Association, American Branch, Proceedings and Committee Reports 14, Stephen Schwebel, after analyzing Dupuy’s award and delineating what he felt to be its five significant holdings with respect to the legal effects of General Assembly resolutions, concluded that these holdings went beyond the generally accepted view of developed countries but not as far as some developing country advocates would like. Id. at 22–23. On the other hand, in International Law and the Internationalized Contract, 74 AJIL 134 (1980), a brief editorial comment, A. A. Fatouros criticized Dupuy’s holdings for hot taking into account recent trends in international economic development and for confirming traditional positions of the developed world. Id. at 139–41. It is difficult to accept Fatouros’s comments because Dupuy’s award did just the opposite: it attempted for the first time in an international judicial decision to set forth standards whereby General Assembly resolutions could be interpreted as being declaratory of international law. Rather than illuminating the “present impasse” between the developed and developing countries, as Fatouros suggested, Dupuy’s award appears to take significant strides toward bridging the international development gap.

196 In the LIAMCO arbitration Mahmassani did not attempt to analyze the UN General Assembly resolutions relating to permanent sovereignty over natural resources. However, he concluded that a state’s sovereign right over natural resources must always be subject to its contractual obligations:

In this connection, the Arbitral Tribunal has reached the conclusion that the said Resolutions [including Resolution 1803 and the Charter], if not a unanimous source of law, are evidence of the recent dominant trend of international opinion concerning the sovereign right of States over their natural resources, and that the said right is always subject to the respect for contractual agreements and to the obligation of compensation. . . .

LIAMCO award, 20 ILM at 53.

197 Michael Akehurst, who has written extensively on sources of international law, confirms for another reason that the Charter is not declaratory of existing law:

Such [UN General Assembly] resolutions are authority for the content of customary law only if they claim to be declaratory of existing law. . . . The preamble to the Charter of Economic Rights and Duties of States declares “that it is a fundamental purpose of the present Charter to promote the establishment of the new international economic order”; these words, especially the word “new”, negate the idea that the Charter is declaratory of existing law.

Akehurst, supra note 165, at 6 (footnotes omitted).

198 Although most jurists would disagree, a few writers and states have suggested that customary international law on matters involving modern science and technology may be created instantly by resolutions adopted unanimously by the General Assembly. See Sohn, , The Development of the Charter of the United Nations: The Present State, in The Present State of International Law and Other Essays 39, 53 (Bos, M. ed. 1973)Google Scholar; Cheng, , United Nations Resolutions on Outer Space: “Instant” International Customary Law?, 5 Indian J. Int’l L. 23, 33–40, 45–48 (1965)Google Scholar.

199 The Libyan Civil Code (1954) (M. O. Ansell & I. M. al-Arif trans, n.d.), Art. 147(2), at 30. This article is identical to Article 147(2) of the Egyptian Civil Code.

200 The committee was headed by the Egyptian Minister of Justice and included several of the most prominent Egyptian legal scholars and Professor Edouard Lambert of France.

201 2 Al-Qanun Al-Madani: Majumat Al-Amal Al-Tahdiriya (The Civil Code: Collection of the Preparatory Works) 278–84 (1949); 1 A. R. Sanhouri, Al-Wasit (The Theory of Obligations), para. 420, at 717–24 (2d ed. 1964).

202 2 Al-Qanun Al-Madani, supra note 201, at 280–81, 284–86; 1 A. R. SANHOURI, supra note 201, para. 415, at 705–06. See also Kourides, supra note 135, at 420–25. Henry Cattan, in his classic study on oil concessions, approached this question from the concept of “the equivalence of benefits,” which exists to a limited extent under Islamic law and French administrative law. After referring to Article 147 of the Egyptian and Libyan Civil Codes and discussing the rule of force majeure and the théorie de l’imprévision, he concluded that the principle of equivalence of benefits in oil concessions had no legal significance. He stated:

Apart from the aforementioned legal exceptions based upon the rule oiforce majeure and the théorie de l’imprévision, it can be said that, as a rule, even though a disproportion between mutual benefits and obligations occurs during the course of the performance of the contract, there exists no juridical means, as distinct from moral or equitable concepts, to redress the economic equilibrium between contractual prestations.

H. Cattan, supra note 124, at 128 and, generally, at 119–31.

203 For a comprehensive discussion of the doctrine of rebus sic stantibus, see the series of three articles by Toth, Akos, The Doctrine of Rebus Sic Stantibus in International Law, [1974] Jur. Rev. 56, 147, 263.Google Scholar On the very limited application of the theory of changed circumstances, see the comments of Sir Humphrey Waldock (now President of the ICJ), special rapporteur, and the other commentary in [1966] 1 Y.B. Int’l L. Comm’n, pt. 1, at 75, 78–82, 85–86 and 130, UN Doc. A/CN.4/SER.A/1966. See also Przetacznik, , The Clausula Rebus Sic Stantibus, 56 Rev. Droit Int’l Sci. Diplomatiques & Pol. 115, 189, 205 (1978)Google Scholar; Kearney, & Dalton, , The Treaty on Treaties, 64 AJIL 495, 542–44 (1970)Google Scholar; 2 L. Cavaré, Le Droit International Public Positif 208–09 (3d ed. Quéneudec, J.-P., 1969)Google Scholar; Schwelb, , Fundamental Change of Circumstances, 29 Zeitschrift Für Ausländisches Öffentliches Recht und Völkerrecht 39, 45–47 (1969)Google Scholar; Lissitzyn, , Treaties and Changed Circumstances, 61 AJIL 895, 921–22 (1967)Google Scholar; J. L. Brierly, supra note 177, at 336–39. For the view of a broader application of the theory of rebus sic stantibus, see Haraszti, , Treaties and the Fundamental Change of Circumstances, 146 Recueil des Cours 1, 46–60 (1975 III)CrossRef Google Scholar.

