Taking of Property in the Practice of the Iran-United States Claims Tribunal*

M. Pellonpää; M. Fitzmaurice

doi:10.1017/S0167676800001811

Taking of Property in the Practice of the Iran-United States Claims Tribunal*

Published online by Cambridge University Press: 07 July 2009

M. Pellonpää and

M. Fitzmaurice

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The Iran-United States Claims Tribunal (hereinafter, the ‘Tribunal’) established by virtue of the Claims Settlement Declaration of 19 January 1981 has:

‘the purpose of deciding claims of nationals of the United States against Iran and claims of nationals of Iran against the United States, and any counterclaim which arises out of the same contract, transaction or occurrence that constitutes the subject matter of that national's claim, if such claims and counterclaims are outstanding on the date of this Agreement, whether or not filed with any court, and arise out of debts, contracts (including transactions which are the subject of letters of credit or bank guarantees), expropriation or other measures affecting property rights …’

Type: Articles
Information: Netherlands Yearbook of International Law , Volume 19 , December 1988 , pp. 53 - 178

DOI: https://doi.org/10.1017/S0167676800001811 [Opens in a new window]
Copyright: Copyright © T.M.C. Asser Press 1988

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References

1. Declaration of the Government of the Democratic and Popular Republic of Algeria concerning the Settlement of Claims by the Government of the United States of America and the Government of the Islamic Republic of Iran. For the text of this and other so-called Algerian Declarations (or ‘Accords’), which, despite their names, are binding treaties between Iran and the United States of America, see 1 Iran-United States Claims Tribunal Reports (Iran-US CTR), p. 3 et seq.

2. Art. II(1) of the Claims Settlement Declaration.

3. Ibid. Art. V.

4. The Tribunal consists of nine arbitrators: three are appointed by the Governments of Iran and the United States respectively, three being non-party appointed. The Tribunal's main work is performed in three ‘Chambers’ or separate panels. Their relative independence explains the phenomenon, to be encountered in this paper, that the Tribunal awards are not always fully consistent with each other. For the Tribunal, its background, nature and activities in general, see, e.g., the following: Amin, S.H., ‘Iran-United States Claims Settlement’, 32 ICLQ (1983) p. 750CrossRef Google Scholar; Stewart, D.P. and Sherman, L.B., ‘Developments at the Iran-United States Claims Tribunal: 1981–1983’, 24 Virg. JIL (1983) p. 1Google Scholar; Stewart, D.P., ‘The Iran-United States Claims Tribunal: A Review of Developments 1983–84’, 16 Law & Pol. Int. Business (1984) p. 211Google Scholar; Jones, D. Lloyd, ‘The Iran-United States Claims Tribunal: Private Rights and State Responsibility’, 24 Virg. JIL (1984) p. 259Google Scholar. Audit, B., ‘Le Tribunal des Différends Irano-Américains (1981–1984)’, 112 Clunet (1985) p. 791Google Scholar; Lagergren, G., ‘Iran-United States Claims Tribunal’, in Bos, A. and Siblesz, H., eds., Realism in Law Making – Essays on International Law in Honour of Willem Riphagen (1986) p. 113Google Scholar. For an Iranian account (in the form of a case comment), see Shirazi, A., ‘Critical Review of Award to Benjamin Isaiah’, Mealey's Litigation Reports, Iranian Claims, 20 July 1984, p. 1015.Google Scholar

5. See infra s. 4.3.1.1. As to the border-line between a ‘taking’ and ‘other measures affecting property rights’ (Art. II, para. 1 of the Claims Settlement Declaration), see infra s. 3.3.7.

6. For the terminology in the context of taking, see also, e.g., Brownlie, I., Principles of Public International Law, 3rd edn. (1979) p. 532Google Scholar; Higgins, R., ‘The Taking of Property by the State: Recent Developments in International Law’, 176 Hague Recueil (1982) no. 3, p. 259 at p. 322Google Scholar; Verwey, W.D. and Schrijver, N.J., ‘The Taking of Foreign Property Under International Law: A New Legal Perspective’, 15 NYIL (1984) p. 3 at p. 39.CrossRef Google Scholar

7. Verwey and Schrijver, loc. cit. n. 6, p. 3.

8. Cf., Dolzer, R., ‘New Foundations of the Law of Expropriation of Alien Property’, 75 AJIL (1981) p. 553.CrossRef Google Scholar

9. As noted in a paper written by Charles N. Brower (then a member of the Tribunal), such circumstances ‘may be divided into two categories: (1) property lost during the height of the civil turbulence occurring from November 1978 into February 1979; and (2) property over which the Islamic Government assumed control or ownership after that time’: Brower, C.N., ‘Current Developments in the Law of Expropriation and Compensation: A Preliminary Survey of Awards of the Iran-United States Claims Tribunal’, 21 Int. Lawyer (1987) p. 639 at p. 641.Google Scholar

10. Cf., Verdross, A. and Simma, B., Universelles Völkerrecht, 3rd. rev. edn. (1984) pp. 395–398Google Scholar. Also cf., Pellonpää, M., ‘International Law and Compensation for the Taking of Alien-Owned Property: Recent Trends in Arbitral Practice’, 3 Kansainoikeus – Ius Gentium (1986) p. 334 at p. 339.Google Scholar

11. In so far as concerns cases decided by 31 August 1987. For a list of the Tribunal cases taken into account, see the Annex. The cases will be cited throughout this article using the claimant's name, an abbreviation of it, or, in cases with several claimants, the name of the principal or first alphabetical claimant or abbreviation of it. The two interlocutory awards (‘ITL’) in the Sedco case will be identified by the number of the award. In the Starrett case each reference indicates whether the ITL or the final award is cited. Citations will refer to the Iran-US CTR where possible. If the award has not yet been reproduced in this (privately published) series, references are to the pages or paragraphs (which are used in more recent awards) of the awards themselves (copies of the awards are available from the Tribunal Registry in The Hague). Also the names of the arbitrators forming the panel are indicated, with the Chairman of the respective Chamber mentioned first, followed by the names of the arbitrators appointed by Iran and the United States respectively.

12. An important treaty to be discussed on several occasions is the Treaty of Amity, Economic Relations, and Consular Rights between the United States and Iran (‘Treaty of Amity’) 1955, 284 UNTS p. 93.

13. Briefly, either for the reason that the issues are relatively straightforward, or because the Tribunal has not dealt with them at any length.

14. From among the abundant literature on taking, the following relatively recent contributions of a general nature (in addition to those referred to elsewhere) can be mentioned: Clagett, B.M., ‘The Expropriation Issue Before the Iran-United States Claims Tribunal: Is “Just Compensation” Required by International Law’, 16 Law & Pol. Int. Business (1984) p. 813Google Scholar; Dolzer, R., Eigentum, Enteignung und Entschädigung im geltenden Völkerrecht [Property, Expropriation and Reparation in Applicable Public International Law] (1985)Google Scholar; Gann, P., ‘Compensation Standard for Expropriation’, 23 Col. J Transn.L (1985) p. 615Google Scholar; de Aréchaga, E. Jiménez, ‘State Responsibility for the Nationalization of Foreign Property’, 11 NYUJIL & Pol. (1979) p. 179Google Scholar; Muller, M., ‘Compensation for Nationalization: A North-South Dialogue’, 19 Col. J Transn.L (1981) p. 35Google Scholar; Sornajah, M., ‘Compensation for Expropriation: The Emergence of New Standards’, 13 JWTL (1979) p. 108Google Scholar; Bring, O., Det folkrättsliga investeringsskyddet (1979)Google Scholar. In connection with the revision of the Restatement of the Foreign Relations Law of the United States, 78 AJIL (1984)Google Scholar and 79 AJIL (1985) served as a forum for an interesting exchange of views consisting of the following contributions: Schachter, O., ‘Compensation for Expropriation’, (1984) p. 121Google Scholar; Robinson, D., ‘Expropriation in the Restatement (Revised)’, (1984) p. 176Google Scholar; Mendelson, M., ‘Compensation for Expropriation: The Case Law’, (1985) p. 414Google Scholar; Schachter, O., ‘Compensation Cases–Leading and Misleading’, (1985) p. 420Google Scholar. An important general source concerning compensation and valuation is Lillich, R., ed., The Valuation of Nationalized Property in International Law, vols. I-IV (1972-1986)Google Scholar; Christie, G.H., ‘What Constitutes a Taking of Property under International Law’, 38 BYIL (1962) p. 311.Google Scholar

15. Cf., Dolzer, R., ‘Indirect Expropriation of Alien Property’, 1 ICSID Rev., Foreign Investment LJ (1986) p. 41CrossRef Google Scholar, who notes that the ‘international law of expropriation’ consists of three separate though interrelated ‘branches’, i.e., those concerning (1) property, (2) taking and (3) compensation.

16. See infra s. 4.4.1.2 on ‘going-concern’ valuation.

17. Starrett Housing Corporation is the parent company of a group of subsidiary corporations engaged in construction and development projects. The claimant's involvement in Iran began in 1974, when Starrett Housing agreed to participate in a project for the construction of a residential community on then unimproved land adjacent to North-West Tehran. The claimant undertook to construct a total of 6,000 apartment units in three phases. See Starrett, interlocutory award, 4 Iran-US CTR, p. 123 et seq. The case is further discussed especially in ss. 3.3.6 and 4.4.1.2 infra.

18. Starrett, interlocutory award, 4 Iran-US CTR, pp. 15–157.

19. That depending on the circumstances the taking of assets, however, does not necessarily mean the taking of somehow related contractual rights is illustrated by the Phelps Dodge and Phelps Dodge International cases. In the former the Tribunal found that the claimant's (‘PDC’) shareholder interest in SICAB company was expropriated. This company had been established with a view to selling and manufacturing wire and cable products, and PDC owned some 20% of its shares. The taking of SICAP did not, as was contended by Phelps Dodge International (‘PDIC’, a subsidiary of PDC), mean expropriation of PDIC's rights based on its contract (technical assistance) with SICAB, as ‘PDIC's contract rights were not dependent upon PDC's shareholder rights; thus, any nationalization or expropriation of PDC's shareholder interest would not in and of itself deny PDIC of its right to technical assistance fees’: Phelps Dodge International, para. 41. On Phelps Dodge, see further ss. 3.3.6 and 4.4.1.3 infra.

20. This agreement from 1973, which entitled the consortium members to purchase crude oil from a defined area in Iran, was prematurely nullified in 1981 by virtue of the 1980 Single Article Act concerning the nationalization of Iran's oil resources. See infra n. 40. The Tribunal found that the SPA had been terminated by a mutual agreement of the parties prior to the alleged taking, and therefore did not extend to the issue of whether there was a taking in the particular circumstances of the case. See infra s. 4.3.2.

21. Mobil Oil Iran et al., partial award, para. 73.

22. This case arose out of the ‘Khemco Agreement’ executed on 12 July 1966 between the claimant's Swiss subsidiary, Amoco International S.A., on the one hand, and the Iranian National Petrochemical Company (‘NPC’), on the other. Pursuant to this agreement a company called ‘Khemco’ was established between the parties on a fifty-fifty basis as a joint stock company under the laws of Iran. Its purpose was to install and operate a plant with a view to the extraction and sale of natural gas and related products by virtue of rather complicated contractual arrangements. The Khemco Agreement had been concluded to remain in force until 1997, but it was declared null and void on 24 December 1980 as a culmination of a series of events characterized by the Tribunal as the taking of the Khemco Company. Damages claimed before the Tribunal consisted essentially of profits allegedly lost due to the premature termination of the Khemco Agreement. For the facts and the relevant contractual setting, see Amoco, partial award, paras. 28–76. The case is further discussed in various sub-sections below, in particular ss. 2.2, 4.3 and 4.4.1.

23. Amoco, partial award, para. 108. The respondents had argued that rights based on a contract did not constitute ‘property’: ibid. para. 105.

24. Higgins, loc. cit. n. 6, p. 272.

25. Cf., Verwey and Schrijver, loc. cit. n. 6, pp. 8–9.

26. For example, in many recent investment protection treaties, these requirements appear as standard provisions. See, e.g., Art. 5 of the Finnish-Chinese Investment Protection Treaty, Finnish Treaty Series (1986) No. 4. Also see Verwey and Schrijver, loc. cit. n. 6, pp. 68, 70.

27. Generally, see Higgins, loc. cit. n. 6, pp. 288–292; Verwey and Schrijver, loc. cit. n. 6, pp. 15–16; Bring, op. cit. n. 14, pp. 71–73; Hailbronner, K., ‘Foreign Investment Protection in Developing Countries in Public International Law’, in Oppermann, T. and Petersmann, E.V., eds., Reforming the International Economic Order – German Legal Comments (1987) p. 99 at pp. 110–112.Google Scholar

28. Art. IV(2) of the Treaty of Amity between Iran and the United States provides, inter alia, that ‘property shall not be taken except for a public purpose’. The provision is reproduced in toto in n. 367 infra.

29. Cf., Hailbronner, loc. cit. n. 27, p. 111 (‘It is remarkable … that even the developing nations inter se have maintained that nationalisation or expropriation must be based on considerations of public utility’).

30. Para. 4 of Resolution 1803 of 1962 on Permanent Sovereignty over Natural Resources reads as follows:

‘Nationalization, expropriation or requisitioning shall be based on grounds or reasons of public utility, security or the national interest, both domestic and foreign’.

For the text of the resolution, see GAOR, 17th Session, Suppl. No. 17, p. 15; 57 AJIL (1963) p. 710. As will be seen especially in connection with the compensation question, this resolution is generally regarded as reflecting the requirements of customary international law better than the subsequent 1974 Charter on Economic Rights and Duties of States. In the Charter, accepted in 1975 as GA Res. 3281, there is no mention of the public purpose requirement. For the text of the Charter, see GAOR, 29th Session, Suppl. No. 31, p. 50; 14 ILM (1975) p. 251. For further discussion on these resolutions, see infra s. 4.1–4.2

31. The claimants had owned, partially through subsidiaries, 35% of the shares of the nationalized company. On the central contents of the nationalization law enacted on 25 June 1977, see INA, p. 4.

32. 4 Iran-US CTR, p. 105.

33. INA Corporation claimed compensation for the taking of its 20% shareholding in Bimeh-Shargh, an Iranian insurance company nationalized by virtue of the above-mentioned law.

34. INA, pp. 7–8.

35. For a brief account of the facts of the case, see supra n. 22.

36. Amoco, partial award, para. 145.

37. Ibid. (emphasis added).

38. Ibid.

39. Ibid.

40. Ibid. para. 146. The principal contents of the Single Article Act of 8 January 1980 were as follows: ‘All oil agreements considered by a special commission appointed by the Ministry of Oil to be contrary to the Nationalization of the Iran Oil Industry Act shall be annulled and claims arising from conclusion and execution of such agreements shall be settled by the decision of the said commission’.

41. See supra at n. 34.

42. Cf., also American International Group, at n. 31 supra, which appears to impose the burden of proof on those alleging that the taking was not for a public purpose.

43. In BP Exploration Company (Libya) Limited v. Government of the Libyan Arab Republic, award on merits of 10 October 1973, 53 ILR, p. 297, the taking of the claimant's concession rights was held by Sole Arbitrator Lagergren to have ‘violate[d] public international law as it was made for purely extraneous political reasons and was arbitrary and discriminatory in character’: ibid., p. 329.

44. Cf., Brownlie, op.cit. n. 6, p. 545.

45. Despite the fact that it is not specifically mentioned in some of the UN Resolutions on the subject. Cf., Harris, D.J., Cases and Materials on International Law, 3rd edn. (1983) pp. 427–428.Google Scholar

46. See supra at n. 32. In INA the non-discrimination principle is not explicitly spelled out. Cf., supra at n. 34. There is, however, nothing to indicate that on this point the award would disagree with the separate opinion of Judge Lagergren, according to whom ‘[i]t it is generally accepted that some types of expropriation are inherently unlawful – among these one can cite cases in which foreign assets are taken on a discriminatory basis or for something other than a public purpose’: INA, separate opinion of Judge Lagergren, p. 1.

