Sapphire International Petroleums Ltd. v. National Iranian Oil Company.

Abstract

International Law — Sources — General principles of law — Meaning and content — Distinguished from equity — Application as law governing concession agreement between State corporation and foreign company — Respect for acquired rights as general principle of law — Pacta sunt servanda — Compensation for breach of concession — Damnum emergens and lucrum cessans.

State responsibility — Damages — Measure of — Indirect damages and damages for loss of profits — Breach of concession agreement — Claim for expenses incurred in concluding agreement — Claim for expenses in performing agreement — Compensation for loss of chance to discover oil in concession area — Valuation of right to unworked and unexplored areas — Applicable method of valuation — Expert evidence — Assessment of compensation ex aequo et bono.

State responsibility — Interest — Rate of interest — Direct and indirect damages for breaches of concession agreement — " Usual rate " of interest — Dies a quo.

Arbitration — The law applied by arbitral tribunals — Arbitration under concession agreement between State corporation and foreign company — Procedural law — Right of parties to choose this law — Effect of giving arbitrator power to determine seat of arbitration Competence of arbitrator to select procedural law — Substantive law — Application of general principles of law — Agreement with no express choice of law — Whether private international law of seat of arbitration governs — Relevance of common intention of parties — Applicability of lex loci contractus and lex loci executionis — Special nature of long-term concession agreement with foreign company — Significance of arbitration clause — Whether intention to reject exclusive application of local law implied.

Arbitration — In general — Appointment and withdrawal of arbitrators — Constitution of arbitral tribunal — Initial failure of one party to appoint arbitrator — Request to third party to appoint sole arbitrator — Claim that appointment null — Non-appearance of party making this claim — Validity of appointment of sole arbitrator — Whether this issue res judicata in subsequent arbitration.

Arbitration — Procedure — Procedure before the tribunal — Effect of default and refusal to appear by one party — Whether arbitrator may proceed to determine merits.

State responsibility — For revocation of, or interference with, concessions — Concession agreement between State corporation and foreign company — Undertaking by Government and State corporation not to cancel or amend concession or hinder its performance — Disputes clause — Provision for reference to arbitration — Application of principle pacta sunt servanda — Responsibility of State corporation for fundamental breach of concession — Measure of damages — Direct and indirect damages — Damages for loss of profits.