204 See generally Ray, supra note 136, at 453, 509–13. One of the few arbitrations concerning economic development agreements to consider the doctrine of rebus sic stantibus was the Tunnel Indemnity case (Hellenic Electric Railways Ltd. v. Government of Greece) (1933). The tribunal mentioned the possible application of the doctrine, not in the context of helping the state to escape its obligations under the concession agreement, but rather of helping the concessionaire to receive an equitable return on its investment in a situation where unforeseen circumstances had destroyed the economic basis of the concession and made performance by the concessionaire impossible. That, however, was not the situation in the Tunnel Indemnity case and rebus sic stantibus was not applied. Wetter, & Schwebel, , Some Little-Known Cases on Concessions, 40 Brit. Y.B. Int’l L. 183, 206–07, 210 (1966)Google Scholar. In another international arbitration discussing rebus sic stantibus, the Alsing case, the umpire did not apply the doctrine. After defining the conditions of application of rebus sic stantibus as including “(1) an unforeseeable event, independent of the will of the aggrieved party; (2) upsetting of the original balance between performance and consideration therefor; (3) the excessive nature of die lack of balance, going beyond the risk of the contract,” the umpire held that the plaintiff Alsing could not meet those conditions. He found that “in a contract of such long duration [28 years], the plaintiff was to expect certain disturbances . . . whether they be occasioned by an economic crisis, internal strife or the events of warfare. . . .” The loss of 6 years of profits due to unforeseeable circumstances was not “disproportionate to the risk which the contract held for Alsing.” Alsing Trading Co. Ltd. & Svenska Tandsticks Aktiebolaget v. The Greek State, 23 ILR at 654–57. See also Schwebel, supra note 100, at 341–45.

205 Sec Toth, supra note 203, at 147, 171, and 177; Bourquin, , Arbitration and Economic Development Agreements, 15 Bus. Law. 860, 862 (1960)Google Scholar; 1 C. Rousseau, Principes Généraux du droit International Public 580 (1944).

206 See generally Koeck, , The “Changed Circumstances” Clause after the United Nations Conference on the Law of Treaties (1968–69), 4 Ga. J. Int’l & Comp. L. 93, 102–13 (1974)Google Scholar; Schwelb, supra note 203.

207 Report of the International Law Commission on its 18th session, [1966] 2 Y.B. Int’l L. Comm’n 259, UN Doc. A/CN.4/SER.A/1966/Add.1. Article 62 reads, in part, as follows:

A fundamental change of circumstances which has occurred with regard to those existing at the time of the conclusion of a treaty, and which was not foreseen by the parties, may not be invoked as a ground for terminating or withdrawing from the treaty unless:

(a) the existence of those circumstances constituted an essential basis of the consent of the parties to be bound by the treaty; and
(b) the effect of the change is radically to transform the extent of obligations still to be performed under the treaty.

Vienna Convention on the Law of Treaties, supra note 160. In 1973, the International Court of Justice for the first time examined the doctrine of changed circumstances and considered it in light of Article 62 of the Vienna Convention. The Court held the doctrine inapplicable to the matter before it and said that “the change of circumstances” must have “increased the burden of the obligations to be executed to the extent of rendering the performance something essentially different from that originally undertaken.” Fisheries Jurisdiction case (Judgment of Feb. 2, 1973), [1973] ICJ Rep. 2, 21. See Jiménez de Aréchaga, supra note 156, at 73–77.

208 North Sea Continental Shelf Cases (Federal Republic of Germany/Denmark, Federal Republic of Germany/the Netherlands), [1969] ICJ Rep. 3, 47.

209 See, e.g., Toth, supra note 203, at 279–80; Arts. 65(3) and 66(b), Vienna Convention on the Law of Treaties, supra note 160.

210 Such a result would undermine all accepted principles of civilized behavior and justice:

It is abhorrent to the sense of justice to say that one party to a contract, whether such a party be a private individual, a monarch, or a government of any kind, may arbitrarily, without hearing and without impartial procedure of any sort, arrogate the right to condemn the other party to the contract, to pass judgment upon him and his acts, and to impose upon him the extreme penalty of forfeiture of all his rights under it, including his property and his investment of capital made on the faith of that contract.

El Triunfo case (United States of America v. Republic of Salvador) (1902), Papers Relating to the Foreign Relations of the United States, 1902, at 859, 871. See also the similar position taken by the French Government, 1 Case of Certain Norwegian Loans, ICJ Pleadings 13, 34 (1957).

One of the basic principles of the sacred law of Islam is that the Imam or the State cannot be the judge in its own cause. See Habachy, , Similarities and Common Principles of Western and Middle Eastern Systems of Law, Middle East Exec. Rep., No. 7, 1979, at 2, 14Google Scholar.

211 See, e.g., Toth, supra note 203, at 263, 279; Rousseau, C., Droit International Public 75 (7th ed. 1973)Google Scholar; Arts. 65(3) and 66(b), Vienna Convention on the Law of Treaties, supra note 160; de Caviedes, Poch, De la clause “rebus sic stantibus” à la clause de révision dans les conventions internationales, 118 Recueil des Cours 105, 186 (1966 II)Google Scholar; Harvard Draft Convention on the Law of Treaties, Commentary to Art. 28, 29 AJIL Supp. 653, 1124 (1935).

212 See text at notes 68–75 supra.

213 One may argue that Lagergren’s discussion of the application of restitutio in integrum under public international law was obiter dictum. If he was unable under the choice-of-law clause to find that a principle existed under Libyan law, it was unnecessary for him to investigate whether one existed under public international law because to be applicable it had to be common to both Libyan and public international law. However, Lagergren may have felt that the discussion was useful because some scholars believe that principles of public international law are included in the body of general principles of law, which was the second directive of the choice-of-law provision. BP award, 53 ILR at 348–49.

214 Id. at 347.

215 Id. at 342–45.

216 For example, Lagergren relied on the Affaire des Forêts du Rhodope Central to demonstrate that judicial tribunals when choosing between granting restitutio in integrum or awarding compensation have chosen to award compensation. Id. at 340. In that case the arbitrator determined that it was in effect physically impossible to restore the Greek nationals to their former positions. Consequently, the arbitrator concluded that the only practical solution was to order Bulgaria to pay compensation. Affaire des Forêts du Rhodope Central (Fond) (Grèce contre Bulgarie), 3 R. Int’l Arb. Awards 1405, 1432 (1933). This holding, however, is not contrary to or inconsistent with the principle enunciated by Dupuy in the TOPCOICALASIATIC arbitration that restitutio in integrum is the preferred remedy and should be applied unless impossible. Dupuy specifically found that there was no such impossibility in the Libyan situation and accordingly granted that remedy. TOPCO/CALASIATIC Award on the Merits, para. 112.