47. See Amoco, partial award, paras. 139–140.

48. See Hailbronner, loc. cit. n. 27, pp. 112–113; Verwey and Schrijver, loc. cit. n. 6, pp. 11–15.

49. Amoco, partial award, para. 139.

50. Ibid. para. 141.

51. Ibid.

52. See ibid. para. 140.

53. Ibid. para. 142.

54. Ibid.

55. Cf., e.g., Pellonpää, M., Expulsion in International Law (1984) p. 113 et seq.Google Scholar; and generally, Vierdag, E.W., The Concept of Discrimination in International Law (1974)Google Scholar; Bossuyt, M., L'interdiction de la discrimination dans le droit international des droits de l'homme (1976)Google Scholar; McKean, W., Equality and Discrimination under International Law (1983).Google Scholar

56. Verwey and Schrijver, loc. cit. n. 6, p. 9 (quoting a definition given by E. Suy).

57. This is because the opinion eminates from one of the American arbitrators, who have quite clearly shown a readiness to impose the strictest requirements on the expropriating or nationalizing State.

58. This case, which resulted in two interlocutory awards and a lengthy final award, concerned, inter alia, the taking of the claimant's (Sedco Inc.) share in SEDIRAN Drilling Company, as well as the taking of oil drilling and related equipment belonging to the claimant's Panamanian subsidiary, Sedco International S.A. (‘SISA’), and operated in Iran on the basis of contracts. The case is further discussed in ss. 3.3.5, 3.3.6, 4.3.1.1, 4.4.1.4 and 4.4.2.1 infra.

59. Sedco, ITL 59–127-3, separate opinion of Judge Brower, p. 24, n. 34.

60. See Amoco, partial award, para. 119 et seq.

61. Ibid. para. 129.

62. Ibid. para. 120. It should be noted, however, that, for example, in some investment protection treaties compatibility with ‘domestic legal procedures’, is mentioned as a legal condition for taking. See, e.g., Art. 5(1)(a) of the Finnish-Chinese Investment Protection Treaty (supra n. 26).

63. See Amoco, partial award, paras. 122–132.

64. Ibid. para. 120.

65. Supra n. 59.

66. Amoco, partial award, para. 120

67. On State contracts, stabilization clauses and related issues in general, see, e.g., Delaume, G.R., ‘State Contracts and Transnational Arbitration’, 75 AJIL (1981) p. 784CrossRef Google Scholar; Peter, W., Arbitration and Renegotiation of International Investment Agreements (1986)Google Scholar; Regli, J.-P., Contrats d'Etat et arbitrage entre Etats el personnes privées (1983).Google Scholar

68. See Judge Brower's separate opinion in Sedco, ITL 59–129-3, pp. 23–24 (‘A taking is unlawful under customary international law when it … violates the terms of an agreement between that State and an alien’.)

69. Amoco, partial award, para. 179.

70. Ibid. para. 166.

71. The claimant relied on two provisions of the Khemco Agreement as alleged stabilization clauses. One of them was easily disposed of as, by its terms, only having ‘the effect of affirming the validity of contractual clauses inconsistent with Iranian law and regulations’ (as distinct from, or precluding changes in, such laws and regulations). Ibid. para. 166. Also see ibid. para. 155. The other provision (Art. 21) was of a somewhat different nature. According to its para. 2 ‘[m]easures of any nature to annul, amend or modify the provisions of this Agreement shall only be made possible by the mutual consent of NPC and AMOCO’: ibid. para. 168. The Tribunal refused to see in this provision any obligation binding the Government of Iran. Although the agreement was, according to its Art. 2 (see ibid. para. 34), ratified on behalf of the Government, the latter did not, in the Tribunal's view, thereby become a party to the agreement and bound by Art. 21, para. 2. This provision was thus only binding on NPC, an entity separate from the Government of Iran. See ibid., paras. 161–164, 171–173. The Tribunal also stated that the right to nationalize, ‘a fundamental attribute of state sovereignty … cannot easily be considered surrendered’ and that it ‘would be particularly adventurous to construe any provision of a contract to which the State is not named as a party as forbidding nationalization’: ibid. para. 179. Judge Brower in his concurring opinion held that the provisions discussed were intended to ‘stabilize’ the contractual relationship between the parties. See Amoco, concurring opinion of Judge Brower, paras. 9–14. Similarly, in Mobil Oil Iran et al. he held that there was a wrongful taking, inter alia, on the basis of a stabilization clause. See Mobil Oil Iran et al., concurring opinion of Judge Brower, paras. 8–16. The main award in this case did not have to consider the issue, since it concluded that the contract had been mutually terminated by the parties prior to the alleged taking. Cf., supra n. 20.

72. Supra at n. 69.

73. Infra s. 4.

74. Cf., Verwey and Schrijver, loc. cit. n. 6, pp. 16–17.

75. 4 Iran-US CTR, p. 105; supra at n. 32.

76. Amoco, partial award, para. 116. Also cf., Phelps Dodge (to be discussed in some detail in infra ss. 3.3.6 and 4.4.1.3), para. 32 (‘Phelps Dodge was entitled to “prompt compensation”.’).

77. The main reasons for this finding have been discussed earlier in this sub-section.

78. See infra s. 4.6.

79. Amoco, partial award, para. 137. The Tribunal found that the Single Article Act guaranteed the fulfilment of this condition. Ibid. para. 138, Judge Brower disagreeing in this regard. See his concurring opinion, paras. 247–259.

80. Iranian pleadings in American International Group, as quoted in the award, 4 Iran-US CTR, p. 103.

81. As indicated in n. 79, in the concrete application of these principles there may be considerable disagreement.

82. Sedco, ITL 59–129-3, separate opinion of Judge Brower, pp. 24–25, n. 34.

83. While State responsibility for wrongful acts has been dealt with by the International Law Commission since the 1950s, the topic of ‘international liability for injurious consequences of acts not prohibited by inlernational law’ has been separately covered by the ILC's codification work only since 1978 (with R.Q. Quentin Baxter and Julio Barboza as successive Rapporteurs). In this work the primary focus has been on environmental questions and ultra-hazardous activities. For a view that also, so far as lawful takings are concerned, the question is one of liability for acts not prohibited by international law, see Akehurst, M.B., ‘International Liability for Injurious Consequences Arising out of Acts not Prohibited by International Law’, 16 NYIL (1985) p. 3 at p. 11.CrossRef Google Scholar

84. Amoco, partial award, para. 192.

85. See infra s. 4.3.1.2.

86. Ibid.

87. Cf., Brower, loc. cit. n. 6, p. 654, and the separate opinion in Sedco, ITL 59–129-3, p. 25, n. 34. It should be noted that generally in the international arbitral practice of recent years the appropriateness of restitution of the owner to its rights has usually been regarded as incompatible with State sovereignty. See Pellonpää, loc. cit. n. 10, pp. 343–345.

88. See infra s. 4.3.3.

89. This is the approach adopted by the Tribunal in the cases to be discussed, in which it has operated with concepts concerning responsibility for wrongful acts (to the extent that it has relied, if at all, on the theoretical framework concerning international responsibility or liability).

90. Otis Elevator Company, para. 29. In this case the claimant sought compensation for its 40% equity share in the Iran Elevator Company Ltd., a private corporation incorporated to establish an elevator manufacturing company in Iran, which was allegedly expropriated by the respondents, the Islamic Republic of Iran, specifically the Ministries of Labour and Commerce, and also Bank Mellat. The claim was dismissed for reasons to be touched upon later in this section.

91. Cf., Art. 3 of the ILC Draft Articles on State Responsibility (Part I): ‘There is an internationally wrongful act of a State when: (a) conduct consisting of an action or omission is attributable to the State under international law; and (b) that conduct constitutes a breach of an international obligation of the State’. For the text of the ILC Draft Articles, see ILC Yearbook 1980 vol. II part 2, p. 30 et seq; also reproduced in 45 ZaöRV (1985) p. 357 et seq. For a brief review of the Commission's work on the subject of State responsibility, see Brownlie, I., System of the Law of Nations, State Responsibility, Part 1 (1983) pp. 13–18.Google Scholar

92. Cf., Riphagen, W., ‘State Responsibility: New Theories of Obligation in Interstate Relations’, in MacDonald, R.St.J. and Johnston, D.M., eds., The Structure and Process of International Law: Essays in Legal Philosophy, Doctrine and Theory (1983) p. 581 at pp. 590–591Google Scholar; Christenson, G.A., ‘The Doctrine of Attribution in State Responsibility’, in Lillich, R.B., ed., International Law of State Responsibility for Injuries to Aliens (1983) p. 321 at pp. 325–326.Google Scholar

93. Supra n. 91.

94. Cf., Riphagen, loc. cit. n. 92, p. 587; Christenson, loc. cit. n. 92, p. 326.

95. In general, see Wolf, J., ‘Zurechnungsfragen bei Handlungen von Privatpersonen’ [Attribution of Acts to Private Persons], 45 ZaöRV (1985) p. 232.Google Scholar

96. Art. VII (3) of the Claims Settlement Declaration: ‘“Iran” means the Government of Iran, any political subdivision of Iran, and any agency, instrumentality or entity controlled by the Government of Iran or any political subdivision thereof’.

97. In some circumstances, however, it has been possible to circumvent the attriburability issue by finding an ‘appropriation’ or ‘usurpation’ in the meaning of commercial law or general principles of law to have taken place. See infra n. 123.

98. In the context of a taking, when meaning Iran in the sense of State responsibility (as distinct from the general provision quoted in the previous note), the Tribunal often refers to the ‘government’. See, e.g., Harza, 1 Iran-US CTR, p. 504: ‘[A] taking of property may occur under international law … if a government has interfered unreasonably with the use of property’. That the ‘government’ in this kind of context is equated with the State under general international law of State responsibility, cf., International Technical Products, p. 46.

99. In Constantine A. Gainoplus a claim for expropriation was dismissed, among other things on the ground that the person who came into possession of the claimant's shares in a company was only coincidentally also a government official (in which capacity he was not acting when coming into possession of the shares). See Gainoplus, pp. 7–8.

100. Oil Field of Texas, para. 42. On the case see further infra s. 3.3.4. Cf., Art. 6 of the ILC Draft (‘The conduct of an organ of the State shall be considered as an act of that State under international law whether that organ belongs to the constituent, legislative, executive, judicial or other power …’). The claim in this case was based on a contract concluded between the claimant and Oil Service Company of Iran (OSCO) for the lease of certain equipment to OSCO to be used in petroleum exploitation. In addition to contract-related claims, the claimant sought compensation on the theory of unjust enrichment from NIOC, and on the theory of expropriation from the Government of Iran which was alleged to have expropriated Oil Field's property leased to OSCO.

101. Sola Tiles, para. 40.

102. See infra s. 3.3.2. Conceivably such actors also could be regarded as falling under the ‘group of persons in fact acting on behalf of the State’ in the sense of Art. 8 of the ILC Draft.

103. 5 Iran-US CTR, p. 364. The claimant's business in Iran consisted of selling phar-maceuticals through the above-mentioned subsidiary. The claimant alleged that acts of the Workers' Council prevented it from recovering certain loan payments due from Schering Iran, as well as amounting to expropriations of certain assets held in bank accounts. See ibid. pp. 363–364, 368–371.

104. See ibid. pp. 369–370.

105. Ibid. p. 370.

106. Cf., Art. 8 of the ILC draft on ‘Attribution to the State of the conduct of persons acting in fact on behalf of the State’.

107. 5 Iran-US CTR, p. 370. Dissenting Judge Mosk was of the view that the Workers' Council's acts created State responsibility for Iran. See ibid. pp. 383–384. Also see Otis Elevator Company, in which it was alleged, inter alia, that certain appropriation of funds by a ‘workers syndicate’ was condoned and encouraged by the Iranian Ministries of Labour and Commerce, para. 33 (‘For the Claimant to be successful … it would need to prove not only the involvement of the respective Ministries in the workers' syndicate but also, more specifically, that the Ministries encouraged and/or participated in an unauthorized dissipation of Iran Elevator's funds’.

108. Ibid. p. 371.

109. The claim in this case was based on an agreement to provide for the construction of certain civil works. During the proceedings the claimant presented various factual explanations and legal theories, ranging from de facto confiscation to forced sale (see infra s. 3.3.3). The bank first argued that the sale in question was authorized, then based its defence on mortgage foreclosure proceedings which ultimately transferred the title to the respondent bank. The Tribunal concluded that it lacked jurisdiction, as the ‘irreversible’ loss of property had not occurred by 19 January 1981. See infra s. 3.3.6. See also International Technical Products, pp. 34–50.

110. International Technical Products, p. 46 (footnote omitted). Cf., ILC Draft Art. 7(2) (‘The conduct of an organ of an entity which is not part of the formal structure of the State or of a territorial governmental entity, but which is empowered by the internal law of that State to exercise elements of the governmental authority, shall also be considered as an act of the State under international law, provided that organ was acting in that capacity in the case in question’).

111. International Technical Products, p. 46.

112. Ibid.

113. The claim was based on contracts which the claimant had allegedly concluded with the two companies, Star Line Iran Co. and Iran Express Lines Co., on the leasing of marine transport equipment such as cargo containers, chassiz and trailers. Cf., Flexi Van Leasing, pp. 3, 16–17. The claim was dismissed, with the American arbitrator dissenting.

114. Ibid. p. 19. As to Iran Express, see ibid. pp. 21–22.

115. Government control over Star Line came to be exercised through the Foundation, itself regarded as an agency of the Iranian Government. Ibid. p. 19.

116. Ibid. p. 20.

117. Ibid. p. 21.

118. The case is further discussed infra s. 3.3.6.

119. Art. II(1) of the Claims Settlement Declaration, quoted at the beginning of this paper. See further infra s. 3.3.7.

120. Foremost, p. 29.

121. See ibid. pp. 24–26.

122. Cf., the discussion on Schering, supra.

123. One component in the Sedco case concerned the alleged taking of oil rigs and related equipment belonging to Sedco's Panamian subsidiary, SISA. The claimant alternatively argued that the events leading to the deprivation of its property constituted either expropriation by Iran or ‘appropriation’ by NIOC. Concluding that NIOC did appropriate the equipment, the Tribunal stated that ‘a finding of expropriation by Iran is not necessary’: Sedco, final award, para. 28. The award went on to reason that ‘[s]ince NIOC clearly is a controlled entity under the Claims Settlement Declaration we need not find that the Government of Iran itself expropriated the rigs in order to grant claimant compensation for the loss of the rigs’: ibid. NIOC's liability was based on ‘general principles of commercial law’ (ibid. para. 17), as distinct from public international law rules on expropriation, and on Art. II(1) of the Claims Settlement Declaration (supra s. 1) by virtue of which the Tribunal's jurisdiction is not limited to the Government of Iran. Thus there was no automatic attribution of NIOC's acts to the Government – on the other hand, the award also did not definitely settle that NIOC's acts could not be so attributed.

124. When discussing in the Amoco case, the question whether Iran was a party to the Khemeo Agreement, the Tribunal stated, inter alia: ‘While NPC is controlled by Iran and was established pursuant to a State law, it has a legal personality distinct from that of the State and NPC contracted only for itself’: Amoco, partial award, para. 161. Also see supra n. 71.

125. Cf., Brownlie, op. cit. n. 91, p. 64, who states that no burden of proof rule is expressed in the ILC Draft. Cf., also Brower, loc. cit. n. 9, p. 655, who, with reference to the Flexi Van Leasing case, notes that the Tribunal standard required to establish State responsibility for actions of separate legal entities ‘appears to be analogous to the traditional piercing the veil standard for disregarding corporate entities’.

126. See also de Arechaga, E. Jiménez, ‘International Responsibility’, in Søerensen, M., ed., Manual of Public International Law (1968) p. 531 at pp. 546–548.Google Scholar

127. See infra s. 3.3.6.

128. Iran-US CTR, p. 154.

129. Harza, 1 Iran-US CTR, p. 504. This case concerned alleged expropriations of bank accounts.

130. 6 Iran-US CTR, at pp. 225–226. (Riphagen, Aldrich). See also infra s. 3.3.6. The Iranian arbitrator, Shafeiei, refused to sign the award, attaching to it an explanation for this. On 27 July 1984 he also filed separately a document entitled ‘Supplementary comments by Dr. Shaf Shafeiei on His Non-Signature of the Award in Case No. 7’. Relying, among other things, on the Sea-Land award he criticized strongly the majority's reasoning concerning expropriation. See ibid. p. 255 et seq.

131. The claimant in this case was a corporation engaged in the international transportation by water of containerised cargo. The basis of its claim was that the claimant was deprived by the Iranian Ports and Shipping Organisation (‘PSO’) of the right to continued use of a containerised cargo facility constructed and operated by it at the port of Bandar Abbas, and that it suffered losses as a result. The claim was based on alternative theories to be discussed below.

132. 6 Iran-US CTR, p. 166.

