BP v.

LIBYAN ARAB REPUBLIC

1 FACTS:
1.1 Mr. Hunt was granted a Concession ('Hunt Concession') for
the extraction of petroeu! in "i#$a% in accordance with the
"i#$an &etroeu! "aw of 1'((.
1.2 )n *+ ,une 1'-.% Mr. Hunt entered into an agree!ent with
/ritish &etroeu! (/&% Cai!ant in the case at #ar) for the
assign!ent of a 10* undi1ided share in the afore!entioned
Concession. The ter!s were such that the parties were to #e
2oint owners of a the e3uip!ent used for the petroeu!
operations% as we as the oi and gas deri1ed through the use
thereof.
1.3 )n *' and 4. 5o1e!#er 1'61% the 7ranian 8o1ern!ent
occupied three isands in the &ersian 8uf. 7t appearing to
"i#$a and other Ara# States that /ritain had conni1ed with
7ran in the occupation% "i#$an 9epresentati1e Mr. Maghri#i
!ade a state!ent regarding% inter alia% "i#$a's reaction
thereto. /asica$% Mr. Maghri#i stated that it appeared to
"i#$a that /ritain had conni1ed with 7ran in the occupation
of the isands% and it is for that reason that "i#$a had decided
to nationai:e its petroeu! industr$% starting with the Hunt
Concession. This nationai:ation was !ade !anifest in the
'/& 5ationai:ation "aw'% passed on 6 ;ece!#er 1'61.
1.4 The /ritish 8o1ern!ent reacted to the state!ent a#o1e with
a state!ent of its own. 7ts Minister of State for Foreign and
Co!!onweath affairs #asica$ said that the /ritish
8o1ern!ent has no 3ua!s a#out other States nationai:ing
their own industries% so ong as there is ade3uate
reco!pense. Howe1er% the nationai:ation of the Hunt
Concession was decared to #e discri!inator$ against /&<
this% in particuar% the /ritish 8o1ern!ent coud not
countenance.
1.5 As expected% the /ritish 8o1ern!ent sent a note of protest
to the "i#$an A!#assador in "ondon. The note essentia$
stated that /ritain wanted an expanation for "i#$a's actions%
and that it aso de!anded co!pensation for the atter's
nationai:ation !o1e!ent.
1.6 /& thus too= steps to initiate Ar#itration of the dispute
#efore a Tri#una constituted #$ the 7C,. /& !ade the
foowing cai!s:
1.6.1 (1) That the /& 5ationai:ation "aw and the
su#se3uent i!pe!entation thereof a!ounted to a
/reach of the "i#$an 8o1ern!ent's o#igations under
the Hunt Concession<
1.6.2 (*) That the /reach did not resut in the
ter!ination of the Concession<
1.6.3 (4) That /& is entited to eect% at an$ ti!e so
ong as the /reach continues% to treat the Concession as
'at an end'<
1.6.4 (+) That /& is entited to #e restored to the
fu en2o$!ent of its rights under the Concession<
1.6.5 (() That /& is the owner of its share of an$
crude oi extracted fro! the area of the Concession
after as we as #efore 6 ;ece!#er 1'61% and of a
e3uip!ent used therefor<
1.6.6 (-) That perfor!ance of /&'s o#igations
under the Concession (such as the pa$!ent of ro$aties
for the use of the oi) are suspended so ong as the
/reach re!ains)<
1.6.7 (6) That /& is entited to da!ages arising
fro! the /reach< and
1.6.8 (>) That the Soe Ar#itrator (of the Tri#una)
reser1e for a su#se3uent stage of the proceedings the
assess!ent of da!ages due.
* 7SS?@S:
2.1 (1) Ahat is the nature of the ConcessionB
2.2 (*) Ahat is the appica#e awB
2.3 (4) Aas there a /reachB
2.4 (+) Ahat are the ega i!pications of the /reach% assu!ing
that there had indeed #een a /reachB
2.4.1 a. ;id the Concession continue to #e in effect
inspite of the /reachB
2.4.2 #. 7s /& entited to da!agesB
4 ;@C7S7)5:
3.1 (1) The Concession constitutes a direct contractua in=
#etween the "i#$an 8o1ern!ent and /&.
3.2 (*) The principes co!!on to the aw of "i#$a and
internationa aw or% in the a#sence thereof% the genera
principes of aw% incuding such of those principes as !a$
ha1e #een appied #$ internationa tri#unas.
3.3 (4) Ces% the 5ationai:ation "aw and the actions ta=en
thereunder #$ the "i#$an 8o1ern!ent do constitute a
funda!enta #reach of the Concession.
3.4 (+) The Concession continues to #e in force% #ut on$ in the
sense that it for!s the #asis of the 2urisdiction of the
Tri#una and of the right of /& to cai! da!ages fro! the
"i#$an 8o1ern!ent #efore the Tri#una.
+ 9@AS)5758:
4.1 (1) Concession as a direct contractual link
4.1.1 The Tri#una referred to its ana$sis of the
contractua arrange!ents #etween Mr. Hunt and the
"i#$an 8o1ern!ent% and #etween Mr. Hunt and /&
soon thereafter. To reiterate% Mr. Hunt was granted a
Concession in accordance with the 1'(( "i#$an
&etroeu! "aw% the pertinent pro1isions of which are as
foows:
+.1.1.1 1. A petroeu! in "i#$a in its natura state in
strata is the propert$ of the "i#$an State.
+.1.1.* *. 5o person sha expore or prospect for%
!ine or produce petroeu! in an$ part of "i#$a%
uness authori:ed #$ a per!it or concession issued
under this aw.