217 See text at notes 249–250 and note 249 infra.

218 Case Concerning the Factory at Chorzów (Claim for Indemnity) (Merits), [1928] PCIJ, ser. A, No. 17, at 47.

219 BP award, 53 ILR at 337–39.

220 TOPCO/CALASIATIC Award on the Merits, para. 98. See, e.g., Mann, supra note 56, at 2–3.

221 TOPCO/CALASIATIC Award on the Merits, para. 98.

222 BP award, 53 ILR at 339–40 and 342. Lagergren relied heavily on Baade, Indonesian Nationalization Measures Before Foreign Courts, 54 AJIL 801, 814–27 (1960). But see Jessup’s discussion refuting Baade’s position, Jessup opinion, supra note 74, at 35–40.

223 For what constitutes a principle, see, e.g., Fitzmaurice, supra note 160, at 7–9.

224 BP award, 53 ILR at 342.

225 See, e.g., International Court of Justice, Statute, Art. 38; Piper, supra note 187, at 332—39; Paolillo, , Some General Reflections on the Acceptance of Treaties as a Means of Expanding the Body of International Law, 10 J. Int’l L. & Econ. 355 (1975)Google Scholar; D’Amato, A., The Concept of Custom in International Law 103–66 (1971)Google Scholar; Baxter, , Treaties and Custom, 129 Recueil des Cours 25 (1970 I)Google Scholar; D’Amato, , Manifest Intent and the Generation by Treaty of Customary Rules of International Law, 64 AJIL 892 (1970)CrossRef Google Scholar; Baxter, , Multilateral Treaties as Evidence of Customary International Law, 41 Brit. Y. B. Int’l L. 275 (1965–1966)Google Scholar; Lauterpacht, H., Private Law Sources and Analogies of International Law 156–59 (1927Google Scholar, reprinted 1970).

226 BP award, 53 ILR at 347.

227 H. Lauterpacht, supra note 225, at 147. It should be noted, as F. A. Mann points out, that Lauterpacht was using restitutio in integrum in a private law and not a public law context. Mann, supra note 56, at 2–3 and 3 n.1.

228 It is worth requoting here part of the Lauterpacht passage from which Lagergren quoted:

A problem of a similar kind is involved in the question as to how far the general principle of private law, that in awarding damages restitutio in integrum should, as a rule, be aimed at, applies in cases when damages are to be awarded under international law. That principle means that the injured person is placed in the position he occupied before the occurrence of the injurious act of omission. . . .

H. Lauterpacht, supra note 225, at 147. In addition, Lauterpacht wrote his book prior to the Chorzów decision.

229 Id. at 149.

230 BP award, 53 ILR at 351 and 353.

231 Without explanation, Lagergren held that he would not draw a distinction between a declaratory award and an award ordering a remedy. Id. at 330. This position obviously made him more concerned about whether Libya would obey an order for restitutio in integrum if issued.

232 In those cases where recourse to coercive enforcement is necessary, this concern is clearly not the function of the arbitral tribunal, which has no available enforcement mechanism. Manley Hudson has written:

The function of enforcing a decision of an international tribunal is an executive function, and as such it should be confided, in the ordinary case at any rate, to a body which is in-vested with executive powers. It becomes, in this event, a political as distinguished from a judicial matter.

M. Hudson, International Tribunals 128 (1944).

233 See, e.g., Conditions of Admission of a State to Membership in the United Nations (Article 4 of the Charter) (Advisory Opinion), [1948] ICJ Rep. 56, 61; Interpretation of Judgments Nos. 7 and 8 (The Chorzów Factory), [1927] PCIJ, ser A., No. 13, at 20; Case Concerning Certain German Interests in Polish Upper Silesia (Merits), [1926] id., No. 7, at 18–19.

234 Most rules of international arbitration confirm this principle. See, e.g., Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Art. 53( 1), supra note 102, at 54; UNCITRAL Arbitration Rules, Art. 32(2), supra note 84, at 194; Rules of Arbitration of the International Chamber of Commerce (in force June 1, 1975), Art. 24(2), reprinted in 15 ILM 395, 405 (1976). See also Cappelli-Perciballi, , The Application of the New York Convention of 1958 to Disputes Between States and Between State Entities and Private Individuals, 12 Int’l Law. 197, 207 (1978)Google Scholar; 2 L. Cavaré, supra note 203, at 307. K. S. Carlston, supra note 80, at 205.

235 See, e.g., Diplomatic Note No. 139 of the United States Embassy in Paris, supra note 44; Memorial Submitted by the Government of the United Kingdom of Great Britain and Northern Ireland, Anglo-Iranian Oil Co. case, ICJ Pleadings 64, 120 (1951).

236 Oscar Schachter, former Director General of the Legal Division of the United Nations and now Professor of International Law at Columbia University, has studied the performance of arbitral awards. His research confirms that the great majority of awards rendered by ad hoc arbitral tribunals have been respected and obeyed: “In legal doctrine, the principle that an arbitral award or a judicial decision is binding upon the parties and must be carried out in good faith has been accepted without dissent. . . . There is a well-settled rule of customary law that such decisions are binding on the losing state.” Schachter, , The Enforcement of International Judicial and Arbitral Decisions, 54 AJIL 1, 2 (1960)Google Scholar. See also, e.g., Stuyt, A. M., Survey of International Arbitrations 1794–1970 (rev. ed. 1972)Google Scholar; Jessup, P. C., The Price of International Justice 1–22 (1971)Google Scholar; Murty, Settlement of Disputes, in Manual of Public International Law, supra note 177, at 673, 697; J. H. Ralston, International Arbitration from Athens to Locarno 110–11 (1929). According to Schachter, “non-compliance has been comparatively rare; there are not more than a few cases out of many hundreds which have involved the refusal by the losing party to give effect to an award rendered.” 54 AJIL at 1–2. Similarly, Böckstiegel confirmed, after reviewing all the arbitral awards rendered prior to 1965 under the aegis of the International Chamber of Commerce, that there was only one case in which the award had not been performed. Böckstiegel, , Arbitration of Disputes Between States and Private Enterprises in the International Chamber of Commerce, 59 AJIL 579, 583 (1965)Google Scholar.

237 See Mann, supra note 80, at 26–31 and 37.

238 In commenting on his Government’s decision to comply with this award, King Faisal said in 1965:

Peace on earth will not be attained unless the grounds of right and justice have been firmly rooted in each state where citizens and non-citizens alike may enjoy them, so that all are assured of the authority of law to uphold their dignity, protect their possessions and help them exercise their freedom.