133. Ibid.

134. The opinion of Howard M. Holtzmann dissenting as to the award on the claims and concurring as to the dismissal of the counterclaims, 6 Iran-US CTR, p. 175 at p. 207.

135. Ibid. p. 162.

136. Ibid. p. 163.

137. Ibid. p. 165.

138. Ibid. p. 166.

139. The Tribunal quoted, with approval, the Dickson Car Wheel Co. case, 4 R1AA, p. 669 at pp. 681–682; 6 Iran-US CTR, p. 165. Cf., also Starrett, ITL, where Chamber One stated that a ‘revolution as such does not entitle investors to compensation under international law’: 4 Iran-US CTR, p. 156. Cf., Brownlie, op. cit. n. 91, pp. 171–172; Wolf, loc. cit. n. 95, p. 234.

140. See supra n. 90 and the text preceeding it.

141. See Otis Elevator Company, para. 39.

142. Dissenting opinion of George H. Aldrich, 29 April 1987, para. 4.

143. See also Sola Tiles, para. 40.

144. In this regard the two-fold distinction made by Brower (supra n. 9) appears of relevance. Also cf., Brower, loc. cit. n. 9, p. 652.

145. Supra n. 130. Also see infra s. 3.3.6.

146. Tippetts, 6 Iran-US CTR, p. 225; accord, Sedco, award no. ITL 55129–3, p. 24. See also the text at n. 128 supra.

147. E.g., Golpira, 2 Iran-US CTR, p. 177. On this case, see infra n. 217.

148. Tippetts, 6 Iran-US CTR, p. 225.

149. Starrett, interlocutory award, 4 Iran-US CTR, p. 155. See also Sedco, ITL 55–129-3, p. 24, n. 5; Dames & Moore, 4 Iran-US CTR, p. 223.

150. As evidenced, for example, by International Technical Products: in this case the Tribunal first sets forth the general standard of ‘unreasonable interference’, then goes on to concretize it by a reference to ‘more or less irreversible deprivation of the property’: award, pp. 46, 49. Cf., also Brower, loc. cit. n. 9, p. 644, who notes that Tribunal awards based on different wordings ‘tend to rely on [each other] for general support’.

151. Sea-Land, 6 Iran-US CTR, p. 168; accord, Sedco, ITL 55–129-3, p. 34.

152. Computer-Sciences Corporation, p. 43. The claim in this case principally concerned contracts concerning data processing services for Iranian military information systems.

153. Ibid. p. 44.

154. See 5 Iran-US CTR, pp. 226–227 (confiscation of office equipment and a company car by the ‘Islamic Revolutionary Guards’ on 5 October 1980).

155. 4 Iran-US CTR, p. 223. The expropriation claim in this case concerned the sequestration by government representatives of the claimant's office equipment stored in a warehouse.

156. Weston, B.H., ‘The New International Economic Order and the Deprivation of Foreign Property Wealth: Some Reflections upon the Contemporary International Law Debate’Google Scholar, in Lillich, op. cit. n. 92, pp. 133–134.

157. For a discussion on the precedents concerning ‘forced sales’ as taking of property, see in general Weston, loc. cit. n. 156, p. 133 et seq; Christie, loc. cit. n. 14, p. 324 et seq; Vagts, D.F., ‘Coercion and Foreign Investment Rearrangements’, 72 AJIL (1978) p. 17 at pp. 22–25.CrossRef Google Scholar

158. Vagts, loc.cit. n. 157, p. 22.

159. Also see the discussion concerning valuation in Starrett, infra s. 4.4.1.2 (d) (a unilaterally imposed procès-verbal which, if considered valid, would have decreased the value of the property, was excluded from the calculation of compensation).

160. This claim was based on the respondent's failure to make payments due under two contracts and the expropriation of certain funds belonging to the claimant.

161. American Bell International, para. 147.

162. Ibid. para. 148.

163. Ibid.

164. Ibid. para. 150.

165. Cf., Otis Elevator Company, in which there was evidence lhat improper force had been used to have funds transferred from Iran Elevator's (the company whose alleged expropriation was at issue) account to another account to be used for severance payments concerning another subsidiary of the claimant. The Tribunal did not hold the respondents (Iran and Bank Mellat) liable, as the transfer took place on the basis of what appeared to the bank to be a valid authorization and as there was no evidence that the Iranian Ministry of Labour or Commerce was involved in the establishment of the latter account. See Otis Elevator Company, paras. 10–11, 33–36. Also cf., supra n. 107. But see the dissenting opinion of Judge Aldrich, para. 11.

166. This has already been discussed supra in s. 3.2.1. Further see infra s. 3.3.6.

167. As discussed earlier (supra s. 3.2.1), the Tribunal did not find any acts attributable to the Government as expropriation. Therefore the discussion relevant here was undertaken by the Tribunal in order to determine whether there was anything establishing Bank Tejarat's liability (under municipal law or general principles of law) as an independent legal person. The considerations put forward, however, also have relevance where the alleged force is attributable to the Government (thus possibly constituting a taking).

168. International Technical Products, p. 42.

169. Ibid.

170. Concurring and dissenting opinion of Brower, Charles N. in International Technical Products, p. 2 (28 October 1985)Google Scholar. Judge Brower based his opinion notably on affidavits produced by the claimant denying the agreement, on the wording of the involved representative's letter produced by the respondents as evidence of the sales agreement in which the representative says that he is accepting the bank's ‘demand’, the fact that the representative shortly thereafter left Iran, as well as on the low sale price amounting to less than half the value at which the building had been appraised a year before. Ibid.

171. Ibid. p. 48.

172. Ibid.

173. Indeed, our example concerning alleged seizure of property by a bank a fortiori would appear to strengthen this conclusion as regards takings by sovereign governments. Dissenting Judge Brower would have reversed the burden of proof applied in this case. In his view Bank Tejarat, in the face of the circumstances suggesting coercion, had the burden of proof of showing the legitimacy of this acquisition. Concurring and dissenting opinion of Judge Brower, ibid. pp. 2–3.

174. Also cf., Sedco in so far as the appropriation of SISA's oil rigs was concerned. Sedco, final award, paras. 6–29, This portion of the claim, however, was decided on the basis of general principles of commercial law, not public international law. See supra n. 123.

175. Oil Field of Texas, para. 43. On this case, see also supra n. 100.

176. Cf., Brower, loc. cit. n. 9, p. 656.

177. Sedco, ITL 55–129-3, p. 37.

178. See Christie, loc. cit. n. 14, p. 318 et seq. Also cf., Higgins, loc. cit. n. 6, p. 278.

179. This is discussed by Karapuu, H., ‘Omistusoikeus perusoikeutena’ [Right to Ownership as a Basic Right] in Scheinin, M., ed., Omistusoikeus [Right to Ownership] (1983) p. 45 et seq.Google Scholar

180. Cf., Christie, loc. cit. n. 14, p. 318.

181. See supra s. 3.3.3.

182. 6 Iran-US CTR, p. 167. We may also refer to Otis Elevator in which, as a measure preceding the transfer of Iran Elevator's funds, described supra in n. 165, the funds were first transferred from the company's interest-bearing time deposit account with Bank Mellat to its current account at the same bank. The bank later failed to follow proper instructions to retransfer the balance back to the interest-bearing account. According to the Tribunal, however, ‘[t]he wrongful refusal of the Bank to transfer the funds from one account to another, on its own, without any other evidence of actions by Bank Mellat subsequently to interfere or restrict the withdrawal or operation of the account is not a sufficiently significant interference on which to base a finding that a deprivation of property has occurred’: Otis Elevator Company, para. 37.

183. For a more detailed discussion concerning exchange controls in the Tribunal's practice, see Gold, J., ‘The Iran-United States Claims Tribunal and the Articles of Agreement of the International Monetary Fund’, 18 George Washington JIL & Econ. (1985) p. 537.Google Scholar

184. Supra s. 3.2.1.

185. See 5 Iran-US CTR, p. 367 (n.1). Instead the respondent was found liable on the basis of Iranian law. Ibid. Cf., also the dissenting opinion of Judge Mosk, ibid. p. 380. As regards certain further similar drafts, the Tribunal rejected the claim (for lack of evidence) that the bank ever received a payment request for the drafts in question. See ibid. pp. 367–368 and (for the criticism by Judge Mosk) pp. 375–377.

186. The claimant, Hood, had formed with the Iranian Corporation, Norm, a joint stock company (‘Hood-Norm’) for the construction work, pursuant to a contract with NIOC, in connection with pumping stations along an oil pipeline. In October 1979 Hood transferred its rights to Norm in return for compensation to be paid in two installments. One did not fall due until after the Tribunal's jurisdictional deadline, whereas for the other Bank Markazi refused to grant the requested authorization to have the money transferred to Hood's account in Munich. See 7 Iran-US CTR, pp. 38–42.

187. Ibid. p. 40.

188. Ibid. pp. 44–47.

189. The Tribunal had not, at any length, discussed Hood's contention of expropriation under general international law. That, however, it inferred from the non-violation of the more specific rules regulating exchange controls that no expropriation could be in question, is confirmed in its later decision made as a response to the claimant's ‘Request for an Additional Award’. Such request was denied on the ground that ‘[t]he Tribunal has [in its award] … considered all of the claims and the grounds on which they are based, and that the award and the reasons therefore are adequate in form and do not warrant any additional consideration or modifications’: Decision no. Dec. 34–100-3 (1 March 1985) p. 2.

190. Cf., Gold, loc. cit. n. 183, p. 571.

191. See ibid. pp. 571–576.

192. On the distinction between capital and current transactions, see ibid. pp. 563–569.

193. The burden of proof as applied by the majority in the Schering case was criticized by the dissenting Judge Mosk. See 5 Iran-US CTR, pp. 375–377. Similarly, in the Dallal case (in which taking was not directly at issue) the dissenting American Judge (Holtzmann) strongly criticized the majority's treatment of burden of proof both as regards the alleged facts and the question of their conformity with the IMF Agreement. See 3 Iran-US CTR, p. 17 et seq. Also, in the last-mentioned case the crucial question was whether the relevant transactions were current or capital transactions. In the Schering case Judge Mosk in his dissenting opinion did not consider the issue of taking from the point of view of customary international law, as he was ready to conclude that in any case the restrictions in question were in violation of the Treaty of Amity and the IMF Agreement: 5 Iran-US CTR, p. 383. In the Hood case he was of the view that a taking compensable under customary international law had occurred. Hood, dissenting opinion of Richard M. Mosk, 7 Iran-US CTR, p. 48 at pp. 49–51.

194. ‘Factories and institutions who have received substantial loans from banks for establishment or expansion, will be owned by the government in the event that their total debt exceeds net assets …’ The main part of Art. 1 is reproduced at pp. 35–36 of the relevant Sedco interlocutory award (award no. ITL 55–129-3).

195. Sedco, ITL 55–129-3, p. 35.

196. Ibid. p. 37.

197. Ibid. p. 38. The Tribunal also noted that the respondents' arguments concerning the financial state of Sediran may bear on the question of valuation although not on the taking as such. It should be noted that this finding concerning the application of Clause C in 1980 only confirmed a conclusion of expropriation which had already been drawn on other grounds (on which Sediran was found to have been taken in November 1979, see infra s. 3.3.6).

198. Starrett, interlocutory award, 4 Iran-US CTR, p. 159. See also Sedco, 55–129-3, p. 24, n. 5.

199. For a general discussion based mainly on the practice of national foreign claims settlement commissions, see Christie, loc. cit. n. 14, pp. 316, 318, 322–324, 333; Weston, loc. cit. n. 156, p. 153 et seq.

200. Sedco, ITL 55–129-3, p. 41, quoting Christie, loc. cit. n. 14, p. 337.

201. As discussed in the previous sub-section, the application of the Law for the Protection and Development of Iranian Industries to SEDIRAN in 1980 in any case meant the expropriation of that company in which Sedco had a 50% equity interest. The case, however, is also relevant for the present topic in view of the claimant's contention (approved by the Tribunal) that the taking actually occurred earlier through the appointment of ‘temporary managers’. Noting that ‘[t]he choice of the date of taking is not without significance because the value of the shareholders' expropriated interest may change dramatically during the surrounding time’ (Sedco, ITL 55–129-3, p. 41), the Tribunal examined the claimant's argument.

202. Cf., supra s. 2.1.

203. Concerning expropriation of the claimant's share in an Iranian partnership created (on a 50/50 basis between the claimant and an Iranian firm) for certain engineering and architectural services. See 6 Iran-US CTR, pp. 220–224 and infra n. 217.

204. This case (award no. 217–99-2) should be distinguished from Phelps Dodge International (award no. 218–135-2). Cf., supra n. 19. Phelps Dodge had an investment (amounting to some 20% of the share value) in the Iranian company SICAB ‘established for the purpose of manufacturing in Iran and selling various wire and cable products’: award, para. 1. See further infra n. 222. For yet another case of ‘progressive taking’, see Sola Tiles, paras. 11–40.

205. As to the factual background, the claimants alleged the expropriation of the 31% equity interest held by affiliated Foremost companies in an Iranian Dairy company (‘Pak Dairy’), as well as expropriation of two unpaid cash dividends. See Foremost, pp. 3–6 and infra s. 3.2.1.

206. See supra n. 90.

207. In which month further relevant events took place, as will be seen infra. Also see 4 Iran-US CTR, p. 144 et seq.

208. Ibid. p. 156. The Tribunal went on to say that ‘[a] Revolution as such does not entitle investors to compensation under international law’ Ibid.

209. Cf., supra s. 3.1.

210. The only difference in the composition of the panel arbitrating the latter case as compared to the former was that in Foremost the Iranian arbitrator was Ameli (and not Kashani, as in Starrett). Cf., also supra n. 205.

211. See Foremost, pp. 10–11. Thus, Foremost alleged ‘that the climate of hostility towards United States nationals forced its expatriate personnel, including Mr. Fisher, Pak Dairy's managing director until November 1979, and Mr. Lorchinger, the chief engineer, to leave the country at the end of 1978’: ibid. p. 10.

212. Ibid.

213. Ibid. p. 26.

214. Ibid. p. 29.

215. Ibid. As discussed above in s. 3.2.1, the attributability of the non-payment to the Government was based on the active role in the matter of the government representatives on Pak Dairy's Board.

216. Foremost, p. 27. Foremost continued to be represented, by proxy, on the board of directors of Pak Dairy until October 1981. Although there was no finding of a taking, the non-payment of the cash dividends nevertheless constituted a measure ‘affecting property rights’ within the meaning of Article II(1) of the Claims Settlement Declaration for which damages were awarded. Cf., infra s. 3.3.7.

217. Brower, loc. cit. n. 9, pp. 647–648. In addition to the cases discussed in the text, this is emphasized by the Golpira case. In this case the claimant, the owner of less than a 10% share in an Iranian medical company, asserted that his shares were expropriated through the expropriation of the principal shareholder (whose share turned out to be 21%) of the company. Denying the claim, the Tribunal noted that ‘[t]he Claimant does not allege that the Government … has appointed managers or directors or that his shares, per se, were expropriated …’. 2 Iran-US CTR, p. 175.

218. Sedco, ITL 55–129-3, p. 39.

219. The title of Act No. 6738 of 16 June 1979 is given at p. 31 of the award.

220. In Thomas Earl Payne the Tribunal found ‘the circumstances … similar to those in SEDCO’ (Payne para. 24), finding a taking to have occurred by the application of the same law. This case concerned the taking of the claimant's share (35 and 30% respectively) in two Iranian companies involved in, e.g., film distribution and the electronic spare parts business.

221. The enactments in question were the ‘Apartment Purchasers Bill’ of 7 January 1980 prescribing that all down-payments from purchasers to housing companies (such as Shah Goli in which the claimant had its property interest) were to be paid to Bank Maskan rather than directly to companies, and the 27 January 1980 ‘Construction Completion Bill’ giving the Ministry of Housing the responsibility over unfinished housing projects. See Starrett, interlocutory award, 4 Iran-US CTR, pp. 146–147, 152–153, 155.

222. Cf., supra n. 204. In this case the claimant owned some 20% of the share issue of the expropriated SICAB company, but the relevant agreements guaranteed it managerial control exceeding this equity interest. After its expatriates had left Iran in the wake of the Revolution, Phelps Dodge, gradually lost its ability to participate in the affairs of SICAB. On 27 October 1980 ‘the Iranian Council for the Protection of Industries, a governmental body’ (Phelps Dodge, para. 9) transferred SICAB's management to two governmental agencies to which the management of the factory was also transferred by the same Council on 15 November 1980. The taking was found to have been completed on the last-mentioned day, as claimed by the claimant. See ibid., paras. 1–9, 19–22.