4.1.2 Mr. Hunt e1entua$ entered into an
Agree!ent with /& for 2oint ownership o1er the
propert$ in rights under the Concession.
4.1.3 These circu!stances con1inced the Tri#una
that a contractua reationship had #een perfected
#etween /& and the "i#$an 8o1ern!ent.
4.2 (*) Applicable law
4.2.1 /& argued that internationa aw aone shoud
go1ern the instant case. /&'s reasoning was ana$:ed #$
the Tri#una and su!!ari:ed into two aspects:
+.*.1.1 a. Conduct in the perfor!ance of an
o#igation under the Concession% in order to #e
1aid% !ust #e 1aid under #oth internationa aw
and "i#$an aw. 7f the conduct is in1aid under the
atter% it is in1aid under the concession. The sa!e
resut is o#tained when the conduct is in1aid
under the for!er. Hence% it is sufficient for the
"i#$an 8o1ern!ent's conduct to #e dee!ed
in1aid under internationa aw for there to #e a
/reach of the Concession% for one of the ee!ents
for 1aid conduct (i.e. that the conduct is 1aid
under internationa aw) is wanting.
+.*.1.* #. The parties to the Concession ha1e
express$ excuded the direct and soe appication
of "i#$an aw% athough DaE s$ste! !ust go1ern.
The on$ two 's$ste!s' a1aia#e are "i#$an aw
and internationa aw. Thus% the excusion of
"i#$an aw warrants the soe appication of
internationa aw.
4.2.2 The Tri#una found parts of /&'s argu!ent to
#e erroneous.
+.*.*.1 a. The Concession contains a Cause (Cause
*>) which states that the sette!ent of of disputes
#$ ar#itration Dxxx sha #e go1erned #$ and
interpreted in accordance with the principes of
aw of "i#$a co!!on to the principes of
internationa aw and in the a#sence of such
co!!on principes then #$ and in accordance with
the genera principes of aw% incuding such of
those principes as !a$ ha1e #een appied #$
tri#unasE.
+.*.*.1.1 Thus% the genera rue is that the
principes of "i#$an aw co!!on to the
principes of internationa aw sha go1ern.
+.*.*.1.* The exception is where no such
co!!on principes !a$ #e found% whereupon
the genera principes of aw sha app$.
+.*.*.1.4 For this reason% as the Tri#una
expained% /& coud not i!!ediate$ resort to
internationa aw% nor !a$ it soe$ re$
thereon. 7t !ust first app$ the principes of
aw co!!on #etween "i#$an aw and
internationa aw% if an$.
+.*.*.* #. This part of /&'s argu!ent was i=ewise
untena#e #ecause it was not stipuated under the
Concession. The Tri#una thus reFe!phasi:ed the
Cause regarding the go1erning aws.
4.3 (4) The Breach
4.3.1 The Tri#una did not ea#orate in detai. A
that needed to #e said% in the Ar#itrator's !ind% was that
the acts co!pained of a!ounted to a funda!enta
#reach of the Concession for the reason that the$ were
e3ui1aent to a tota repudiation of the agree!ent and
the o#igations of the "i#$an 8o1ern!ent thereunder.
7t appeared to the Tri#una that the acts were for pure$
extraneous poitica reasons and was ar#itrar$ and
discri!inator$ in character.
4.4 (+) e!al i"plications o# the Breach
4.4.1 a. Continuit$ o# the Concession
+.+.1.1 The Tri#una oo=ed to the "aw of Treaties%
Custo!ar$ &u#ic 7nternationa "aw% and the Case
"aw of 7nternationa Tri#unas% to ascertain the
genera rue on /reach of contractua o#igations.
7t su!!ari:ed its findings as foows:
+.+.1.1.1 Dwhen an internationa contractua
o#igation is unawfu$ a#rogated #$ one
part$% the other part$ !a$ regard the
agree!ent as sti existing unti it eects%
within a reasona#e ti!e% to ter!inate it.
;uring the inter1ening period% the innocent
part$ !a$ suspend its perfor!ance
thereunder.E
+.+.1.* /ut it was pointed out that the afore!entioned
genera rue had $et to #e tested on a particuar set
of facts as is present in the case at #ar. For that
reason% the Tri#una then turned towards principes
of "i#$an aw co!!on to internationa aw
(pursuant to Cause *>)% #ut found none. The
Tri#una oo=ed into genera principes of aw (the
second step% under Cause *>). That o1er1iew was
i=ewise to no a1ai: Dit is cear xxx that there does
not exist a unifor! genera principe of aw that an
agree!ent continues in effect after ha1ing #een
repudiated #$ one part$ #ut not #$ the otherE.
1
+.+.1.4 The Tri#una concuded #$ stating the
foowing rue% in confor!it$ with internationa
aw and the go1erning principe of @ngish and
A!erican contract aw: Dwhen #$ the exercise of
so1ereign power a State has co!!itted a
funda!enta #reach of a concession agree!ent #$
repudiating it through a nationai:ation of the
enterprise and its assets in a !anner which i!pies
finait$% the concessionaire is not entited to ca
for specific perfor!ance #$ the 8o1ern!ent of the
agree!ent and reinstate!ent of his contractua
rights% #ut his soe re!ed$ is an action for
da!agesE.
*
+.+.1.+ Thus% the Concession can on$ #e dee!ed as
ha1ing continued to exist on$ insofar as it for!s
the #asis of the Tri#una's 2urisdiction and /&'s
cai! for da!ages.
4.4.2 #. %a"a!es
+.+.*.1 /ased on the pre!ises esta#ished a#o1e
(particuar$% that there had indeed #een a /reach)%
the ogica concusion was that /& was entited to
da!ages.
1 (' 7"9 4(*.
* 7#id.% 4(+.