In compliance with the Muslim (Shari’ah Law) provisions, which we strictly apply in our country, we place right and justice in such a position that no one can detract from it. All are equal before the Law, and all appear before the courts as claimants or defendants without distinction or immunity to anyone even though he be the Head of State. Nor does the hatred of us by any foreign community prevent us from upholding justice in its favor, even against ourselves. The Koran enjoins us, “let not the hatred of a people incite you not to act fairly; act fairly, that is nearer to piety”. In this connection, the Kingdom of Saudi Arabia has set a magnificent example for all the nations of the world. We implement the ruling which an arbitration court rendered in favor of a foreign company and against the Government with the same strictness and alacrity as we implement a ruling rendered in our favor. This we do voluntarily and willingly because we are executing one of the injunctions of God Almighty. . . .

Letter from King Faisal to the President of the Washington World Conference on World Peace Through Law (Sept. 1965), quoted in Yamani, Foreign Investment Atmosphere in Saudi Arabia, in Private Investors Abroad—Structures and Safeguards 53, 58–59 (1966).

239 See, e.g., Arbitration between The State of Saudi Arabia and The Arabian American Oil Co., 27 ILR at 117; The Steamship Lotus, [1927] PCIJ, ser. A, No. 10, at 3; El Chamizal Arbitration, in 5 AJIL 782 (1911), and the subsequent Convention between the United States of America and the United Mexican States for the Solution of the Problem of Chamizal, in force Jan. 14, 1964, 15 UST 21, TIAS No. 5515, 505 UNTS 185, reprinted in 2 1LM 874 (1963); Norwegian Shipowners’ Claims (Norway v. U.S.A.), 1 R. Int’l Arb. Awards 308, 344 (1922); The Alabama Claims, 4 Papers Relating to the Treaty of Washington of 1871, in 2 Foreign Relations of the United States 49, 544 (1872).

240 For example, the long history of attempts to satisfy the award in the Lena Goldfields case rendered against the USSR and in favor of a British company ended when the Government of the United Kingdom apparently linked its negotiations for payment of the award to discussions on a trade agreement between the two countries; a settlement was reached shortly thereafter. See Nussbaum, , The Arbitration between the Lena Goldfields, Ltd. and the Soviet Government, 36 Cornell L. Rev. 31 (1950)Google Scholar. More recently, the Turkish Government reached a settlement with an American company as a result of an adverse determination in an arbitration proceeding. This settlement and the facts surrounding it are discussed in Menzies, , Continental Grain’s $80–Million Turkish Bath, Fortune, May 21, 1979, at 54Google Scholar, 55–56, and in Wall Street Journal, Aug. 16, 1979, at 28, col. 6.

241 Libyan law leaves no doubt that restitutio in integrum is the appropriate remedy when one party has breached its obligations. Islamic law, one of the sources of Libyan law, accepts the principle of specific performance. TOPCO/CALASIATIC Award on the Merits, paras. 92–93. See Chehata, C., Théorie Générale de L’Obligation en Droit Musulman Hanefite 71–72 (1969)Google Scholar; 2 S. Mahmassani, The General Theory of Obligations and Contracts in Islamic Law 251 -52 (in Arabic, 1948) (Mahmassani was the sole arbitrator in the LIAMCO arbitration).

The codified law of Libya clearly confirms the principle of restitutio in integrum. In considering provisions of the Libyan Civil Code (and the Egyptian Civil Code from which the Libyan Civil Code is derived), Dupuy referred in particular to Article 206(1) (to which Article 203(1) of the Egyptian Civil Code is identical). TOPCO/CALASIATIC Award on the Merits, para. 94. See Habib, S., The Contractual Sources of Obligations in the Libyan Civil Code, para. 190, at 373 (in Arabic, 1972)Google Scholar; 2 F. P. Walton, The Egyptian Law of Obligations 232 (2d ed. 1923). Dupuy also referred to the Commentary of the Drafting Committee of the Egyptian Civil Code, which confirms specific performance of contractual obligations. Quoted in 1 A. R. Sanhouri, supra note 201, para. 466, at 787.

In addition, Morcos in his expert opinion, supra note 74, at 16 and 21, specifically recognized that restitutio in integrum is an accepted principle of Libyan law:

The principle of restitutio in integrum is recognized by Libyan law, particularly in Book I, Part II, Article 202 et seq. These articles are derived from the Egyptian Civil Code which, in its turn, is based, to a large extent, on the French Civil Code which clearly points out that restitutio in integrum is the preferred remedy whenever possible.

All the foregoing provisions of the Libyan Civil Code show that the creditor always has the right to ask for the fulfillment of the obligation in kind so long as such fulfillment is possible. It is only in cases where this becomes impossible that a creditor finds no alternative other than to ask for compensatory damages.

Hence, Dupuy found that “in Libyan law, specific performance is the primary and normal sanction for breach of contract.” TOPCO/CALASIATIC Award on the Merits, para. 94.

242 See text at note 218 supra.

243 TOPCO/CALASIATIC Award on the Merits, paras. 99–101.

244 Mavrommatis Jerusalem Concessions, [1925] PCIJ, ser. A, No. 5, at 51.

245 Case Concerning the Temple of Preah Vihear (Cambodia v. Thailand), [1962] ICJ Rep. 6, 36–37.

246 Affaire Martini (Italy v. Venezuela), 2 R. Int’l Arb. Awards 975 (1930),reprinted in 25 AJIL 554,585(1931).

247 Anglo-Iranian Oil Co. case, ICJ Pleadings 64 (1951). The British Government in its Memorial in this dispute over the Iranian nationalizations asserted that restitutio in integrum is the preferred remedy under international law: “The authorities adduced above show that there is nothing in the principles of international law and in international practice which prevents the Court from decreeing restitution in kind and that, on the contrary, international law prescribes such restitution as the remedy if restitution is possible.” Id. at 116, and see discussion at 82, 110–17.

248 1 Case Concerning the Barcelona Traction, Light and Power Co. Ltd. (New Application), ICJ Pleadings 1, 183 (1962).

