Texaco Overseas Petroleum Co. v. Libya 17 ILM or 53 ILR 389,1978

Texaco Overseas Petroleum Co. v. Libya 17 ILM or 53 ILR 389,1978

FACTS: On Septemb September er 1, 1, 1973 and February 11, 1974, Libya (defendant) issued decrees decrees nationalizing all of the rights, interests, and property of the Texaco Overseas Petroleum Company (TOPCO) and California Asiatic Asiatic Oil Company (CAOC) in Libya that had been granted to t o them jointly by the Libyan government under 14 deeds of concession. •

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TOPCO and and CAOC requested requested a arbitration rbitration and appoin appointed ted an arbitrator. arbitrator. However, Libya refused refused to submit to arbitration and did not appoint an arbitrator. The 14 deeds of concession provided by Libya to the two companies permitted the President of the International Court of Justice (ICJ) to appoint a sole arbitrator to hear and determine the disputes. The Libyan government opposed this practice and argued that the disputes were not subject to arbitration because they involved sovereign acts by Libya. The President of the ICJ rejected these arguments and appointed a sole arbitr arbitrator, ator, hence the Libyan government refused to participate in the subsequen subsequentt arbitration proceedings. proceedings. On January January 19, 1977, 1977, the arbitrator issued an award on the merits in favor of TOPCO and and CAOC. CAOC. He held that the deeds of concessio concession n were binding on all parties, that the Libyan government breached its obligations under the deeds of concession, and that the Libyan government was legally bound to perform the deeds of concession according to their terms. The deeds of concession contained a provis provision ion stating  that the concession woul d be governed by princi ples of Liby an law law comm on to princ iples of international law, and that in the absence absence of such com mon prin ciples, then they would be governed by and in accordance with the general general princi ples of law, including th ose which have been been appli appli ed by international tribu nals. The arbitrator arbitrator concluded that the nature of the the deeds of concession concession agreement agreement made it an internationalized contract. He then considered the effect and consequences of an internationalized contract on the rights of the parties.

ISSUE: Whether or not reference made to general principles of law in the I nternational nternational arbitration context a sufficient criterion for the internationalization internationalization of a c ontract? HELD: YES. Whenever reference is being made to ge neral principles of law in the international arbitration context, it is always held to be a sufficient s ufficient criterion for the internationalization internationalization of a contract. c ontract. The lack of a adequate dequate law in the state considered and the need to protect the private contracting party against unilateral and abrupt modifications of law in the contracting state is a justification to the recourse to general principles. Though international international law involves subjects of a diversified nature, legal international capacity is not solely attributable to a state. A private contracting party, unlike a state, has only a limited capacity and is lim ited to invoke only those rights that he derives from his contract.