223. The claimant, a US engineering and architectural consulting partnership, Tippetts, Abbot, McCarthy and Stratton (‘TAMS’), had created a 50/50 partnership (TAMS-AFFA) with an Iranian firm ‘for the sole purpose of performing engineering and architectural services on the Tehran International Airport (“TIA”) project’: 6 Iran-US CTR, p. 220. The claimant alleged a taking of its 50% interest through various actions by Iran. The Tribunal accepted the allegation, noting that in July 1979 the Government had appointed a temporary manager who ‘assumed the right to sign checks on TAMS-AFFA's accounts by himself and make personnel and other decisions without consulting TAMS’: ibid. p. 224. While the claimant at first succeeded in returning some of its control, starting in December 1979 it was deprived of even the limited amount of participation that was left. In that month ‘[t]he last remaining TAMS representative with signatory authority apparently left the country’ (ibid. pp. 224–225), and thereafter ‘TAMS-AFFA ceased all communication with TAMS, neither reporting to it on the status of the TIA project and TAMS-AFFA's finances nor responding to its letters or telexes’: ibid. p. 225. The Tribunal concluded that the claimant had been ‘deprived of its property interest in TAMS-AFFA since at least 1 March 1980 and that the Government of Iran is responsible, by virtue of its acts and omissions, for that deprivation’. Ibid.

224. Supra n. 219.

225. Otis Elevator Company, para. 40. The Tribunal did not find sufficient evidence that the government-appointed supervisor (or the successor who followed him) assumed real ‘control of Iran Elevator's operations’ (ibid. para. 42), noting also that the appointment for both Iran Elevator and Otis Iran, another affiliate of the claimant, was made primarily with a view to the latter's situation (ibid. para. 41). In the Tribunal's view there was also no ‘evidence that the Claimant was specifically denied access to any company matters’: ibid. para. 46. ‘On the balance of evidence before it, the Tribunal [held] that a multiplicity of factors affected the Claimant's enjoyment of its property rights in Iran Elevator, among them its position as a minority shareholder in an inactive company and the changed circumstances of the Iranian elevator market’: ibid. para. 47. Thus no taking was found to have occurred.

226. See supra n. 223. Another example of a case where the deprivation of management rights was not considered to amount to a taking is provided by Amoco. In it the Tribunal did conclude ‘that Iran caused NPC, NIOC and the managing director of Khemco to act in July 1979 contrary to the position taken by the board of directors of Khemco, thus practically depriving Amoco of its rights in the management of Khemco …’.: Amoco, partial award, para. 181. These measures were not regarded as amounting to a taking, which was found to have been finalized later (see supra n. 21, although they were taken into account in the determination of the valuation date. See infra n. 239.

227. Phelps Dodge, para. 21.

228. Ibid. para. 21.

229. Ibid., para 22: ‘The Tribunal fully understands the reasons why the Respondents felt compelled to protect its interests through this transfer of management, and the Tribunal understands the financial, economic and social concerns that inspired the law pursuant to which it acted, but those reasons and concerns cannot relieve the Respondent of the obligation to compensate Phelps Dodge for its loss’

230. Ibid. para. 22.

231. As stated in Sedco, ITL 55–129-3, pp. 42–43.

232. Ibid. p. 40. See also Starrett, interlocutory award, 4 Iran-US CTR, p. 154.

233. Sedco, ITL 55–129-3, p. 42.

234. In the way discussed in supra s. 3.3.5.

235. Thus in Starrett the Tribunal determined as the date of the taking, 30 January 1980, by which date the claimant's rights had been rendered ‘so useless that they must be deemed to have been taken’: Starrett, interlocutory award, 4 Iran-US CTR, p. 155, see also p. 156. In Phelps Dodge the taking was considered completed on 15 November 1980 when control of the SICAB factory was taken over by the Government and the claimant was deprived ‘virtually of all of the value of its property rights’ in the company: Phelps Dodge, para. 22. Also see Tippetts, supra n. 223, and Thomas Earl Payne, paras. 23–24.

236. The case has been discussed in supra ss. 3.2.1 and 3.3.3.

237. International Technical Products, p. 49.

238. Art. II(1) of the Claims Settlement Declaration. This was the issue in International Technical Products just quoted. Also cf., the discussion concerning Foremost, supra at n. 216.

239. As is further discussed infra in ss. 4.4 and 4.6. Cf., Brower, loc. cit. n. 9, p. 656 (‘When an expropriation occurs in a revolutionary setting the fixing of the exact date of the expropriation may be critical, since the property value may fluctuate with the volatile political, social and economic milieu’). There is, however, in the Tribunal's practice one exception to the rule that the valuation date is the same as the date of the taking. This is the Amoco, case in which the taking was determined to have finally occurred in December 1980. See supra n. 22. The Tribunal, however, admitted that prior encroachment on Amoco's management rights by measures of NPC and NIOC (see supra n. 226) ‘should be considered to have some bearing on the Claimant's right to compensation’: Amoco, partial award, para. 181. This fact was taken into account by determining the date at ‘which such measures definitively took effect, rather than the date of the final decision of nationalization’ as the valuation date: ibid. This somewhat anomalous conclusion, in which some kind of equitable considerations may have played a role or which, possibly, was reached in order to exclude abnormal depression of the value from the calculation of compensation as required by law (see infra s. 4.4.1.1), seems too unique to affect the general conclusions drawn in the text.

240. See Christie, loc. cit. n. 14, pp. 323–324; Dolzer, op. cit. n. 14, p. 239, fn. 232; Weston, loc. cit. n. 156, p. 170.

241. Cf., Higgins, loc. cit. n. 6, p. 278 (‘tendency has been, if the essential property rights remain intact, to refuse compensation even if substantial property loss can be shown’).

242. 6 Iran-US CTR, p. 169. The Tribunal's use of the phrase ‘unlawful act’ appears slightly inaccurate. As shown, inter alia, by the INA award rendered by the very same Chamber, a taking may be lawful and still give rise to compensation without any need to rely on the principle of unjust enrichment. See the text at n. 34 supra. It is the lack of the basic elements of expropriation and nationalization (lawful or not) that justified the resort to the principle of unjust enrichment, not the lack of lawfulness.

243. 6 Iran-US CTR, p. 169.

244. As will be discussed in s. 4 infra, it is the market value of the property in the hands of the owner (or some equivalent of it) rather than the ‘enrichment’ of the government that forms the point of departure in compensation for a taking. In Sea-Land the claim was for some $40 million (including interest), and the award was a mere $750, 000: 6 Iran-US CTR, pp. 157–158, 172. According to Judge Holtzmann, who dissented, inter alia, on this point, ‘the figure of $750, 000 seems to have recommended itself to the Majority on the sole ground that it was low enough’: ibid., p. 216.

245. 6 Iran-US CTR, p. 168.

246. See supra ss. 3.2.1 and 3.3.6.

247. Foremost, p. 33, and see also p. 32.

248. See supra at n. 3.

249. It is recalled that the Tribunal stressed that the non-payment of the cash-dividends was attributable to the Government of Iran.

250. On the other hand, the Sedco award on SISA claims, in which the compensation for property lost was also not based on customary international law rules on expropriation, clearly does not have such a precedent value. As discussed earlier, the findings regarding substantive law were based on general principles of commercial law, whereas jurisdiction over NIOC (the ‘ap-propriator’) derived from the Claims Settlement Declaration. See supra n. 123.

251. Moreover, in matters such as exchange controls it should be kept in mind that it is due to the legitimate regulative motives that the interference is to quite an extent positively accepted by international law. In this kind of context the Foremost case, where there was no such justification, would be clearly distinguishable.

252. ITL 59–129-3, p. 7 (quoting Dolzer, loc. cit. n. 8, pp. 558–559).

253. Ibid. p. 7 (footnote omitted).

254. Cf., e.g., Amoco International Finance Corporation, partial award, para. 186 (‘In spite of some reservations of the Respondents on the general principle in customary international law, the question whether compensation is due in case of expropriation is not in dispute in this Case’.); INA, p. 7 (‘The Respondent does not contest that compensation is in principle payable to INA, but asserts that it should be calculated on the basis of the net book value of the nationalised shares’.). The only major case in which Iran has questioned the principle of compensation appears to be Mobil Oil Iran et al., in which the Respondents argued ‘that the consequence of a lawful nationalisation “may be that the State has an obligation to compensate”, but they add “that is controversial …”.’: Mobil Oil Iran et al., para. 129.

255. Thomas Earl Payne, para. 26.

256. On lump sum agreements in general, see Lillich, R.B., ‘Lump Sum Agreements’, in Encyclopedia of International Law, vol. 8 (1985) p. 367.Google Scholar

257. For an illustration of such settlements, see, e.g., Brower, C.N., ‘The Future of Foreign Investment – Recent Developments in the International Law of Expropriation and Compensation’, in Cameron, V.S., ed., Private Investors Abroad – Problems and Solutions in International Business in 1975 (1976) p. 93 at p. 114 et seq.Google Scholar

258. On the basis of the latter kind of settlements it has occasionally been argued that an international lex petrolia has developed in the oil industry requiring only compensation corresponding to the net book value of the assets taken (as distinct from the full market value of the enterprise). Cf., Alt, O., ‘Neue Schiedssprüche zum Recht der Verstaatlichung’ [New Arbitral Awards in Nationalisation Law], 35 Österreichische Zeitschrift für öffentliches Recht und Völkerrecht (1985) p. 265 at p. 295Google Scholar. As to the Tribunal practice, see infra at nn. 266–267.

259. Thus while the 1962 Resolution 1803 on Permanent Sovereignty over Natural Resources (supra n. 30) in its pertinent part (para. 4) still provides for the payment of ‘appropriate compensation in accordance with the rules in force in the State … and in accordance with international law’ (emphasis added), the Charter (supra n. 30) has dropped any reference to international law as the yardstick of the ‘appropriateness’ of the compensation. According to Art. 2(2)(c) of the Charter ‘appropriate compensation should be paid by the State … taking into account its laws and regulations and all the circumstances that the State considers pertinent: On the concept of sovereignty over natural resources, see further, e.g., Zakariya, H.S., ‘Sovereignty over Natural Resources and the Search for an International Order’, in Hossain, K., ed., Legal Aspects of the New International Economic Order (1980) p. 208Google Scholar. On the Charter see Weston, loc. cit. n. 156, p. 89.

260. 4 Iran-US CTR, p. 103.

261. The respondents in Sedco, ITL 59–129-3, p. 6.

262. Cf., supra s. 3.3.7.

263. Normally such items may not be entered in the balance sheet. Cf., e.g., on the West German law in this respect, Wurmstich, J.-D., ‘Coverage of Political Risk by National Insurance Agencies: The German Investment Guarantee Scheme’, in Hauser, H., ed., Promotion of Direct Investment in Developing Countries (1986) p. 123 at p. 129Google Scholar. Cf., infra n. 418.

264. Cf., supra s. 2.2.4.

265. Amoco, partial award, para. 187.

266. According to the respondents the ‘appropriate compensation’ [cf., supra at n. 261] should be ‘assessed with “unjust enrichment” as the guiding principle. Should any enrichment on the part of Respondents entitling Claimant to compensation be found, such compensation should be calculated according to the net book value of the company, a valuation basis allegedly widely used in compensation settlements in the oil industry’: Sedco, ITL 59–129-3, p. 6.

267. Amoco, partial award, para. 251. Cf., nn. 250, 266 supra. It should be noted that the net book value has also been alleged to be the proper method of valuation in fields other than the oil industry, for example in insurance. See the quotation from the INA award at n. 246 supra.

268. American International Group, 4 Iran-US CTR, p. 105.

269. Amoco, partial award, para. 184. Cf., also Sedco, ITL 59–123-3, p. 5, according to which the claimants, proceeding from the general standard of ‘full (“prompt, adequate and effective”) compensation’, emphasized that ‘in any event “unlawful takings are subject to the strictest compensation requirements”.’

270. American International Group, 4 Iran-US CTR, p. 102.

271. See infra s. 4.4.2.2(a).

272. See infra s. 4.4.2.2(c).

273. Formulated by US Secretary of State Hull in his correspondence with the Mexican Government in the late 1930s. See, e.g., Harris, op. cit. n. 45, p. 428.

274. Generally on the Hull standard as elaborated by the United States, see Gann, loc. cit. n. 14, pp. 618–622; Restatement of the Law, Foreign Relations Law of the United States (Revised, The American Law Institute 1986), p. 712Google Scholar (‘Economic Injury to Nationals of Other States’). Much the same view is also reflected in the ‘Draft Convention Concerning the Protection of Foreign Property’, adopted by the OECD in 1967 and reproduced with notes and comments in 7 ILM (1968) p. 118 et seq.

275. ‘Assessment of the present state of customary law on this subject on the basis of the conduct of States in actual practice is difficult, inter alia, because of the questionable evidentiary value for customary international law of much of the practice available’: Sedco, ITL 59–129-3, p. 8.

276. In some cases the Tribunal has applied the Treaty of Amity between Iran and the United States, instead of or in addition to customary international law. The Treaty and the reasons why the Tribunal has not limited its consideration exclusively to this lex specialis are discussed in infra s. 4.3.5.

277. See the separate opinions of Judges Lagergren and Holtzmann in the INA case, both filed on 15 August 1985, and the separate opinion of Judge Brower in the Sedco interlocutory award of 27 March 1986.

278. Sedco, ITL 59–129-3, p. 8. In Amoco the Tribunal elaborated that the practice most directly relied on by the respondents, the settlements in the oil industry since the early 1970s, was concretely influenced by such non-judicial considerations. See Amoco, partial award, para. 252 (‘The provisions of such an agreement, indeed, are the outcome of negotiations in which many motivations other than legal ones may have prevailed. This is especially true here, where certain commercial advantages given to the companies (even if they were not expressly detailed in the agreements) produced the concessions that they accepted as the standard of compensation’.).

279. The issue does not seem to have been raised by the parties.

280. Sedco, ITL 59–129-3, p. 8. The Finnish-Egyptian Investment Protection Treaty (Finnish Treaty Series 3/1982), for example, requires that expropriations and similar measures be ‘accompanied by provisions for the payment of prompt adequate and effective compensation, which shall be freely transferable in convertible currencies from the Contracting State, and the transfer is made within such a period as normally required for the completion of transfer formalities’: Art. 5(l)(c). For investment protection treaties, see Verwey and Schrijver, loc. cit. n. 6, p. 60 et seq., who analyze 195 instruments of this kind (listed as an Annex to their article), some of which have been concluded between developing and developed countries, some between developing countries inter se. For further discussion, see Sornajah, M., ‘State Responsibility and Bilateral Investment Treaties’, 20 JWTL (1986) p. 79Google Scholar (who denies the significance of these treaties as evidence of customary international law); Maschke, O.M., ‘Investitionsschutzabkommen, Neue vertragliche Wege im Dienste österreichischer Wirtschaft’ [Investment Protection Treaties, New Contractual Means Serving the Austrian Economy], 37 Österreichische Zeitschhft für öffentliches Recht und Völkerrecht (1986) p. 201.Google Scholar

281. Sedco, ITL 59–129-3, p. 8.

282. Ibid. p. 9 (quoting the arbitration case between Kuwait and the American Independent Oil Company (AMINOIL), award of 24 March 1982, 21 ILM (1982) p. 976 at para. 157).

283. The Tribunal quite apparently would not share the following view from the early 1970s: ‘State practice, in short, has not matched legal rhetoric; and to insist, as some do, that this turn of events [frequent settlements providing for less than full compensation], far from evincing international law, represents little more than a voluntary concession to socio-economic and political expediency is to inflict upon us all, we submit, a fundamental misconception of the nature of law, in general, and the dynamics of international law, in particular’: Weigel, D.R. and Weston, B.H., ‘Valuation upon the Deprivation of Foreign Enterprise: A Policy Oriented Approach to the Problem of Compensation under International Law’Google Scholar, in Lillich, ed., op. cit. n. 14, Vol. I, p. 3 at p. 9. Cf., also Lillich, loc. cit. n. 256, pp. 370–371. The quoted passage is from a time preceding the emergence of the new bilateral investment protection treaties. Should the rationale contained in the quotation be accepted (which the Tribunal has not done), it would have validity also as regards the different practice evidenced by such treaties. It is a little surprising that the Iranian arbitrators have often disagreed with the majority on, inter alia, the relevance of the settlement practice. For an extensive elaboration of an alternative view, see INA, dissenting opinion of Judge Ameli (26 November 1986).