249 Professor Wortley expressed this view 16 years earlier after the Indonesian nationalizations:

A demand for restitution is in fact the obvious answer to wrongful seizure and is the normal remedy, because it is not for the wrongdoer to decide how he will make reparation, but for the claimant to initiate his claim. . . . The fact that in the Suez case, or in other cases, states may not have thought fit always to press for restitution, does not mean that a custom has grown up to the contrary. There are times when a claimant prefers compensation to actual restitution, as may have been the case at the time of the shipping depression, when the Norwegian Government asked for compensation rather than for the return of the ships used by the United States of America. Nevertheless the demand for restitution made by Switzerland against the United States, by Nottebohm against Guatemala, and by the British Government in the Anglo-Iranian case, shows it is often the obvious and satisfactory remedy. The fact that in these cases the validity of the claim was not decided, but went off on a technical point, certainly does not prove that claims for restitution are obsolete. Indeed, it is the notion of restoring what had been -wrongfully taken which is the root of any claim, even for damages.

Wortley Indonesian Nationalization Measures, 55 AJIL 680, 681–82 (1961) (emphasis supplied).

250 TOPCO/CALASIATIC Award on the Merits, para. 101.

251 Id., paras. 102–104. Dupuy cited the following: H. Lauterpacht, supra note 225, at 149; Reitzer, L., La Réparation Comme Conséquence de L’acte Illicite en Droit International 173 (1938)Google Scholar; 1 G. Schwarzenberger, International Law as Applied by International Courts and Tribunals 233 (1945) (see also Schwarzenberger, G. & Brown, E. D., A Manual of International Law 147 (6th ed. 1976)Google Scholar); de Aréchaga, Jiménez, International Responsibility, in Manual of Public International Law, supra note 177, at 565–66Google Scholar; de Visscher, C., Le Déni de justice en droit international, 52 Recueil des Cours 362, 436 (1935 II)Google Scholar; Tenekides, , Responsabilité internationale, in 2 Encyclopedie Juridique Dalloz 790 (1969)Google Scholar; 2 P. Guggenheim, Traité de Droit International Public 68–69 (1954); Reuter, P., Principes de droit international public, 103 Recueil des Cours 425, 595 (1961 II)Google Scholar; de Eulate, Alvarez, La “restitutio in integrum” en la práctica y en la jurisprudencia internacionales, Temis, Rev. Ciencia & Técnica Jurídica, Nos. 29–31, 1971–1972, at 11, 12–32Google Scholar.

He could also have referred to, e.g., 2 L. Cavaré, supra note 203, at 559–60; E. Nwogugu, supra note 146, at 191; Delbez, L., Les Principes Généraux Du Droit International Public 384–85 (3d ed. 1964)Google Scholar; Amerasinghe, , State Breaches of Contracts with Aliens and International Law, 58 AJIL 881, 882 (1964)Google Scholar; Wortley, supra note 249, at 681–82; Lachs, , The Restitution of Monetary Gold, 88 J. Droit Int’l 5, 13 (1961)Google Scholar; 3 G. Dahm, Völkerrecht 232–33 (1961); 3 Décisions de la Commission Arbitrale sur les Biens, Droits et Interets en Allemagne 436, 467 (No. 70, 1960); Rolin, , Avis sur la validité des mesures de nationalisation décrétées par le gouvemement indonésien, 6 Neth. Int’l L. Rev. 260, 268–69, 271 (1959)Google Scholar; Schwarzenberger, , The Protection of British Property Abroad, 5 Current Legal Prob. 295, 316–17 (1952)Google Scholar; Sibert, M., Traité de Droit International Public 320–55 (1951)Google Scholar; Freeman, A., The International Responsibility of States for Denial of Justice 573 (1938)Google Scholar; 2 M. Whiteman, Damages in International Law 857 (1937); Lais, R., Die Rechtsfolgen Völkerrechtlicher Delikte 29–30 (1932)Google Scholar.

252 TOPCO/CALASIATIC Award on the Merits, para. 102.

253 Id., paras. 106 and 108.

254 Alvarez de Eulate, supra note 251, at 19–20.

255 Jessup opinion, supra note 74, at 18–46. After an extensive analysis, Judge Jessup found: “It is a principle of international law that reparation must be made for an internationally illegal act and that restitutio in integrum is the primary or preferred form of reparation.” Id. at 72.

256 TOPCO/CALASIATIC Award on the Merits, para. 109. In support of this finding, see J.-F. Lalive, Un Grand Arbitrage pétrolier entre un Gouvernement et deux sociétés privées étrangères, 104 J. Droit Int’l 319, 345–47 (1977).

257 Mann, supra note 56, at 2–3 (footnotes omitted), and for further extensive sources at 3n.6.

258 Quoted in TOPCO/CALASIATIC Award on the Merits, para. 113.

259 Ibid.

260 Georges Delaume, Legal Policy Adviser at the International Bank for Reconstruction and Development, specifically confirms this interpretation and refers to a very similar provision in another Middle Eastern concession agreement as having the same effect. 2 G. Delaume, supra note 84, §14.03, at 6 & n.1 (Booklet 7, 1976). Delaume in his treatise said:

In these, as in the case in which the parties to an arbitral or judicial proceeding are given additional periods of permissible delay to comply with the terms of the award or judgment, it is apparent that the major concern of the parties is to preserve to the maximum possible extent the cooperative character of their association and to avoid the mutually disastrous consequences of a total collapse of their common venture.

1 id., §5.11, at 37 (Booklet 6, 1980) (footnote omitted). See also H. Cattan, supra note 124,at 181.

261 TOPCO/CALASIATIC Award on the Merits, para. 111.

262 Ibid.

263 Another argument for performance, which Dupuy did not mention, is that it fulfills the intentions and the reasonable expectations of the parties. The theory that the reasonable expectations of the parties to a contract should be respected and that the contracting state should be estopped from acting contrary to any reasonable expectations that it has itself created is a well-established doctrine of law. See, e.g., S. Toriguian, supra note 139, at 198–99; Friedmann, W., Law in A Changing Society 456 (1959)Google Scholar; A. Fatouros, supra note 155, at 256–57 and 345. (For a discussion of the principle of estoppel in another context supporting the oil companies’ position, see note 158 supra.)

