and the Islamic Republic of Iran
Iran-United States Claims Tribunal, 10 Iran-U.S. Cl. Rep. 180 (1986)
II. CONTENTIONS OF THEPARTIES
. . . SEDCO claims to be entitled to full (‘‘prompt, adequate and effective’’) com- pensation by virtue of customary international law. SEDCO contends that in the case of an ongoing business enterprise like SEDIRAN the full market value means going concern value including not only net assets but also good will and anticipated future earnings. . . .
The standard of ‘‘full’’ (or ‘‘prompt, adequate and effective’’) compensation in fact has never been the standpoint of international law, Respondents assert. Cus- tomary international law, according to Respondents, requires ‘‘appropriate’’ com- pensation to be measured in the light of all the circumstances of the case, and 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.
III. CONCLUSIONS OF THETRIBUNAL
. . . Although Respondents argue otherwise, it is the Tribunal’s conclusion that ‘‘the overwhelming practice and the prevailing legal opinion’’ before World War II supported the view that customary international law required compensation equivalent to the full value of the property taken. . . . It is only since those days that this traditional legal standpoint has been challenged by a number of States and commentators.
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 ques- tionable evidentiary value for customary international law of much of the practice available. This is particularly true in regard to ‘‘lump sum’’ agreements between States (a practice often claimed to support the position of less than full compensa- tion), as well as to compensation settlements negotiated between States and foreign companies. Both types of agreements can be so greatly inspired by non-judicial considerations—e.g., resumption of diplomatic or trading relations—that it is extremely difficult to draw from them conclusions as to opinio juris, i.e., the deter- mination that the content of such settlements was thought by the States involved to be required by international law. . . . The bilateral investment treaty practice of States, which much more often than not reflects the traditional international law standard of compensation for expropriation, more nearly constitutes an accurate measure of the High Contracting Parties’ views as to customary international law, but also carries with it some of the same evidentiary limitations as lump sum agreements. Both kinds of agreements involve in some degree bargaining in a context to which ‘‘opinio juris seems a stranger.’’
Those arguing that there has been an erosion of the traditional international law standard of full compensation often cite also resolutions and declarations of the United Nations General Assembly. Respondents in this case, for example, refer in particular to the Declaration on the Establishment of a New International Economic Order and the Charter of Economic Rights and Duties of States (‘‘Charter’’) as well as the earlier Resolution 1803, of 14 December 1962, on Permanent Sovereignty over Natural Resources.
United Nations General Assembly Resolutions are not directly binding upon States and generally are not evidence of customary law. Nevertheless, it is generally accepted that such resolutions in certain specified circumstances may be regarded as evidence of customary international law or can contribute—among other fac- tors—to the creation of such law.
There is considerable unanimity in international arbitral practice and scholarly opinion that of the resolutions cited above, it is Resolution 1803, and not either of the two later resolutions, which at least reflects, if it does not evidence, current international law. . . .
. . . [Resolution 1803] has been argued, on the one hand, to express the tradi- tional standard of compensation with different words and, on the other hand, to signify an erosion of this standard.
Those learned writers who have argued, however, that the adoption of Resolu- tion 1803, against the background of general recognition of the permanent sover- eignty of States over natural resources, evidenced or brought about a change in customary international law so that less than full compensation should be the applic- able standard, have focused mainly on the possible impact of the Resolution on the issue of compensation in the context of a formal systematic large-scale
nationalization, e.g., of an entire industry or a natural resource, a circumstance not argued by either of the Parties to have been present in the instant case.
Opinions 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 for the property taken. This is true whether or not the expropriation itself was otherwise lawful. . . .
The Tribunal thus holds that Claimant must receive compensation for the full value of its expropriated interest in SEDIRAN, as claimed, whether viewed as an application of the Treaty of Amity or, independently, of customary international law, and regardless of whether or not the expropriation was otherwise lawful.
The second case involved Libya’s nationalization of various Western oil proper- ties. When Libya became an independent state in 1951, its economic prospects were bleak. But the discovery of large oil deposits in 1959 soon transformed Libya from a poverty-stricken country to a wealthy one. To achieve this transformation, Libya granted deeds of concession to Western oil companies to encourage them to under- take the costly and risky efforts necessary to find and develop Libya’s oil deposits. The concessions conferred broad rights on the oil companies, enabling them to earn substantial profits on their investments. In the early 1970s, Libya began to insist on substantial equity participation in the Western oil company concessions, anywhere from 51 to 100 percent. In 1973 and 1974, Libya nationalized the interests and properties in Libya of nine international oil companies, including Texaco Overseas Petroleum Company (TOPCO), a Texaco subsidiary, and Cali- fornia Asiatic Oil Company (CAOC), a Standard Oil subsidiary. The timing was dictated in part by Libya’s desire to retaliate for U.S. support for Israel and U.S. efforts to coordinate opposition to the 1973 Arab oil embargo. TOPCO and CAOC invoked the arbitration clauses in their deeds of concession. They sent notices to the Libyan government requesting arbitration and appointed their arbitrator. When Libya responded by denying that there was any arbitrable dispute, TOPCO and CAOC requested Manfred Lachs, the President of the ICJ, to appoint a sole arbi- trator, as provided for in the deeds of concession. Lachs appointed Rene´-Jean Dupuy, Professor of Law at the University of Nice. In the following excerpt, Dupuy considers the effect of General Assembly resolutions on the customary inter- national law relating to expropriation.