284. As regards the relevance of the settlement practice, the Tribunal, in addition to AMINOIL (supra n. 282), cited the Barcelona Traction case (Belgium v. Spain) (Judgment of 5 February 1970), ICJ Rep. 1970, p. 3 (at p. 40). From among the other practice sharing a similar attitude, see Banco Nacional de Cuba v. Chase Manhattan Bank, US Court of Appeal, Second Circuit, 4 August 1981, 658 Fed. Reporter, 2nd Series 875 at 892 (1981).

285. Sedco, ITL 59–129-3, pp. 9–10 (footnote omitted). The Tribunal cited, inter alia, Brownlie, op. cit. n. 6, and Akehurst, M., ‘Custom as a Source of International Law’, 47 BYIL (1974-1975) p. 1.Google Scholar

286. Sedco, ITL 59–129-3, p. 10. As to the case law, the Tribunal referred to Texaco Overseas Petroleum Company/California Asiatic Oil Company v. Government of the Libyan Arab Republic, award of 19 January 1977, 17 ILM (1978) p. 1 at p. 30; AMINOIL, para. 143 (supra n. 282); the Chilean Copper case, Landgericht of Hamburg 1973, 12 ILM (1973) p. 251 at p. 276; and the separate opinion of Judge Lagergren in INA. On this case law, see also Pellonpää, loc. cit. n. 10; Gann, loc. cit. n. 14.

287. Sedco, ITL 59–129-3, p. 10.

288. In para. 177 the Tribunal noted that ‘the rule of international law that a State has the duty to respect contracts freely entered into with a foreign party … was spelled out by the United Nations General Assembly in 1962 in G.A. Res. 1803 …’. Noting also (ibid.) that ‘the rule has been questioned since then’, the Tribunal added that the Claims Settlement Declaration ‘constitutes an implied but unequivocal recognition of this rule, which has been constantly confirmed by the abundant case law of the Tribunal and is not disputed by the parties in this Case’. Cf., para. 8 of GA Res. 1803 (‘Foreign investment agreements freely entered into by or between sovereign States shall be observed in good faith’). One instance where this rule can be said to have been questioned is the Charter of the Economic Rights and Duties of States; it does not spell out any duty to respect ‘State contracts’. The Charter, however, is not mentioned by the Tribunal as a relevant document. (It is recalled that the Tribunal did not conclude on the basis of the quoted reasoning that a taking in breach of such a contract would be illegal in international law. Cf., supra s. 2.2.2). When discussing whether the ‘prompt payment of just compensation’ is a condition of lawfulness of an expropriation the Tribunal notes that while, inter alia, the Charter has cast some doubt on this, ‘other less controversial resolutions, such as G.A. Res. 1803 … confirm the existence of the rule’: Amoco, partial award, para. 116.

289. See Sola Tiles, paras. 44–45 (GA Res. 1803 discussed as evidence of the contents of the requirements of customary law, with no mention of the Charter).

290. Sedco, ITL 59–129-3, p. 11. The Tribunal specifically referred to the following two separate opinions.

291. As to the Tribunal's practice subsequent to these separate opinions, the Sola Tiles case is to be interpreted to adhere to the view of Judge Holtzmann rather than that of Judge Lagergren. See Sola Tiles, para. 44 et seq. In this case the Tribunal held ‘that the drafters used the word “appropriate” in the sense of “adequate”’: ibid. para. 45 (citing the travaux prèparatoires). For a different interpretation of the preparatory works, see Verwey and Schrijver, loc. cit. n. 6, pp. 80–81.

292. Norway v. USA, 1 RIAA, p. 307 (1922), cited at least in Tippelts, 6 Iran-US CTR, p. 225, and Amoco, partial award, p. 104 at n. 6.

293. Texaco (supra n. 286); Libyan American Oil Company (Liamco) v. The Government of the Libyan Arab Republic, award of 12 April 1977, 20 ILM (1981) p. 1 (cited in Sedco, ITL 59–129-3, pp. 11–12, and Amoco, para. 206); BP Exploration Company (Libya) Limited v. Government of the Libyan Arab Republic (supra n. 43) (Amoco, partial award, para. 206).

294. Amoco, para. 206, refers to the ICSID cases of Benvenuti et Bonfant Srl. v. People's Republic of the Congo, award of 8 August 1980, 21 ILM (1982) p. 740, and AGIP Co. v. People's Republic of the Congo, award of 30 November 1979, 21 ILM (1982) p. 726. The ICC case S.P.P. (Middle East) Limited v. Arab Republic of Egypt, award of 11 March 1983, 22 ILM (1983) p. 752, is cited in Amoco, partial award at p. 100 n. 5, and p. 104 n. 6.

295. Thus the case law of the Tribunal appears to prove the correctness of the premise presented at the beginning of this paper, i.e., that although there is no stare decisis principle in international law, cases decided by international courts and tribunals are likely to be regarded as most authoritative sources of law by other corresponding organs. See supra s.1.

296. Barcelona Traction (supra n. 284); Chilean Copper case (supra n. 276); Banco Nacional de Cuba (supra n. 284, quoted in Sola Tiles, para. 47), and, above all, the Chorzów Factory case (Germany v. Poland), 1928 PCIJ sen A, no. 17, Judgment of 13 September 1928 (see infra).

297. See, e.g., Computer Science Corporation, p. 44 (office furniture and equipment for which the claimant only sought compensation corresponding to the net book value, see infra s. 4.4.2.2(a)); Dames & Moore, 4 Iran-US CTR, pp. 221–224 (see infra 4.4.2.2(a)).

298. Amoco, partial award, para. 191. Chorzów Factory is also cited, e.g., in Starrett, final award, para. 264.

299. As an explanation for its lengthy discussion of the case (see Amoco, partial award, para. 192 et seq.) the Tribunal ‘recognized … that its treatment of compensation is fairly complex and must be carefully analyzed’: ibid. para. 191. As to how the case was construed by the Tribunal, see infra s. 4.3.3. That Chorzów Factory is possible to interpret differently, cf., the concurring opinion of Judge Brower in Amoco (14 July 1987), especially para. 16 et seq.

300. See the discussion in supra s. 4.1.

301. Amoco, partial award, para. 209. Even assuming that in some cases less than full compensation is proper under international law, the ‘full value’ of the property is presumably the starting point in valuation, and therefore a key concept in our field.

302. Supra s. 1.

303. See infra s. 4.3.1.1.

304. Thus in Amoco the Tribunal was faced with a taking which is to be characterized as a nationalization in the meaning referred to. The taking was based on the so-called Single Article Act on the nationalization of the oil industry. See infra s. 4.3.2. Without stressing the distinction between expropriation and nationalization the Tribunal throughout the partial award used the words apparently interchangeably. Cf., e.g., para. 131 (‘The Single Article Act … was a complete re nationalization of the oil industry and, for all practical purposes, it amounted to a nationalization of the rights of the foreign parties to nullified contracts. Such a construction of the Single Article Act as a measure of expropriation is … conceded by the Respondents’).

305. Amerasinghe, C.F., ‘The Quantum of Compensation for Nationalized Property’Google Scholar, in Lillich, ed., op. cit. n. 14, vol. III, p. 91 at p. 114. Cf., also Brownlie, op. cit. n. 6, p. 538; Brower, loc. cit. n. 257, p. 157.

306. See supra s. 3.3.6.

307. Sedco, ITL 59–129-3, p. 11. Later in the award (pp. 12–13), inter alia, Amerasinghe and Brownlie (supra n. 306) are explicitly referred to in support of the Tribunal's conclusion.

308. Ibid. p. 13.

309. Before quoting Tippetts' stand on the standard of compensation the Tribunal in Sedco stated: ‘that international law requires full compensation in cases such that now before us is supported by the practice of this very Tribunal. Thus in one case concerning expropriation of Claimant's 50 per cent share in an Iranian entity created for the purpose of performing certain engineering and architectural services, the Tribunal stated that …‘: Sedco, ITL 59–129-3, p. 13.

310. 6 Iran-US CTR, p. 225.

311. Oil Field of Texas, para. 43 (citing, inter alia, the Sedco award just discussed).

312. See Sola Tiles, paras. 41–50. The Tribunal concluded ‘that the same standard would be required in this case by customary law as by the direct application of the Treaty [of Amity] …’: ibid., para. 42. Cf., infra s. 4.3.5.

313. 4 Iran-US CTR, p. 222.

314. Ibid. p. 223.

315. Cf., Bring, op. cit. n. 14, pp. 253–254.

316. The circumstances surrounding the taking are discussed in detail in the first interlocutory award rendered in the case (ITL 55–129-3). The taking took place through the appointment of ‘temporary managers’ by virtue of the relevant Iranian legislation, and the award cited indicates that even before the taking it was known that all of SEDIRAN's functions, as well as those of other private oil drilling companies, were to be assumed by the State-owned National Iranian Drilling Company. See ITL 55–129-3, pp. 29–30. Also see supra s. 3.3.6. Moreover, shortly after the taking of SEDIRAN the Single Article Act providing for the annulment of concession-like agreements was enacted. See infra s. 4.3.2. Judge Brower in his concurring opinion in Sedco (ITL 59–129-3) hinted at the possibility of the relevant events being regarded as nationalization (without, however, directly arguing that they were). This he seemed to do in order to stress his view that no distinction, as regards the standard of compensation, between expropriation and nationalization should be read into the Sedco award in question. Cf., infra n. 318. In one view it could perhaps be argued that all takings carried out in and after the revolutionary process of Iran were de facto part of a big nationalization programme. The Tribunal, however, clearly has not proceeded from such a premise.

317. See the quotation at n. 307 supra.

318. Ibid. Judge Brower in his separate opinion to the relevant Sedco award argued that ‘no “nationalization exception” can be read into the Interlocutory Award’: separate opinion of Judge Brower, ITL 59–129-3 (27 March 1986) p. 22, n. 31. Although this is true in the sense that the Tribunal did not say that less than full compensation would suffice in large-scale nationalizations, the award seems to leave the question of nationalization open rather than to confirm the applicability of full compensation also in such circumstances. Cf., the case comment in 80 AJIL (1986) p. 969 at p. 971 (‘Arbitrator Brower … deviated somewhat from the majority opinion by concluding more firmly that, whether or not the expropriation occurred in the course of a “programmatic nationalization” the full compensation standard still applied’).

319. See supra s. 2.2.1.

320. INA, p. 8.

321. The question was further elaborated in the separate opinions filed by the two majority arbitrators in the case, Lagergren and Holtzmann. The former in effect argued that the standard of full compensation has indeed been eroded, whereas the latter forcefully supported its continuing validity also as regards nationalization. Cf., the text at n. 291 supra.

322. INA, p. 8. Although the compensation eventually determined was based on the Treaty of Amity (see infra s. 4.3.5), this passage suggests that the result would have been the same under customary international law with which we are dealing here.

323. The investment dated from four and a half years before the date of the nationalization. 4 Iran-US CTR, p. 108.

324. Ibid. p. 105.

325. Cf., ibid. p. 106. See further infra ss. 4.4.1.1 and 4.4.1.2 (on valuation).

326. A similar conclusion can be drawn on the basis of the practice of other arbitral tribunals, too: ‘although some erosion of the standard of full compensation has received occasional support as a matter of principle, concrete compensation decisions come at least closer to this standard than to any alternative standard of partial compensation or the like’. Pellonpää, loc. cit. n. 10, p. 349.

327. Supra at n. 320. See further infra s. 4.3.3.

328. Sedco, ITL 59–129-3, p. 12.

329. See Liamco (supra n. 293), award, p. 160 (20 ILM (1981) p. 80) where the Arbitrator ‘reached the conclusion that a lump sum of $66,000,000 … should be a reasonable equitable indemnification for the nationalization of the concession rights of LIAMCO's interest in Concession No. 20 …’. The claim in this regard had amounted to $186,270,000.

330. Liamco, award, p. 155 (20 ILM (1981) p. 79) speaks of the ‘undisputed obligation to pay full compensation for all the loss sustained (damnum emergens), on all these grounds … the damnum emergens should represent the market value which the nationalized assets have …‘. As regards damnum emergens Sole Arbitrator Mahmassani awarded $ 13,882,667 as claimed by the claimant.

331. Sedco, ITL 59–129-3, p. 12 (brackets in the original, footnote omitted).

332. We may quote a passage from n. 2 at p. 4 of the award, where the assets of SEDIRAN are described as follows:

‘The assets of SEDIRAN consisted principally of ten drilling rigs and associated transportation equipment, spare parts and camps. SEDIRAN's assets also included, however, warehouse facilities, land and other fixed assets. Furthermore, the assets of SEDIRAN listed by SEDCO in a reconstructed balance sheet as of 22 November 1979 encompass as well a substantial amount of receivables based on allegedly unpaid invoices submitted under two drilling contracts.

With respect to the drilling rigs, Claimant additionally seeks damages for the loss of use of the rigs for a nine month period, the time allegedly needed to replace a rig. Claimant labels this part of its claim to damages for “lost profits”. This loss appears, however, to be a direct loss resulting from the unavailability of the rigs to Claimant for use elsewhere and as such is damnum emergens’. The Tribunal, however, did not award anything for the lost revenues as regards SEDIRAN's rigs. See infra n. 541.

333. Before discussing Liamco the Tribunal noted that ‘[o]pinions both of international tribunals and of legal writers overwhelmingly support the conclusion that under customary international law in a case such as here presented, a discrete expropriation of alien property, full compensation should be awarded …’: ITL 59–129-3, p. 11. In an accompanying note (n. 18) it is added that ‘[a]s some of these opinions are expressed in the context of large-scale nationalization cases, they should a fortiori weigh heavily in a case such as the one here presented’. This is followed by the discussion on Liamco.

334. It should be noted, however, that there is one case which is to be classified as an expropriation and in which the Tribunal appears to have left somewhat open the question (on which it did not have to decide) of the entitlement to full damages also for lucrum cessans. This is Sola Tiles where the Tribunal, for the reason that the Claimant could not show any loss of profits, refrained from assigning any ‘value to future lost profits and therefore [did] not decide the question whether and to what extent lost profits can be claimed in expropriation cases in addition to the going concern value’: Sola Tiles, para. 64.

335. In American International Group the Tribunal did award compensation also for lost profit expectations as a part of the going concern value of the company. That the compensation was less than the claim does not mean that it was intended in any respect to be ‘partial’. See infra s. 4.4.1.2 (a) and (b). In INA no amount was awarded for the lost profits as such, but this case also has to be seen in the light of the concrete circumstances present rather than as a standpoint of principle. See infra s. 4.4.1.3.

336. When discussing, in his separate opinion, certain evidence purportedly supporting the obiter dicta statement concerning the possible erosion of the full compensation standard made in INA (supra at n. 320), Judge Lagergren noted that ‘regard must be had to the fact that these … pronouncements have been made in the special and limited context of the rights and duties of States with respect to their natural resources’. INA, separate opinion of Judge Lagergren, p. 4.

337. Mobil Oil Iran et al., para. 6.

338. For the factual background of the ‘oil cases’ and the main contents of the SPA, which was preceded by the so-called Consortium Agreement of 1954, see Mobil Oil Iran et al., paras. 1–23.

339. Ibid. para. 143.

340. Ibid. para. 130. Judge Brower, according to his concurring opinion, would have held that the events amounted to both the repudiation of the contract by the Iranian parties and to a taking. See Mobil Oil Iran et al., concurring opinion of Judge Brower (14 July 1987).

341. See Mobil Oil Iran et al., para. 175.

342. See supra s. 2.2.

343. See further infra s. 4.4.1.2 (d) on the discounted cash flow method of valuation by which the claimant had computed its claim.

344. According to the respondents this compensation should have been calculated according to the net book value of the (physical) assets of the company; a method which does not necessarily meet the requirements of the standard of full compensation even as regards damnum emergens only. See infra s. 4.4.2.2(a).

345. Amoco, partial award, para. 197.

346. Ibid. para. 192. See also supra s. 2.2.

347. Ibid. para. 189. Cf., also supra s. 2.2.4.

348. Ibid. para. 189. On the Treaty, see infra s. 4.3.5.

349. Ibid. para. 193 (citing Chorzów Factory). Also see the separate opinion of Judge Lagergren in INA, p. 1 (in ‘inherently’ unlawful takings ‘it is well settled that the measure of compensation ought to be such as to approximate as closely as possible in monetary terms to the principle of restitutio in integrum – a remedy which is itself for practical reasons usually impossible of achievement’).