In effect, estoppel is based on an equitable concept, that is to say, good faith, and founded in common sense and common justice. Jessup in his opinion, supra note 74, at 66–70, refers to many cases and to the writings of Friedmann, Fatouros, Jenks, Alfaro, Fitzmaurice, Lauterpacht, and de Visscher to illustrate the acceptance of estoppel as one of the fundamental principles of international law. See also, e.g., Case Concerning the Temple of Preah Vihear, [1962] ICJ Rep. at 40 (Separate Opinion of Judge Alfaro); Schwarzenberger, , Fundamental Principles of International Law, 87 Recueil des Cours 191, 301 (1955 I)Google Scholar; Cheng, B., General Principles of Law as Applied by International Courts and Tribunals 141–42 (1953)Google Scholar. Islamic law, one of the two sources of Libyan law, also recognizes the principle of estoppel. This principle is expressed by one of the maxims of Islamic jurisprudence provided in Article 100 of the Mejelle (the codification of Islamic principles of law under the Ottoman legal system): “When someone attempts to repudiate the consequences deriving from his own act, he will be prevented from doing so.”

Moreover, the incorporation of a stabilization-of-rights provision in clause 16 of the deeds of concession further confirms the doctrine of estoppel and performance. Prosper Weil concluded that, by inserting such a clause (he specifically quotes clause 16 as an example), the contracting state creates reasonable expectations of the fulfillment of the contract and should be estopped from taking action contrary to the position it has taken in the contract on which the investing party has relied. Weil pointed out that the investing party relies on the effectiveness of the stabilization-of-rights clause, which may be the determining factor in the investor’s decision to conclude the contract. See Weil, supra note 146, at 326. See also E. Nwogugu, supra note 146, at 61–62 and 174.

264 TOPCO/CALASIATIC Award on the Merits, para. 112. The British Government asserted this conclusion before the ICJ 26 years earlier: “The relief to be granted in the present case in respect of the action of the Imperial Government of Iran should be full restitution of its concessionary rights to the Anglo-Iranian Oil Company, since there is no reason to render such restitution impracticable. . . .” Anglo-Iranian Oil Co. case, ICJ Pleadings at 117 (1951).

265 LIAMCO award, 20 ILM at 63.

266 Id. at 85–86.

267 Id. at 65 and 86.

268 See text at notes 231 -240 supra.

269 LIAMCO award, 20 ILM at 63–64. Mahmassani stated that “restitution presupposes the cancellation of the nationalization measures at issue, and such cancellation violates also the sovereignty of the nationalizing State.” Id. at 125. For a brief discussion of other practical problems involved in an award of restitutio in integrum, see Varma, , Petroleum Concessions in International Arbitration, 18 Colum. J. Transnat’l L. 259, 286 (1979)Google Scholar.

270 TOPCO/CALASIATIC Award on the Merits, para. 112.

271 LIAMCO award, 20 ILM at 64.

272 In considering damages, Mahmassani applied the concept that where performance in kind is impossible, substitution performance is due to make the injured party whole. He looked to Libyan law and then to international law to confirm the common principle that LIAMCO was entitled to an indemnity that should include “as a minimum the damnum emergens, e.g. the value of the nationalized corporeal property, including all assets, installations, and various expenses incurred.” Id. at 67. The sole arbitrator concluded that LIAMCO was entitled to damnum emergens, which represented the market value of the nationalized physical plant and equipment owned by LIAMCO, and awarded approximately $14 million for that portion of the claim. Id. at 78–79, 86–87.

However, he could not find a common principle of indemnification for intangible property, loss of profits (lucrum cessans), as LIAMCO had requested. Mahmassani first investigated Libyan law and determined that a claim for loss of profits is accepted in Libyan law (and also in civil law and Islamic law, from which Libyan law is derived); such a provision is codified in Article 224 of the Libyan Civil Code. Id. at 68. On the other hand, while admitting that international law provides substantial precedent favoring damages for loss of profits, Mahmassani felt that since World War II there was a trend towards derogating from this general rule. Id. at 69–76. Hence, he was unable to conclude “clearly and unmistakingly” that damages for loss of profits were presently established in international law. Id. at 68–69, 76. He accordingly looked to the second portion of the choice-of-law provision; in applying general principles of law, Mahmassani selected the formula of “equitable compensation,” which he found to be in harmony with Libyan law and international law. Mahmassani determined that under this formula LIAMCO was entitled to damages for loss of its concession rights covering the remaining term of the concession, including the producing life of the petroleum deposits lying within the concession area, in the amount of $66 million (rather than the $186 million claimed by LIAMCO). He also found that LIAMCO was entitled to damages for interest and for a portion of the costs of the arbitration proceedings. Id. at 78–84, 86–87.

273 Wall Street Journal, Nov. 26, 1974, at 19, col. 1; N.Y. Times, Nov. 26, 1974, at 65, col. 3; Wall Street Journal, Feb. 7, 1975, at 25, col. 4; N.Y. Times, Feb. 7, 1975, at 40, col. 1.

274 Wall Street Journal, Sept. 26, 1977, at 6, col. 4; N.Y. Times, Sept. 26, 1977, at 55, col. 1.

275 Memorandum, dated March 26, 1981, from counsel for LIAMCO and Libya to each amicus curiae in the action referred to in note 277 infra. To date, neither the amount nor any description of the settlement has been made public.

276 The U.S. Government strongly supports this position:

The Government of the United States believes that private parties which have suffered a loss from uncompensated expropriation of their property, and have failed to secure satisfaction through previously-agreed dispute settlement mechanisms because of the action of the expropriating State to frustrate such procedures, are properly entitled to pursue their legal remedies against such property, and are equally entitled to pursue enforcement of judgments and arbitral awards, in courts of competent jurisdiction of countries where such property, or assets of the expropriating State or its agencies or instrumentalities, attachable for the purpose of execution on a judgment or award, may be found.

Diplomatic Note No. 139 of the U.S. Embassy in Paris, supra note 44, at B–8.

