(06) Saudi Arabia v. Aramco

Saudi Arabia v. Arabian American American Oil Company (Aramco) Facts:  • The present case is an arbitration relating to the interpretation of the 1933 Concession Agreement between the Government of the State of Saudi Arabia (Government and Aramco Aramco giving Aramco e!clusive rights to transport oil e!tracted from its concession in Saudi Arabia"  • Article 1 of the 1933 Concession Agreement provides that #The Government hereb$ grants to the Compan$ on the terms and an d conditions hereinafter mentioned% and with respect to the area de&ned below% the e!clusive right% for a period of ' $ears from the eff ective ective date hereof to e!plore% prospect% drill for% e!tract% treat% manufacture %transport% deal with% carr$ awa$% and e!port )etroleum*+ Thus% under the Concession % Aramco has the e!clusive right, 1"to search for petroleum ( e!plore and prospect  -"to e!tract oil ( drill for and e!tract  3"to re&ne petroleum and produce its derivatives ( treat and manufacture  ."to transport petroleum% to sell it abroad% and to dispose of it commerciall$ ( transport% deal with% carr$ awa$ and e!port   • Article -- of the 1933 Concession Agreement provides that # /t is understood% of course% that the Compan$ has theright to use all means and facilities it ma$ deem necessar$ or advisable in order to e!ercise the rights grantedunder this contract so as to carr$ out the purpose of this enterprise*+ • Subse0uentl$% in 19.% the Government concluded the 2nassis Agreement which gave the Saudi Arabianaritime Arabianaritime Tan4ers" 5td (Satco a 3 $ears right of priorit$ for the transport of Saudi Arab 2il" • The central point in dispute submitted to the Arbitration Tribunal is to determine what rights were conferred uponAramco b$ the Concession Agreement particularl$ as regards the transport of Saudi Arab oil b$ Aramco " • Government6 argument , The Concession Agreement purports to authori7e Aramco to e!plore areas supposed tocontain oil deposits% and in c ase of discover$% to e!tract and produce the oil% but not to transport b$ sea " Theterm #transport+ in Article 1 onl$ contemplated the internal transport from the site of the e!traction to the port po rt ofloading or the 8as Tanura re&ner$ for manufacture" /t cannot mean e!ternal transport% outside the limits of SaudiArabia" The e! clusive right of transport b$ sea was not included within the e!pectations of the parties% as noe!press stipulation to this eff ect ect was included in the Agreement" • The Arbitration Tribunal Tribunal notes the good faith of the )arties as regards the resolution of the case"  ISSUE 2: Aramco Aramco has the right to transport oil b$ b $ sea" HE!  ;
 • The Arbitration Tribunal cannot adopt the argument of the government without straining the meaning of the te!ts" • The terms used in Article 1 of the Concession Agreement to indicate the content of Aramco6s e!clusive right must be understood in their plain% ordinar $ and usual sense which is the sense accepted in the oil industr$" /n its capacit$ as first concessionaire% Aramco en=o$s indeed e!clusive rights which have the character of ac0uired or > vested > rights and which cannot be ta4en awa$ from it b$ the Government b$ means of a contract concluded with a second concessionaire% even if that contract were e0ual to its own contract from a legal point of view" The principle of respect for ac0uired rights is one of the fundamental principles both of public international law and of the municipal law of most civili7ed States" #To transport + ? to carr$ be$ond persons or things i"e" from one place to another% whatever the distance betweenthem" /t does not impl$ and special means of transportation" Conse0uentl$ it can appl$ to land% water or seatransport" /n connection with the oil business% the methods adopted  b$ the oil industr$ cannot be ignored •

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According to principles in interpreting concessions% an$ restriction on the rights granted  b$ a general clausemust be e!pressed in a clear and une0uivocal manner if it is to be invo4ed against the concessionaire" /nArticle --% onl$ the transportation b$ air was e!pressl$ e!cluded" The mere absence of the words #seatransport+ cannot mean its e!clusion" The government further claims that the right of transport across boundar $ of the

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territorial waters is granted tothe concessionaire in one direction onl$@which is in order to reach Saudi Arabia and not in order to ta4e itsoil and products awa$ from the countr$" The arbitration tribunal holds that such contention is not supported b$ various te!ts which

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constitute theConcession and overloo4 the practical utilit$ for Aramco to transport oil outside the territorial waters" The 9B. 2ff shore Agreement provides that Aramco en=o$ an e!clusive right to transport

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not onl$ within theterritorial waters% but also across boundar$ which separates the waters from the high seas" urthermore% it is impossible to imagine that the parties would want to give the

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concessionaire an e!clusiveright to transport restricted to the territorial waters while den$ this right as regard transportation overseaswhich is the onl$ 4ind of transportation of real interest to the concessionaire" The legal construction resorted to b$ the Government appears to be contrar$ to the nature of things% to theneeds of commerce% to the real intention of the parties% as well as the wording of various agreementspertaining to the concession