350. Ibid. para. 196 (quoting the PCIJ in Chorzów Factory).

351. Ibid. para. 197.

352. See infra s. 4.4.1.2(d).

353. Amoco, partial award, para. 227.

354. ‘To this element of damnum emergens, a complementary one is added where the expropriation is unlawful: the value of the revenues that the owner would have earned if the expropriation had not occurred, i.e., lucrum cessans’: ibid. para. 228.

355. Ibid.

356. See infra s. 4.3.5.

357. Amoco, partial award, para. 264.

358. Para. 264 of the partial award is worth quoting in toto: ‘Going concern value encompasses not only the physical and financial assets of the undertaking, but also the intangible valuables which contribute to its earning power, such as contractual rights (supply and delivery contracts, patent licenses and so on), as well as goodwill and commercial prospects. Although those assets are closely linked to the profitability of the concern, they cannot and must not be confused with the financial capitalization of the revenues which might be generated by such a concern after the transfer of property resulting from the expropriation (lucrum cessans)’.

359. Cf., supra n. 332, quoting Sedco, in which the Tribunal, in the light of the particular circumstances of that case, decided to treat a very limited amount of lost revenues as part of damnum emergens, thereby implicitly excluding prospects of profitability in general from the sphere of that concept. Also cf., the concurring opinion of Judge Brower in Amoco International Finance Corporation, para. 19 (‘What does “going concern value” mean other than the concern's value as a producer of profits?’). In Sola Tiles, however, the view presented in the Amoco partial award appears to receive some support. For reasons already indicated (supra n. 334), the Tribunal did not assign any ‘value to future lost profits and therefore [did] not decide the question whether and to what extent lost profits can be claimed in expropriation cases in addition to the going concern value’: Sola Tiles, para. 64. Thus similar to Amoco (but unlike Judge Brower in his concurring opinion quoted, or the Tribunal in, for example, American International Group, cf., infra s. 4.4.1.2(a)), Sola Tiles distinguished lucrum cessans from the going concern value. Going concern valuation is discussed in infra s. 4.4.1.2.

360. Cf., the concurring opinion of Judge Brower in the Amoco case, para. 2 (‘… I am deeply concerned that the Award's concepts of what constitutes full compensation are wrong in important respects and may not in fact produce the required full compensation’).

361. See supra at n. 320.

362. As in Sedco the loss of revenues for the period needed to replace the expropriated drilling rigs. Cf., supra n. 332.

363. See supra n. 358.

364. Cf., Ibid.

365. Although Sola Tiles (cf., supra n. 334) may be interpreted to suggest that similar adjustments might come to be applied also in what may be called discrete expropriation, the Tribunal's practice as a whole indicates that departure, if any, from full damages is more conceivable in large-scale nationalizations of a lawful character.

366. Supra n. 12.

367. Emphasis added. The whole provision reads as follows: ‘Property of nationals and companies of either High Contracting Party, including interests in property, shall receive the most constant protection and security within the territories of the other High Contracting Party, in no case less than that required by international law. Such property shall not be taken except for a public purpose, nor shall it be taken without the prompt payment of just compensation. Such compensation shall be in an effectively realizable form and shall represent the full equivalent of the property taken; and adequate provision shall have been made at or prior to the time of taking for the determination and payment thereof’.

368. Brower, loc. cit. n. 9, p. 660.

369. 4 Iran-US CTR, p. 109.

370. 6 Iran-US CTR, p. 225. In this case the applicability of the Treaty had not been addressed by the parties. Cf., Brower, loc. cit. n. 9, p. 660. As late as 22 April 1987 the Tribunal, in Sola Tiles, left the status of the Treaty undetermined, since the ‘conclusion, that the same standard would be required in this case by customary law as by the direct application of the Treaty itself, obviates the need to decide whether and on what footing [the Treaty] applies here’: Sola Tiles, para. 42.

371. INA, p. 9. As noted earlier (supra n. 322), it appears that the INA award was ready to accept full compensation in the case before it also on the basis of customary international law.

372. The Tribunal in Amoco noted ‘that the part of the Treaty which relates to consular relations was suspended with the closure of the consulates of both nations and the rupture of diplomatic relations’: Amoco, partial award, para. 96.

373. Phelps Dodge, para. 27. For the most elaborate discussion in the Tribunal's case law on the various alleged (or otherwise possible) grounds on which the invalidity of the Treaty at the times relevant to cases of taking could be based (duress, fraud, changed circumstances, violation of the Treaty by the United States, tacit termination), see Amoco, partial award, para. 88 et seq. The Tribunal in this, as well as in others, put much weight on the fact that the ICJ in the Case Concerning United States Diplomatic and Consular Staff in Tehran (United States v. Iran), Judgment of 24 May 1980, ICJ Rep. 1980, p. 3, ‘held that the Treaty was in effect at least as of 29 November 1979’: Amoco, partial award, para. 92.

374. See Starrett, final award, para. 261, and Thomas Earl Payne, para. 28. Also in Amoco the Tribunal found the Treaty standard determinative, but drew on customary international law when deciding on the legal consequences to be drawn from the distinction between lawful and wrongful takings. Cf., supra at nn. 347–348.

375. See Sedco, ITL 59–129-3, p. 13 (‘The Tribunal thus holds that Claimant must receive compensation for the full value of its expropriated interest … whether viewed as an application of the Treaty of Amity or, independently, of customary law …‘.). The Tribunal in this case examined the contents of customary international law, ‘due to Respondents’ arguments that the said Article [IV(2) of the Treaty] simply incorporates customary law as it may exist from time to time’: ibid., p. 7.

376. Phelps Dodge, para. 28.

377. See supra at n. 320.

378. Cf., supra s. 4.3.3 in finem.

379. Amoco, partial award, para. 208.

380. Cf., infra s. 4.7.

381. Cf., Judge Brower's concurring opinion in Amoco, para. 2, in which concern is expressed that the concept of full compensation adopted in the partial award in question ‘may not in fact produce the required full compensation’ (quoted supra n. 360).

382. On valuation in the light of the newer international arbitral practice in general, see Pellonpää, M., ‘Valuation of Expropriated or Nationalized Property in International Arbitral Practice of Recent Years’, Finnish Branch of International Law Association 1946–1986 – Essays on International Law (1987) (Publication No. 5 of the Finnish Branch of the International Law Association) p. 145.Google Scholar

383. Cf., supra ss. 4.3.1.2 and 4.3.4.

384. As discussed in supra s. 4.3.5 (see text preceding n. 379), the Tribunal interpreted the Treaty so as to exclude any ‘excess profit’ deduction to be made from the full compensation. However, also in no case decided on the basis of customary international law has this kind of deduction (which can be interpreted to pertain either to the standard of compensation or to the valuation of the property, or both) been applied.

385. See, e.g., INA, p. 10; American International Group, 4 Iran-US CTR, p. 106.

386. Starrett, final award, para. 277, referring with approval to the report of the expert appointed by the Tribunal in that case; see infra s. 4.4.1.2(d). Also see INA, pp. 10–11.

387. INA, p. 10. See also American International Group, 4 Iran-US CTR, pp. 106–107; Starrett, final award, para. 281; Amoco, partial award, para. 248 (‘it has always been recognized that the effects of the prospect of expropriation on the market price of expropriated assets must be eliminated for the purpose of evaluating the compensation to be paid, since they are artificial and unrelated to the real value of such assets’).

388. American International Group, 4 Iran-US CTR, p. 107. See also Sedco, final award, para. 31 (addressing the taking of tangible assets, but putting forward the general proposition concerning market value that ‘events preceding the taking calculated to diminish the value of the property’ should not be taken into account).

389. Amoco, partial award, para. 217.

390. See American International Group, 4 Iran-US CTR, p. 107; Phelps Dodge, para. 30; Thomas Earl Payne, para. 35.

391. American International Group, 4 Iran-US CTR, p. 106 (‘Evidence regarding the actual development of the company's business in the years following the nationalization should thus be disregarded. Rather, the valuation should be made on the basis of the fair market value of the shares … at the date of nationalization’). See also INA, p. 10. Apparently the only case in which a valuation date other than the date of the taking has been chosen is Amoco International Finance Corporation, with 24 December 1980 being determined as the date of the taking and 31 July 1979 as the date of valuation. This, however, may be seen as a method of excluding the effect of Governmental actions which have depressed the value of the property in the foreign owner's hand rather than as a rejection of the principle that the property should be valued as of the date of the taking. Cf., the text at n. 389 supra. In July 1979, the Tribunal found, ‘Iran caused NPC, NIOC and the managing director of Khemco’ to act in a way ‘practically depriving Amoco of its rights in the management of Khemco …’: Amoco, partial award, para. 181. Although these acts were not found to constitute the taking (which was finalized by the December 1980 Decision of the Special Commission established by virtue of the Single Article Act; cf., supra s. 4.3.2), their impact was considered such as to justify the calculation of the value as of 31 July 1979. Ibid. para. 181. Judge Brower argued that 31 July 1979 also should have been determined as the date of the taking. Such a determination could have affected the important conclusion that the taking in question was lawful. Amoco, partial award, concurring opinion of Judge Brower, paras. 3–6. Also cf., supra n. 241.

392. Which raise many practical problems of application, such as the border-line between specific actions directed against the property and more general changes in the political and economic climate, as well as the actual extent of the rule that events which are subsequent to the taking should be disregarded. The latter issue may prove problematic in view of the fact that in the valuation as a going concern (infra s. 4.4.1.2) some projections into the future may be needed in order to value the profitability of an enterprise as an element of its value as of the date of the taking. While these questions are discussed at more length in subsequent sub-sections, we may in this context refer to the Starrett case as an illustration. In this case the Tribunal-appointed expert in his discounted cash flow calculations omitted the actual inflation rate (25%) of the post-expropriation period, instead applying the rate of 17% which he estimated as foreseeable on the date of the taking. See Starrett, final award, para. 195, and infra s. 4.4.1.2 (d).

393. Cf., infra s. 4.4.1.4 in finem (on Sola Tiles).

394. Amoco, partial award, para. 219. Even if the price quoted on the stock market should be available, it does not necessarily provide a sufficient basis for the calculation of the compensation in case of a taking. Even if the possible collapse of the quoted price, which may have been caused by the threat of the taking, could be eliminated by the choice of an earlier valuation date, such quoted price normally concerns a small quantity of shares. In case of expropriation or nationalization the comparison, more often than not, should rather be made to the higher price (also per share) which the buyer of the whole stock (or the majority thereof), and thereby the acquirer of the controlling interest, normally has to pay. Cf., Mendelson, M.H., ‘International Law and the Valuation of Nationalized Shares: Two French Decisions’, 35 ICLQ (1985) p. 284 at pp. 288–289.CrossRef Google Scholar

395. 4 Iran-US CTR, p. 106.

396. It seems a debatable point, and partly a matter of definition, whether the use of such indirect methods should be characterized as alternative means of reaching the market value, or rather as a means of establishing the value in the absence of market value (and thereby instead of it). In Starrett the expert appointed by the Tribunal and the Tribunal itself clearly proceeded from the premise that the discounted cash flow calculations (to be discussed in infra s. 4.4.1.2(d)) of the expert would lead to the finding of the market value. See Starrett, final award, paras. 18 et seq, 277. Similarly Thomas Earl Payne, paras. 34–35. On the other hand, in Amoco, partial award, the Tribunal, while not rejecting the idea that the alternative methods ‘permit a determination of “full value”, the just price, and adequate or equitable value, and so on’, did deny that any of the alternative values could ‘legitimately be labelled “market value”.’: Amoco, partial award, para. 220. Considering ‘all the subjective conjectures incorporated’ in such valuation methods the Tribunal held ‘that the phrase “market value” is of no help in the absence of regular transactions in a free market and can too easily be misleading’: ibid. We also use the term ‘market value’ to denote the value directly determinable on the basis of an operational market.

397. See Gann, loc. cit. n. 14, pp. 618–619 (quoting the position of the US State Department).

398. Clagett, loc. cit. n. 14, p. 838.

399. Muller, loc. cit. n. 14, p. 40.

400. See Amoco, partial award, paras. 214–215.

401. Although in the particular case just referred ta (Amoco) it did not accept the specific method of valuation (discounted cash flow) which gave the claimed amount of more than $ 183 million, as proposed by the claimant. See supra s. 4.3.3, and infra s. 4.4.1.2 (d).

402. 4 Iran-US CTR, p. 109. Also see, e.g., Amoco, partial award, para. 263 (‘After its expropriation Khemco remained a going concern … Going concern value accordingly is the measure of compensation in this case’.); Thomas Earl Payne, para. 34.

403. 4 Iran-US CTR, p. 106.

404. Ibid. p. 107.

405. Ibid.

406. Ibid. p. 106.

407. Ibid. p. 107.

408. See below (b) on Thomas Earl Payne, and s. 4.4.1.3 on Phelps Dodge.

409. 4 Iran-US CTR, pp. 107–108.

410. Ibid. p. 108.

411. Ibid. (n. 1).

412. Ibid. p. 109.

413. But at the same time many times more than that accepted as the maximum value by the respondents. See ibid. pp. 104, 108–109.

414. Cf., supra n. 220.

415. Thomas Earl Payne, para. 31.

416. Ibid. para. 36.

417. Ibid. para. 35. See also Brower, loc. cit. n. 9, pp. 667–668.

418. Thomas Earl Payne, para. 37.

419. Cf., supra at n. 267. In para. 255 of the partial award the Tribunal stated, inter alia, that: ‘the theory that net book value is the appropriate standard of compensation in all cases of lawful expropriation overlooks the fact that a nationalized asset is not only a collection of discrete tangible goods (equipments, stocks and, possibly, grounds and buildings). It can include intangible items as well, such as contractual rights and other valuable assets, such as patents, know-how, goodwill and commercial prospects. To the extent that these various components exist and have an economic value, they normally must be compensated, just as tangible goods, even if they are not listed in the books’.

420. See supra s. 4.3.3, and below under (d).

421. Amoco, partial award, para. 265 (quoting the award in Aminoil, supra n. 282.

422. Ibid. para. 264. In Aminoil the arbitral tribunal (composed of Reuter, Sultan and Fitz-maurice) designated various criteria for the fixing of the value of the various components of the undertaking: depreciated replacement value for the fixed assets, appraised value for non-fixed assets, and the concept of ‘reasonable rate of return’ derived from the contractual relationship between the parties for the computation of Aminoil's legitimate earning expectations. See Aminoil, paras. 160, 173(2) and (3). Also see Pellonpää, loc. cit. n. 382, p. 152; Gann, loc. cit. n. 14, pp. 637–638; Redfern, A., ‘The Arbitration Between the Government of Kuwait and Aminoil’, 55 BYIL (1984) p. 65 at pp. 107–108.Google Scholar

423. Amoco, partial award, para. 265.

424. Ibid. para. 267. Specifically the Tribunal asked the claimant to provide (subject to the possibility for the respondents to comment thereon) data concerning ‘the total investment made by the two parties in Khemco (amounts and dates); the annual reports, control budgets and financial statements (with all the relevant annexes) of Khemco; the net book value of Khemco as of 31 July 1979; the replacement value of Khemco's assets at the same date; and the estimated value of Khemco's intangible assets at the same date, including goodwill and commercial prospects’: ibid.

425. See supra s. 4.3.3.

426. Cf., Amoco, partial award, para. 265.

427. That some approximation in the last resort was involved in Aminoil is indicated by the fact that the award does not reveal how the compensation amount of $ 206,041,000 was actually arrived at. Cf., the references quoted in n. 422 supra.

428. Clagett, loc. cit. n. 14, p. 839 (the author was the claimant's main counsel in Amoco International Finance Corporation).

429. See supra s. 4.4.1.2(b).

430. See supra s. 4.3.3.

431. Amoco, partial award, para. 227 (quoting the claimant's own requested remedy).

432. It, however, did not exclude the appropriateness of the DCF method in connection with a wrongful taking in which the remedy, in principle, should correspond to restitutio in integrum.

433. ‘The capitalization of the future earnings … could lead to unjust enrichment for the beneficiary of such compensation, since he could, hypothetically establish a similar enterprise with comparable earnings, spending only a portion of the compensation received, and earn additional revenues with the remaining part’: Amoco, partial award, para. 231.

434. See idem. paras. 226, 230. The Tribunal, inter alia, referred to the Aminoil (supra n. 282) and Liamco (supra n. 293) cases as examples of cases involving lawful takings in which the Tribunal has rejected elaborated DCF calculations presented by the respective claimants.