277 Libyan American Oil Co. v. Socialist People’s Libyan Arab Jamahirya, 482 F. Supp. 1175 (D.D.C. 1980), appeal docketed, Nos. 80–1207 and 80–1252 (D.C. Cir., Feb. 15, 1980), appeal withdrawn (March 26, 1981), vacated (May 6, 1981). Libya argued that the court did not have jurisdiction and that, even if it determined that it had jurisdiction, the court should refrain from recognizing and enforcing the award under the New York Convention because of the act of state doctrine. Libya did not in any way challenge the validity of the award. Judge Smith rejected Libya’s jurisdictional argument and found that Libya had clearly waived its defense of sovereign immunity under the U.S. Foreign Sovereign Immunities Act of 1976 by expressly agreeing to arbitration in the LIAMCO deeds of concession. 482 F. Supp. at 1176–78. However, Judge Smith accepted the defense of the act of state doctrine. Id. at 1178–79. There are seven grounds in Article V of the New York Convention, supra note 117, for exceptions to recognition and enforcement. Judge Smith found Article V, subsection 2(a) to be applicable; it provides for an exception if the competent authority in the country where enforcement is sought determines that “[t]he subject matter of the difference is not capable of settlement by arbitration under the law of that country.” Judge Smith determined that the subject matter of the difference before him was the Libyan action of nationalization and concluded that it was not capable of settlement by arbitration under U.S. law because the act of state doctrine requires judicial abstention from passing on the effectiveness of the acts of foreign sovereigns. 482 F. Supp. at 1178–79. For a summary, see 75 AJIL 148 (1981).

278 For authorities confirming generally the intention of the New York Convention to make easier the enforcement of foreign arbitral awards and confirming specifically the very narrow interpretation and construction of two exceptions to the enforcement of foreign arbitral awards under Article V(2) (a) (nonarbitrability of subject matter exception) and Article V(2) (b) (public policy exception), see, e.g., In re Laminoirs-Trefileries-Cableries de Lens, S.A. v. Southwire Co. & Southwire Int’l Corp., 484 F. Supp. 1063, 1068–69 (N.D. Ga. 1980); Sch’erk v. Alberto-Culver Co., 417 U.S. 506, 516–17, 520 n.15 (1974); Antco Shipping Co., Ltd. v. Sidermar S.p.A., 417 F. Supp. 207, 216–17 (S.D.N.Y. 1976), aff’d without opinion, 553 F.2d 93 (2d Cir. 1977); Biotronik Mess-und Therapiegeraete GmbH & Co. v. Medford Medical Instrument Co., 415 F. Supp. 133, 136–37, 139–40 (D.N.J. 1976); Fotochrome, Inc. v. Copal Co., Ltd., 517 F.2d 512, 516–18 (2d Cir. 1975); In re Fotochrome, Inc., 377 F. Supp. 26, 30 (E.D.N.Y. 1974), aff’d sub nom. Fotochrome, Inc. v. Copal Co., Ltd., 517 F.2d 512 (2d Cir. 1975); Parsons & Whittemore Overseas Co. v. Société Générate de l’lndustrie du Papier (RAKTA), 508 F.2d 969, 973–75 (2d Cir. 1974); Aksen, , Application of the New York Convention by United States Courts, in 4 Y.B. Comm. ARB. 341, 342, 351 (1979)Google Scholar; Hober, , Defenses to Recognition and Enforcement of Foreign Arbitral Awards in the United States, 48 Nordisk Tidsskrift for International Ret 38, 48–53 (1979)Google Scholar; Barry, , Application of the Public Policy Exception to the Enforcement of Foreign Arbitral Awards Under the New York Convention, 51 Temple L.Q. 832, 846 n.69 (1978)Google Scholar; Trooboff, & Goldstein, , Foreign Arbitral Awards and the 1958 New York Convention, 17 Va. J. Int’l L. 469, 470, 479–82 (1977)Google Scholar; Junker, , The Public Policy Defense to Recognition and Enforcement of Foreign Arbitral Awards, 7 Calif. W. Int’l L.J. 228, 230, 234 (1977)Google Scholar; Cosca, & Zimmerer, , Judicial Interpretations of Foreign Arbitral Awards Under the U.N. Convention, 8 L. & Pol’y Int’l Bus. 737, 746–48, 762 (1976)Google Scholar; Contini, supra note 118, at 299.

279 In support of the motion to reverse the district court’s decision, the Departments of Justice and State filed a brief for the United States as amicus curiae; the American Arbitration Association and the Committee on International Law of the Association of the Bar of the City of New York each filed a brief as amicus curiae; and the U.S. Chamber of Commerce, the National Association of Manufacturers, the National Foreign Trade Council, Inc., and the Rule of Law Committee filed a brief as amici curiae.

280 Exequatur, which literally means “let it be executed,” is the legal procedure by which foreign judgments or foreign arbitral awards are determined enforceable within the local jurisdiction.

281 Unpublished. The order of exequatur, inscribed on the last page of the LIAMCO award filed with the Tribunal de Grande Instance, states that the award “contains nothing contrary to law and public order” and “will be executed according to its terms.” The authors are indebted to Mr. George P. Armour, Deputy General Counsel of Atlantic Richfield Company, for a copy of the order of exequatur.

282 Libyan American Oil Co. v. Socialist People’s Libyan Arab Jamahirya, Decision No. 1:S048, Case No. 0 261/79 (Svea Court of Appeal, Stockholm, June 18, 1980). The authors are indebted to Dr. J. Gillis Wetter for an English translation of this decision.

283 Referred to in the Decision of the Swiss Federal Supreme Court, infra note 285, at 159. The certificate of enforcement made the LIAMCO award equivalent to an enforceable judgment of a Swiss court and thus enforceable anywhere in Switzerland.

284 On Feb. 12, 1979, acting on the basis of the order of exequatur of the LIAMCO award (supra note 281), LIAMCO attached certain sums, held by various banks and corporations in France, belonging or owing to the State of Libya and 19 national Libyan entities (banks and companies). On Feb. 22, 1979, the Attorney General of France applied to the Tribunal de Grande Instance of Paris to vacate these attachments. He urged that a breach of a French international obligation was at issue and that any attachment measures, even of a conservatory nature, be vacated if they would interfere with the sovereignty of a foreign state by imposing restrictions that disregarded “the principles of international courtesy and independence.” Libya through its Embassy in Paris informed the Tribunal that it strongly protested the attachments as a violation of its public affairs and of the immunities traditionally granted to sovereign states. On March 5, 1979, the Tribunal accepted the Attorney General’s position and vacated the orders of attachment. Finding that it was not immediately possible to distinguish which attached amounts were being used for proper state purposes and which amounts arose out of the commercial activity of the state, the Tribunal held that the mere claim of the right to a privilege arising from French and international public order is sufficient to justify vacating the attachment orders. The Tribunal, however, noting LIAMCO’s legitimate right to compensation pursuant to valid arbitral proceedings, established a panel of three experts to investigate the assets of the Libyan companies to determine whether they were being used in an official or commercial capacity and to gather information that might facilitate the settlement of the dispute between LIAMCO and Libya. The experts were directed to report their findings back to the Tribunal. Procureur de la République et al. v. LIAMCO et al., Tribunal de Grande Instance de Paris (March 5, 1979), reprinted in 106 J. Droit Int’l 859 (1979); see also Oppetit, Note, id. at 862.

