INTERNATIONAL ARBITRAL TRIBUNAL: AWARD ON THE MERITS

IN DISPUTE BETWEEN TEXACO OVERSEAS PETROLEUM

COMPANY/CALIFORNIA ASIATIC OIL COMPANY AND THE
GOVERNMENT OF THE LIBYAN ARAB REPUBLIC (Compensation
for Nationalized Property)
17 ILM 1; January 1978
TOPIC: Personality Under International Law
FACTS:
14 Deeds of Concessions was concluded between Libya and 2 USA Companies. These
deeds were modified with the consent of all parties for the purpose of bringing the
Concessions in line with the amended Petroleum Laws. In 1973, 51% of the properties,
rights and assets relating to the Deeds of Concessions were nationalized by a Decree. In
1974, another Decree was issue which provides that all the properties, rights and assets
of the Deeds was nationalized. In the same Decree, the Companies were declared solely
responsible and liable for all liabilities and obligations arising from their activities. The
Decree provides that a committee will be formed to determine the compensation to be
paid but this committee did not function or that its members were nominated. In the
1973 Decree, Amoseas was formed by the Companies to carry out its activities in Libya
to the extent of 49%. But because of the Decree in 2974, the Amoseas was converted to
a Non-Profit Company, and the assets of which were completely owned by the Libyan
National Oil Company.
The Companies, with notice to Libyan Government, raised the matter to arbitration. In
1974, the President of ICJ appointed the sole arbitrator. The Libyan government did not
participate in the arbitral proceeding but the Arbitrator kept them informed and updated.
ISSUE:
Whether Libya had undertaken international obligations which prevented it from taking
nationalizing measures and whether the disregard of such obligation is justified by the
sovereign nature of such nationalization measures.
HELD:
If the contract is an internationalized contract, the State has placed itself under the
international law. In the case at bar, Libya had undertaken specific commitment which
could not be disregarded by the nationalization measures commitments that Libya had
granted a Concession of a minimum duration of 50 years. But such commitment cannot
be regarded as a negation of its sovereignty, but a manifestation if such sovereignty.
The arbitration observed that, :The recognition by international law of the right to
nationalize is not sufficient ground to empower a State to disregard its commitment,
because the same law also recognized the power of a State to commit itself
internationally, especially by accepting the inclusion of stabilization clauses in a contract
entered into with foreign private party.