435. Amoco, partial award, para. 238.

436. Ibid. para. 232. Cf., supra s. 4.4.1.2(c). In the instant case the Tribunal expressed certain doubts whether the claimant had correctly applied the method. Thus it held as uncertain whether Khemco would have been able to obtain gas continuously at a price based on a formula agreed upon in 1967, and similar uncertainty in the Tribunal's judgment surrounded the claimant's sales price projection in view of the fact ‘that oil prices have demonstrated a great instability’: ibid. para. 237. The Tribunal also held that while the risk of unlawful expropriation could be disregarded for the purpose of the determination of the risk factor affecting the discount rate (cf., infra on Starrett), the exclusion by the claimant of the possibility of a lawful taking was much more problematic. See Amoco, partial award, paras. 233–248.

437. See ibid. para. 239 (‘The element of speculation in short-term projection is rather limited … The speculative element rapidly increases with the number of years to which a projection relates’).

438. Concurring Judge Holtzmann did note that the DCF method was applied ‘in a case which some might categorize as involving a legal expropriation because the taking had its roots in legislation’: Starrett, final award, concurring opinion of Judge Holtzmann (14 August 1987), p. 6. Judge Holtzmann himself did not regard the taking as lawful. Also cf., supra s. 2.2. Perhaps the only thing in the final award that might be taken to imply that the expropriation was considered lawful is the fact that the Tribunal applied an interest rate (8.5%) which had previously been selected only in cases in which the taking had explicitly been found lawful. See infra s. 4.6.

439. See supra ss. 2.2 and 3.3.6.

440. Starrett hereinafter refers to the claimants collectively.

441. Starrett; interlocutory award, 4 Iran-US CTR, pp. 156–157. The ‘Basic Project Agreement’ was between Shah Goli (to whom it had been assigned from Starrett) and Bank Omran, an Iranian development bank.

442. Ibid. p. 157.

443. Ibid. The expert appointed was L. Svensson from Sweden.

444. Para. 1 of the terms of reference reproduced in 4 Iran-US CTR, pp. 157–158 (also quoted in para. 4 of the final award).

445. For the relief sought, see Starrett, final award, para. 12.

446. For the valuation proceedings by the expert, see ibid., paras. 6–11.

447. As a point of principle concerning the role of the expert it was noted that ‘how well qualified an expert may be … it is fundamental that an arbitral tribunal cannot delegate to him the duty of deciding the case. Rather the Expert's Report is simply one element to be considered and weighed by the Tribunal along with all the other circumstances of the Case’: ibid. para. 266.

448. ‘The Expert similarly calculated the value of Starrett Construction as of the valuation date’: ibid. para. 34.

449. For the definition of the market value as used in the final award, see supra at n. 386. Also see supra n. 396.

450. The Tribunal considered ‘reasonable’ the assumption that the buyer would be Iranian. Starrett, final award, para. 278. See also ibid., paras. 18–20, 27–30.

451. For these calculations by the expert, see ibid., paras. 47–76; for the Tribunal's assessment, see paras. 279–302. The adjusted net book value was determined at 4,661 million rials: ibid. para. 51.

452. Ibid. para. 279.

453. Ibid. para. 204.

454. Ibid. para. 32.

455. The calculations by the expert and the parties' views on these calculations are described in para. 77 et seq. of the final award, the Tribunal's assessment is contained in ibid., paras. 302–345.

456. Ibid. para. 103. The circumstances in which the signing of the Procès-verbal took place are recounted in Judge Holtzmann's concurring opinion, in which the testimony of a witness on that matter is described. According to the testimony the Shah Goli, representatives were pressed to sign the Procès-verbal by armed Revolutionary Guards. See Starrett, concurring opinion of Judge Holtzmann (14 August 1987), pp. 16–17.

457. The final award, however, only recognized part of the revenues from the price escalation to be realizable. This was because of the Tribunal's approach to place ‘itself in the shoes of the reasonable businessman’ who ‘would have expected to collect the 10 percent escalation amount on some, but not all, sales’: ibid. para. 312. The fact that the 10% escalation could be expected to be collected at least on some sales shows that the Tribunal did not regard the Procès-verbal as valid. Cf., the concurring opinion of Judge Holtzmann, pp. 17–18.

458. Starrett, final award, para. 314.

459. See ibid., paras. 109 et seq.

460. Ibid. para. 319.

461. Cf., ibid., where the Tribunal, referring to certain signs of return to economic stability, stated that ‘the effects of these improvements could be foreseen by the end of January 1980 …‘.

462. Ibid. para. 195. For this issue see further ibid., paras. 195–200 (the expert report and the party reactions to it), and para. 336 (the Tribunal's assessment).

463. Ibid. para. 195.

464. It was estimated that at this time the heavy duty construction equipment belonging to Shah Goli would be sold in connection with the liquidation of the company. Cf., ibid. para. 145.

465. Ibid. para. 201.

466. Ibid. para. 204.

467. Ibid. para. 205.

468. Cf., supra at n. 457.

469. The Tribunal estimated that there would be fewer apartments for resale, i.e., apartments once sold but which would be resold (for higher prices) because the original buyer had left Iran (see Starrett, final award, paras. 303–306), and fewer extra parking spaces to be sold than estimated by the expert, and thus somewhat less future revenues. The Tribunal also estimated that certain costs would have been higher than calculated by the expert. See ibid. para. 337.

470. Ibid. para. 342.

471. Ibid. para. 345. For the expert's calculations, see ibid., paras. 204–218.

472. Ibid. para. 350. This means that there could be no double recovery of the amount in question.

473. See ibid. p. 168, n. 42.

474. Ibid. para. 352. For the expert's calculations, see paras. 217–218.

475. Ibid. para. 355.

476. Cf., supra s. 2.1.

477. Starrett, final award, para. 362.

478. See ibid., paras. 353–369. For the expert's calculations (and the parties' comments thereto), see ibid., paras. 225–237.

479. Ibid. para. 366.

480. Indeed, one might perhaps argue that the issue in Starrett in fact was not the valuation of an enterprise, but rather the DCF valuation of a limited project. Cf., however, the concurring opinion of Judge Holtzmann in Starrett, p. 5 (‘Analysis of the Final Award shows that the compensation awarded is based on the going concern value of the expropriated property, considered as an enterprise that the willing buyer would carry on in the future’.).

481. As noted above, approximation was not totally absent even in Starrett in which the DCF valuation method was utilized as the basic technique. Cf., supra at n. 470.

482. Rovine, A. (former Agent of the United States to the Iran-United States Claims Tribunal), ‘Recent Valuation Decision of the Iran-US Claims Tribunal’, Mealey's Litigation Reports – Iranian Claims (1984) p. 18 at p. 20.Google Scholar

483. The OECD Draft Convention on the Protection of Foreign Property (supra n. 274). Notes and Comments to Art. 3, para. 96.

484. See supra s. 3.3.6.

485. Phelps Dodge, para. 29.

486. Ibid. para. 30. The Tribunal, inter alia, noted that ‘SICAB was expected to be dependent on government orders to 60 or 70 percent and could not be viable if it failed to obtain sizeable government orders’: ibid.

487. Ibid. The Tribunal went on to say that ‘[i]n the case of SICAB, any conclusions on these matters would be highly speculative’: ibid.

488. Ibid. para. 31.

489. Cf., ibid. para. 28.

490. See supra s. 4.3.1.2.

491. INA, p. 11.

492. Ibid. p. 15.

493. It seems that the Tribunal, in principle, regarded the $ 285,000 as a conservative estimate of the market value of the claimant's property as a going concern. Cf., ibid. p. 10. Since, however, the criterion for the determination of the value was neither the actual market information about the time of the taking nor calculations concerning the future profitability or the like, the case fits in better under the present sub-heading than in any other part of this article. Cf., supra n. 395.

494. Supra n. 294. On the case, see also Pellonpää, loc. cit. n. 371, pp. 156–157.

495. See the award, paras. 4.78–4.79. As, however, this amount exceeded that actually claimed, the arbitral tribunal only awarded the latter.

496. Cf., Gann, loc. cit. n. 14, p. 624.

497. See supra s. 3.3.6.

498. Clagett, loc. cit. n. 14, p. 822.

499. 6 Iran-US CTR, p. 226.

500. Ibid.

501. TAMS-AFFA was created with a view to a project concerning Tehran International Airport (TIA). Its relevant contract with the Iranian Civil Aviation Authority contained a clause excluding the Tribunal's jurisdiction in accordance with Article II(1) of the Claims Settlement Declaration (the Tribunal lacks jurisdiction over claims based on ‘a binding contract between the parties specifically providing that any disputes thereunder shall be within the sole jurisdiction of the competent Iranian Courts …‘). Therefore receivables pertaining to this contract could only be taken into account as a part of TAMS-AFFA's assets (in connection with the expropriation claim), whereas the contract disputes as such fell outside the Tribunal's jurisdiction. See 6 Iran-US CTR, pp. 221–223. Related liabilities were similarly outside the jurisdiction of the Tribunal, which also ‘ did not regard itself as competent to finally determine the amounts of the debts owed by TAMS-AFFA to third parties. See ibid. pp. 226–228.

502. Ibid. p. 227.

503. Ibid. p. 228.

504. Ibid.

505. See supra ss. 3.3.5 and 3.3.6 and, as regards the standard of compensation, ss. 4.3.1 and 4.3.2.

506. Sedco, ITL 59–129-3, p. 4, n. 2.

507. Sedco, final award, para. 267.

508. Ibid.

509. Ibid.

510. The 241 page award devotes 118 pages (paras. 264–580) to the relevant discussions and calculations.

511. Sedco, final award, para. 319.

512. Ibid. para. 580 (footnotes omitted).

513. Sola Tiles, para. 51.

514. Ibid. para. 63.

515. The Tribunal noted that Simat's business ‘consisted largely of selling specialised luxury tiles’. For such items the market would have seriously deteriorated, quite apart from the difficulties the company would have had in importing such items to Iran. See ibid. para. 63.

516. In the year preceding the taking, i.e., 1978, Sola Tiles had been engaged in negotiations concerning the sale of part of the company to an Italian investor. The evidence concerning these negotiations showed that in 1978 the potential investor valued the physical assets and receivables of Simat as $ 750,000. The claimant's claim regarding these assets amounted to $ 707,782. With respect to most of such assets (warehouse, showrooms and equipment) the Tribunal found nothing to indicate a diminution of the value during the course of the following year. Making, however, certain adjustments concerning the level of the inventory as compared to the situation in 1978, and assessing the value of money and receivables, the Tribunal ended up with $ 625,000, using the ‘value contemplated by a serious potential investor … [as] a well-founded starting point for the Tribunal's own assessment of Simat's value during the latter part of 1979’: ibid. para. 57. See also ibid., paras. 53–60.

517. As to the concept of ‘indirect claims’, according to Art. VII(2) of the Claims Settlement Declaration ‘Claims of Nationals’ of the United States (or Iran) include ‘claims that are owned indirectly by such nationals through ownership of capital stock or other proprietory interests in juridical persons, provided that the ownership interests of such nationals, collectively, were sufficient at the time the claim arose to control the corporation or other entity …’

518. See Sedco, final award, paras. 17–29.

519. See ibid., paras. 88–92. The fact (supra n. 123) that the Tribunal failed to positively confirm that the events amounted to a taking by the Government (instead of ‘appropriation’ by NIOC) is not relevant for the present discussion concerning valuation, as there is nothing whatsoever to suggest that the valuation techniques would have been different, had the theory of the Governmental expropriation been accepted as the basis of liability. Full value for the property was considered the applicable general standard regardless of whether the question was of ‘public’ expropriation or ‘private’ appropriation. See Sedco, final award, para. 30.

520. See supra s. 4.3.4.

521. Sedco, final award, para. 31.

522. Cf., Amoco, partial award, para. 218 (‘market value has frequently been used for the valuation of compensation in case of expropriation. This specifically applies in case of expropriation of discrete properties such as real estates needed by a State in view of certain public works’.). As to the market value of business enterprises according to the same partial award, cf., supra n. 396 and the text at n. 394.

523. Sedco, final award, para. 32.

524. Ibid.

525. Ibid. para. 64.

526. Ibid. para. 69.

527. Ibid. para. 67 (quoting the respondents' argumentation): ‘It is impossible to determine a value without a market and the only buyers who would have been interested would have been the Government. They would not want to buy something they already had control of.

528. Ibid. para. 68.

529. See supra ss. 4.4.1 and 4.4.2.

530. Sedco, final award, para. 69. See also ibid. para. 31.

531. Ibid. para. 69.

532. Ibid. Reference was made, inter alia, to the Case Concerning United States Diplomatic and Consular Staff in Tehran (supra n. 373).

533. See Sedco, final award, paras. 70–73.

534. Ibid. para. 75.

535. Ibid.

536. Ibid. Generally on the Tribunal's approach to the problem of evidence presented by the parties or persons closely affiliated to them, see Straus, M., ‘The Practice of the Iran-US Claims Tribunal in Receiving Evidence from Parties and from Experts’, 3 JIA, no. 3 (1986) p. 57 at pp. 58–63.Google Scholar

537. See Sedco, final award, para. 38.

538. By similar, new ones. See ibid., paras. 43–46.

539. Ibid. para. 42.

540. Ibid. para. 76. That ‘comparative sales’ only provided an approximate guide apparently was due to the conclusion that ‘[o]ne of the most important elements on which to base the value of a particular rig … appears to be the operating condition of that rig at the valuation date’: ibid., para. 75.

541. Also in this regard the amount as claimed was considerably decreased. See ibid., paras. 78–87.

542. Sedco, ITL 59–129-3, p. 4, n. 2, quoted supra at n. 332. In fact nothing for the loss of revenues was awarded with respect to the rigs of SEDIRAN (with which company ITL 59–129-3 was directly concerned). The reason was ‘that SEDIRAN's rigs were not taken from SEDIRAN by Iran; Iran took over the corporation, but so far as the evidence shows the corporation retained its assets. Therefore there presumably was no loss of revenue to SEDIRAN, the compensation for which the Claimant might be entitled to share’: Sedco, final award, para. 299. In so far as concerned the valuation of SEDIRAN rigs (as a part of the company's liquidation value) the Tribunal also in other respects decreased the claimed value (from $ 76,600,000 to $ 62,500,000) more substantially than was the case with SISA rigs ($ 29,430,000 to $ 26,000,000). In part this appears to have been due to the fact that the total insurance value of the ten SEDIRAN rigs ($ 57,623,419.00) only amounted to 75% of the claimed value (88% in the case of the SISA rigs). Even more importantly, for SEDIRAN rigs the claimant had calculated the ‘current net book value’ (see infra s. 4.4.2.2(c)) which allegedly underestimated the actual value only slightly. While, according to Sedco's original calculations, the current net book value was $ 70,277,304 (91.7% of the claimed value), the claimant (upon NIOC's criticism) subsequently adjusted it to $ 57,276,370. Apparently accepting that the current net book value would make some 91.7% of the actual market value, the Tribunal ended up with the amount of $ 62,500,000. See Sedco, final award, paras. 271–297.

543. See supra n. 521.

544. See infra s. 4.4.2.2.

545. Sedco, final award, para. 303.

546. See ibid., paras. 303, 313.

547. See supra s. 4.4.1.4 in finem.

548. See Sola Tiles, paras. 54–60.

549. Ibid. para. 58.

550. Ibid. para. 60. The total value, including the receivables was determined at $ 625,000. Ibid. See also supra n. 516.

551. Supra s. 4.4.2.1(a).

552. Cf., infra under (c).

553. Gann. loc. cit. n. 14, p. 619 (citing the State Department position from 1976).

554. In the sense of the historical, uninflated value less depreciation as shown in the books of the owner, as distinct from ‘current’ (or ‘updated’) net book value. Cf., Muller, loc. cit. n. 14, p. 40. Also cf., infra under (b).

555. Cf., Aminoil (supra n. 282), where the ad hoc arbitral tribunal stated (with respect to fixed assets) that ‘the method called that of the net book value may be suitable when it is a case of a recent investment, the original cost of which was not far from that of the present replacement cost’: para. 165.

556. See supra s. 3.3.2.

557. Computer Sciences Corporation, p. 44. While it is not clear why the claimant only sought the net book value of the equipment, it is conceivable that this was because the relevant portion of the claim was only a tiny fraction of the whole case, and therefore in the claimant's view perhaps did not deserve the effort of more sophisticated calculations. The total claim amounted to $ 11,588,202 plus interest. See ibid. pp. 7–9.