285 On Feb. 13, 1979, LIAMCO obtained an order of attachment from the Zurich District Court, in an amount equivalent to the amount of the award, against the financial assets of the State of Libya and of certain Libyan governmental organizations being held at six banks in Zurich and instituted procedures to seize certain of those Libyan assets. Libya intervened and appealed to the Federal Supreme Court, alleging infringement of its immunity under international law and requesting cancellation of the order of attachment and the seizure based thereon and annulment of the writ to make payment. Libya did not challenge the validity of the LIAMCO award. In June 1980, the Federal Supreme Court upheld the Libyan appeal on the-ground that the Swiss courts did not have the necessary jurisdiction, but the Court never reached the issue whether Libya was entitled to immunity from seizure of its assets. The Court confirmed the requirement of Swiss law in cases of enforcement measures against foreign states that a “sufficient domestic relationship” must be present before Swiss courts can assume jurisdiction and found that such a “relationship” was not present. Socialist People’s Libyan Arab Jamahiriya v. Libyan American Oil Co. (LIAMCO), Swiss Federal Supreme Court (First Public Law Department, June 19, 1980), reprinted in 20 ILM 152 (1981); see also 75 AJIL 153 (1981). For a recent discussion of how Swiss courts have interpreted a “sufficient domestic relationship” in connection with attempts to execute against foreign property in Switzerland, see Lalive, J.-F., Swiss Law and Practice in relation to Measures of Execution against the Property of a Foreign State, 10 Neth. Y.B. Int’l L. 153 (1979)CrossRef Google Scholar.

286 However, there have been an increasing number of arbitration disputes involving government agencies and private investors. It is reported that government agencies have been parties to more than one-fifth of all the cases held before the International Chamber of Commerce Court of Arbitration (Paris) since 1976. 26 Bus. Int’l 379, 380 (1979). In addition, for example, the Government of Kuwait has recently agreed to arbitrate disputes arising out of its nationalization in 1977 of American Independent Oil Co.’s (a subsidiary of R.J. Reynolds Industries Inc.) oil business iii Kuwait. Wall Street Journal, July 26, 1979, at 25, col. 3. To the best of the authors’ knowledge, the arbitration is being conducted ad hoc in Paris before an arbitral tribunal consisting of three arbitrators.

287 See text at notes 235–240 supra.

288 A well-recognized scholar in this field recently pointed out:

[Undoubtedly, the increasing unilateral application of this doctrine [of sovereign control by producing countries over their natural resources] is also related to the ease with which the host countries have been able to apply it, and to the lack of opposition by the affected private or public interested parties against unilateral expropriation or the cancellation of legal and contractual rights. Because of the fear of being arbitrarily cut off from supplies, Western nations and their companies now accept within a wide range practically any economic or political terms that a producing country may impose on them. This subservience, however, rather than safeguarding the remaining rights and position of the companies, in fact encourages the host countries to continue to proceed as they see fit. We have thus entered a period in international oil of near “lawlessness” in the relationship between producing countries, the oil companies and the importing countries.

Levy, Oil and the Decline of the West, 58 Foreign Aff. 999, 1003–04 (1980).

289 See, in particular, von Mehren, R. & Kourides, , The Libyan Nationalizations: TOPCOI CALASIATIC v. Libya Arbitration, 12 Nat. Resources Law. 419 (1979)Google Scholar; Cohen-Jonathan, supra note 125; J.-F. Lalive, supra note 256. For brief references to the importance of the award, see McLaughlin, , Arbitration and Developing Countries, 13 Int’l Law. 211, 221 (1979)Google Scholar; Bowett, , Libyan Nationalization of American Oil Companies’ Assets, 37 Cambridge L.J. 5 (1978)CrossRef Google Scholar; Mann, supra note 56, at 65; Seidl-Hohenveldefn, , Schiedsspruch über die Nationalisierung von endolkonzessionen der Texaco und der Calasiatic durch Libyen, 8 Recht der Internationalen Wirtschaft 502 (1977)Google Scholar.

290 In a recent article, supra note 195, on aspects of a new international economic order, Raman stated: “If the developing countries want to attract direct foreign investment and advanced technology, they must offer the investors incentives to enter into agreements. Fair treatment, economic stability, and an opportunity to realize a fair return on capital invested are naturally the minimum requirements for promoting international cooperation.” Id. at 38. See generally Allain, Investissements Privés et développement, in Pays en voie de Développement, supra note 164, at 254–63.

291 See generally, e.g., Solomon, , Developing Nations and Commercial Banks, 12 J. Int’l L. & Econ. 325, 334–62 (1977–1978)Google Scholar; Feuer, , Les Nations Unies et le nouvel ordre économique international (1974–1976), 104 J. Droit Int’l 606, 612–13 (1977)Google Scholar; P. Lalive, supra note 146, at 24–25; Dawson, , The Role of the Private Banker in the New International Economic Order, 16 Va. J. Int’l L. 297, 305–07 (1976)Google Scholar; Steiner, H. & Vagts, D., Transnational Legal Problems 496–97 (2d ed. 1976)Google Scholar; S. Toriguian, supra note 139, at 199; Z. Kronfol, supra note 139, at 91–92; Habachy, , Content of Sovereignty, in Rights and Duties of Private Investors Abroad 89, 101–02 (1965)Google Scholar; Friedmann, & Pugh, , Comparative Analysis, in LEGAL ASPECTS of Foreign Investment 734, 783 (Friedmann, W. & Pugh, R. eds., 1959)Google Scholar.

292 See, e.g., Lachs, Some Thoughts on the Role of Good Faith in International Law, in Declarations on Principles, supra note 187, at 47, 53–54; Schwarzenberger, supra note 263, at 323–26; B. Cheng, supra note 263, at 105 and 106–60.

293 TOPCO/CALASIATIC Award on the Merits, para. 91.

294 See Carreau, , Le Nouvel Ordre économique international, 104 J. Droit Int’l 595, 602–03, 605 (1977)Google Scholar.

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International Arbitrations between States and Foreign Private Parties: the Libyan Nationalization Cases

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