558. 4 Iran-US CTR, p. 222. This equipment was used in connection with the contract which the claimant had with the Atomic Energy Organization of Iran concerning site validation and environmental studies regarding a proposed nuclear power plant. See ibid. p. 218. On the case, see also supra ss. 3.3.2 and 4.3.1.

559. Ibid. pp. 223–224.

560. Cf., Rovine, loc. cit. n. 482, p. 22.

561. See 5 Iran-US CTR, p. 227 (‘The only evidence of value presented with regard to the confiscated prpperty is an inventory of property items noting the original purchase price of each item, which when totalled, equals 5,455,990 rials. Taking account of the likely depreciation of major items and the nominal re-sale value of small items, the Tribunal concludes that value of the confiscated property on 5 October 1980 equalled 1,000,000 rials or … US$ 14,192’.) On the case, see also supra s. 3.3.2.

562. Sedco, final award, para. 313.

563. Ibid., paras. 300–301.

564. One of the two land parcels involved (Ahwaz compound), however, was not valued by current cost accounting but by reference to the ‘market value’ of similar land. See supra s. 4.4.2.1(a) and Sedco, final award, para. 307. Current cost accounting was utilized by the claimant also as a supporting argument in the valuation of SEDIRAN's drilling rigs. See supra n. 542.

565. Sedco, final award, para. 284.

566. Ibid. para. 304. The discussion in para. 297 of the final award reveals that the current cost accounting as applied in the case was based on ‘Statement of Financial Accounting Standards No. 33 (“SFAS No. 33”) entitled “Financial Reporting and Changing Prices”.’

567. Sedco, final award, para. 305.

568. This figure does not appear in the final award. It has been arrived at by subtraction from the total value of SEDIRAN's fixed assets as determined by the Tribunal, i.e., from $ 5,312,493 (see the table preceeding n. 512 supra) the $ 2,003,444 for the land in Ahwaz for which the market value was available. Cf., supra 4.4.2.1(b).

569. A table, provided by the claimant, in para. 307 of the final award shows a historical value of $ 2,813,311. When the portion for the land in Ahwaz (given as $ 359,079) is subtracted the remaining historical value is less than $ 2.5 million.

570. Sedco, final award, para. 306.

571. Gann, loc. cit. n. 14, p. 619 (citing the US State Department position from 1976). Also cf., Muller, loc. cit. n. 14, p. 40 (‘the net asset value at current prices less depreciation’).

572. ‘A blow-out preventor is a device designed to prevent uncontrolled flow of fluids from a[noil] well’: Oil Field of Texas, para. 9.

573. See supra s. 3.3.4.

574. Oil Field of Texas, para. 43.

575. The award, on the one hand, emphasizes that ‘whether the equipment at issue was used or new is not as such determinative as to its value’ (para. 44), which might be taken to indicate that the claimant was entitled to the value of corresponding new equipment without depreciation accounting for the age of the devices actually taken. On the other hand, the Tribunal stated that ‘what has to be determined is the amount it would have cost to replace the three blow-out preventers that had been leased and were retained by NIOC, based on the market conditions for such equipment at the time’: ibid. This in turn may indicate that the actual condition and age of the preventers was decisive. In any case, other practice has not found it appropriate to award compensation reflecting the replacement cost of new equipment, without any depreciation accounting for the wear and tear of the equipment actually taken. Thus it may be recalled that in Sedco the evidence of the replacement cost (c. $ 35 million) of the six SISA oil rigs was found only ‘broadly confirmatory’ of the market value (found to be $ 26 million), because there was no evidence of the ratio between the depreciated actual value of the rigs taken and the cost needed to replace these by new ones. See supra s. 4.4.2.1(a). In the ad hoc arbitrations concerning Aminoil (supra n. 283) and Liamco (supra n. 293) the physical assets were assessed (as part of the valuation of the whole enterprise as a going concern) based on the replacement cost as deducted by depreciation. See Aminoil, paras. 165–166; Liamco, pp. 163–164. Cf., Gann, loc. cit. n. 14, pp. 633, 637; Rovine, loc. cit. n. 482, p. 22.

576. Sedco, final award, para. 89.

577. Ibid.

578. Ibid. para. 91.

579. Appropriation of the SISA warehouse stock is discussed in paras. 88–95 of the final award.

580. Ibid. para. 318. This conclusion was corroborated by what the Tribunal regarded as an admission by NIOC of the existence of the warehouse stock in the claimed value. See ibid., paras. 314–318. The amount with respect to SEDIRAN was $ 7,152,950. This figure appears under ‘Current Assets’ in SEDIRAN's reconstructed balance sheet, reproduced supra in s. 4.4.1.4 (text at n. 512).

581. See supra text at n. 525.

582. See supra text at n. 460.

583. See Notes and Comments on the OECD Draft Convention on the Protection of Foreign Property (supra n. 274), Art. 3, para. 27; Verwey and Schrijver, loc. cit. n. 6, p. 19.

584. For the basic provision on this payment mechanism, see para. 7 of the General Declaration. Also see infra n. 582.

585. McCollough & Company, para. 108.

586. See ibid., paras. 105–112.

587. Ibid. para. 108. McCollough & Company had two contracts, one with the Iranian Ministry of Post, Telegraph and Telephone, the other with the National Iranian Oil Company (NIOC), concerning consultation services in connection with certain telecommunications projects. For the general background, see the award, paras. 11, 59. No expropriation claim was at issue in this case.

588. The McCollough & Company award shows that the conversion rate in 1977–1979 was approximately 70.50 rials per dollar, whereas the rate as of 16 April 1986 was 80.70 rials per dollar: ibid. para. 110. The Tribunal found it ‘inequitable to oblige the claimant … to suffer the full extent of such depreciation’ (ibid), and therefore made certain adjustments by applying a formula according to which 12.5% was added to the rial amounts due. See ibid. para. 111. The Tribunal found a legal basis for such adjustments in ‘general principles of law’, as well as in Art. V of the Claims Settlement Declaration making it incumbent to take ‘changed circumstances’ into account. See McCullough & Company, para. 109. The Tribunal's approach, which was a departure from its earlier practice in conversion, was criticized by Judge Brower in his concurring and dissenting opinions in the case (20 April 1986). See paras. 15–21 of the dissenting opinion.

589. This was the amount of the original investment. See infra s. 4.4.1.3.

590. INA, p. 15.

591. Ibid.

592. Such reservations were criticized by Judge Holtzmann in his separate opinion, ibid. p. 19.

593. American Bell International, para. 151.

594. In Tippetts the date of the taking was 1 March 1980. See supra s. 3.3.6. Having found the claimant's expropriated interest to amount to 400,000,000 rials, the Tribunal concluded that ‘the Respondent Government of the Islamic Republic of Iran is obligated to compensate the Claimant in the amount of US $ 5,594,405, which was the equivalent on 1 March 1980 of IR 400,000,000’: 6 Iran-US CTR, p. 228. In Pereira the Tribunal concluded that the value of the confiscated property as of the date of the taking (5 October 1980) ‘equalled 1,000,000 rials, or, when appropriately converted, US $ 14,192’: 5 Iran-US CTR, p. 227. Simple calculations show that the ‘appropriate’ conversion rate (approximately 70.46) was that of the date of the taking. Cf., supra n. 588.

595. Starrett, final award, para. 343.

596. Para. 7 of the General Declaration provides that whenever ‘the Security Account has fallen below US $ 500 million, Iran shall promptly make new deposits sufficient to maintain a minimum balance of US $ 500 million in the Account’. According to the same provision this minimum has to be maintained until ‘all arbitral awards against Iran have been satisfied in accordance with the Claims Settlement Declaration, at which point any amount remaining in the Security Account shall be transferred to Iran’. It is not, however, absolutely guaranteed that Iran in all circumstances would regard itself as bound by these rules, although so far it has.

597. Instead the claimants may have to seek enforcement wherever Iran has assets. With a view to such a situation (as well as those situations where the award is in favour of an Iranian party, and therefore cannot be satisfied out of the Security Account), Art. IV(3) of the Claims Settlement Declaration provides that ‘[a]ny award which the Tribunal may render against either government shall be enforceable against such a government in the courts of any nation in accordance with its laws’. Whether this provision, which arguably should be construed as a waiver of the sovereign immunity plea in possible enforcement proceedings, is enough to guarantee that the Tribunal awards fall under the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (330 UNTS, p. 38) is a question which cannot be dwelled upon here. See Lake, W.T. and Dana, J. Tucker, ‘Judicial Review of Awards of the Iran-United States Claims Tribunal: Are the Tribunal's Awards Dutch?’, 16 Law and Policy in International Business (1984) p. 755, especially p. 787 et seq.Google Scholar

598. Generally on interest in international law, see Lillich, R., ‘Interest in the Law of International Claims’, in Essays in Honor of Voitto Saario and Toivo Sainio (1983) (Publication No. 3 of the Finnish Branch of the International Law Association) p. 51.Google Scholar

599. Thus the US ‘Department of State views the “prompt” requirement as satisfied by the payment of interest from the time of the taking of the property to the date of payment of compensation as long as there is no inordinate delay’. Gann, loc. cit. n. 14, p. 620 (quoting a letter from the State Department Legal Advisor). Similarly the United Kingdom. See Harris, op. cit. n. 45, p. 428.

600. Thus in Amoco International Finance Corporation the Tribunal found the taking (in 1980) lawful, although to date no compensation has been paid. See supra s. 2.2.3.

601. See supra n. 367.

602. Phelps Dodge, para. 32.

603. American Bell International, para. 205.

604. See, e.g., Tippetts, 6 Iran-US CTR, pp. 225, 227; INA, p. 16.

605. In Sedco, with regard to the taking of the six SISA drilling rigs (see supra s. 4.4.2.1(a)) the interest was calculated from a date nine months after the date of the taking. This was due to the fact that the Tribunal awarded compensation for the loss caused by the non-use of the rigs during the nine month period it took to replace the rigs. Therefore, ‘where actual damages for loss of use of an asset are awarded it is not appropriate to award interest on the value of the appropriated property (which also is intended to compensate for loss of the use of the property) until the theoretical replacement date …’ Sedco, final award, para. 87. For all the other expropriated property items at issue in this case the interest was calculated from the date of the taking. See ibid., para. 583. In Starrett, on loans which were regarded as having been taken in connection with the taking of 31 January 1980 (see supra s. 4.4.1.2(d)) the interest was calculated from the dates on which the respective installments of the loan were agreed to be payable in so far as these dates were subsequent to the date of taking. See Starrett, final award, para. 369 (‘Since all but the first of these installments were to be made after the date of the taking, Starrett … could not reasonably expect to receive on 31 January 1980 the entire amount of this loan which together with the other loans in this case, have been considered free of interest …‘). In other respects this case also follows the general rule stated in so far as the interest was computed from the date of the taking. See ibid. However, in a footnote (n. 51) to para. 369 Judge Lagergren added that ‘while the award of interest from the date of the taking in the present case is in accordance with the Tribunal's practice, this does not necessarily reflect the existence of any general obligation in current international law to make payment of compensation immediately on the date of taking. Accordingly, it might be reasonable to allow interest to run only from the date or dates (in case of payments in installments) on which the compensation was to be paid’. In Sea-Land the Tribunal did hold that ‘[i]n view of the special circumstances in this case, interest could be awarded at most from the date of the Award to the date of payment from the Security Account’: 6 Iran-US CTR, p. 173. Actually the Tribunal, ‘recognizing the very small amount involved’, declined to pay any interest. Ibid. It is recalled that in this case Iran was found liable not on the basis of a taking but by virtue of the principle of unjust enrichment. See supra ss. 3.2.2 and 3.3.7.

606. Lillich, loc. cit. n. 598, p. 56.

607. See ibid. pp. 52, 56–57.

608. See Pellonpää, loc. cit. n. 10, pp. 357–358.

609. INA, p. 17.

610. Thus in the Phelps Dodge case interest was awarded until ‘the date on which the Escrow Agent instructs the Depository Bank to effect payment out of the Security Account’: Phelps Dodge, para. 34. Similarly, e.g., Tippetts, 6 Iran-US CTR, p. 229; American International Group, 4 Iran-US CTR, p. 110; American Bell International, para. 208(iv). Even the formulation just quoted, which reflects the special payment mechanism concerning the arbitration in question, may in practice in some cases lead to the interest being computed until a slightly earlier terminal date than that of the actual payment, but this does not detract from the principle thereby adopted, i.e., that interest should run until the payment rather than the date of the award.

611. Starrett, final award, para. 373.

612. See Gann, loc. cit. n. 14, pp. 620–621.

613. For example, it seems that both the 10% applied by Chamber Three in Dames & Moore and the rate of 12% utilized by Chamber Two in Tippetts reflect such general practices (applied in the absence of a contractually determined interest rate) of the respective Chambers in their compositions at the relevant time.

614. This was the case in Computer Sciences where the interest rate was determined as 11.5% (see Computer Sciences, paras. 44–45) and, presumably, also in Phelps Dodge with its rate of 11.25%. Cf., the text at n. 602 supra.

615. The first-mentioned case was decided by Chamber Three, the two others by Chamber One (with Judge Lagergren presiding in both). Here we may omit Pereira concerning, inter alia, the taking of some office equipment and an automobile. In this case no interest at all was granted. This, however, was due to the fact that none was claimed. See 5 Iran-US CTR, p. 227.

616. American International Group, 4 Iran-US CTR, p. 110; INA, p. 16 (in a footnote it is explained that ‘the Chamber adopts the rate used by Chamber Three in a claim concerning a parallel case of nationalization of an insurance company pursuant to the same law, the American International Group …‘); Starrett, final award, para. 371.

617. Such an idea would appear to be discernible in INA. Cf., n. 616.

618. Cf., supra s. 4.4.1.2(d).

619. Indirectly this kind of argumentation appears to be supported by the Lauth case concerning the termination of an employment contract, in which the rate of 8.5% was also applied. Although the taking of property was not at issue, the explanation for the choice of the interest rate is very interesting. Referring to ‘the principles enunciated’ in McCollough & Company, ‘and taking into account that the Tribunal has made no finding that the Respondent was at fault in the termination of the contract, the Tribunal determine[d] that interest shall be awarded on the amount of the Award [in favour of the claimant] at the rate of 8.5% per annum …‘: Theodore Lauth, para. 62.

620. See McCollough & Company, para. 103.

621. Starrett, final award, para. 244.

622. Ibid. para. 370. For criticism on this point, see the concurring opinion of Judge Holtzmann, pp. 22–25.

623. 7 Iran-US CTR, p. 191. The Tribunal quoted Whiteman's, M.Damages in International Law, vol. III (1943)Google Scholar, according to which ‘[t]here are few rules within the scope of the subject of damages in international law that are better settled than the one that compound interest is not allowable.’ The claim in this case was for unpaid tobacco products sold and delivered to the Iranian Tobacco Company.

624. As has rightly been pointed out, the 6% has not been conceived of as a static rule, but rather as a reflection of the financial circumstances of the relevant time. See Lillich, loc. cit. n. 598, p. 58; McCollough & Company, para. 93. In Starrett the respondents argued that the interest, if any, should be allowed at a rate not exceeding 6% and calculated from the date of the award. Starrett, final award, para. 245.

625. The Aminoil award (supra n. 282) has been mentioned as a rare example of an international case where compound interest has been allowed. See McCollough & Company, para. 96.

626. Amoco, partial award, para. 259 (rejecting ‘unjust enrichment … as [the] basis of the obligation to compensate in case of expropriation’). Also see Tippetts, 6 Iran-US CTR, p. 225. (‘The Tribunal prefers the term “deprivation” to the term “taking”, although they are largely synonymous, because the latter may be understood to imply that the Government has acquired something of value, which is not required’).

627. It is recalled, however, that the Sea-Land case gives support for the view that the theory of unjust enrichment may provide an alternative basis for some relief in case no expropriation or nationalization is found to have taken place. See supra s. 3.3.7.

628. But see the separate opinion of Judge Lagergren in INA, pp. 8–9, who argues for the possibility of full compensation being discounted ‘in a case of lawful large-scale nationalisations’, the discounting often being ‘greater in a situation where the investor has enjoyed the profits of his capital outlay over a long period of time, but less, or none, in the case of a recent investor, such as INA’.

629. Cf., Amoco, partial award, para. 220.

630. Ibid.

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Taking of Property in the Practice of the Iran-United States Claims Tribunal*

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