## Facts

- Libya granted a 50-year petroleum concession (Concession 65) in 1957 under its 1955 Petroleum Law, covering a large area and conferring exclusive exploration and production rights.
- The concession was assigned so that BP Exploration Company (Libya) Ltd. became a co-concessionaire.
- The concession included (i) a stabilization-type term requiring mutual consent to alter rights and obligations and (ii) an arbitration clause for disputes concerning interpretation, performance, and the parties’ rights and liabilities.
- Libya enacted a law on December 7, 1971 nationalizing BP’s interests and activities under Concession 65, effectively expropriating BP’s concession rights.
- BP protested and commenced arbitration under the concession on December 11, 1971, seeking declarations of breach and compensation.
- Libya did not appear or fully participate in the arbitration.
- An ad hoc arbitration seated in Copenhagen proceeded in two stages: a merits award on October 10, 1973 and a subsequent decision on August 1, 1974 addressing Libya’s attempt to reopen the proceedings under the law of the seat.

## Issues

1. Whether the tribunal had jurisdiction to decide the dispute despite Libya’s nationalization measure and non-participation.
2. What law governed the concession and the dispute: Libyan law, international law, and/or general principles of law.
3. Whether Libya’s nationalization constituted a fundamental breach of the concession and an internationally wrongful taking (including questions of discrimination, arbitrariness, and compensation).
4. What remedy was available for the breach: restoration/specific performance, declarations that the concession remained in force, or monetary damages.
5. Whether the arbitrator had competence under Danish procedural law and the arbitration agreement to reopen or continue the proceedings after issuance of the 1973 merits award.

## Decision

- The tribunal affirmed jurisdiction under the concession’s arbitration clause and proceeded in Libya’s absence after finding Libya had notice and an opportunity to participate.
- The tribunal held the governing law comprised principles of Libyan law consistent with international law, together with general principles of law; where inconsistent, international law-type principles prevailed.
- Libya’s nationalization and its implementation were found to be a fundamental breach of the concession and contrary to international law standards applicable to takings, including requirements of non-discrimination and effective compensation.
- The tribunal treated damages as the principal remedy and awarded monetary compensation for the value of the expropriated concession rights and related losses; restoration in kind was not ordered as the operative remedy.
- In the 1974 award, the tribunal concluded it lacked an open-ended power under Danish law (as lex arbitri) and the arbitration agreement to reopen a final merits award based on alleged legal or procedural errors; the 1973 award stood.

## Legal Principles

- An arbitration clause in a State concession agreement can sustain arbitral jurisdiction notwithstanding subsequent nationalization and a respondent State’s default, so long as due notice and opportunity to be heard are provided.
- Where a concession refers to “general principles of law” and to domestic-law principles common to international law, the agreement may be treated as governed by a combination of domestic law and international law-type norms, with international law prevailing in case of conflict.
- A State’s sovereign power to nationalize is constrained by international law standards; discriminatory, arbitrary, or confiscatory measures, including compensation mechanisms that are not concrete and effective, may render the taking unlawful and engage State responsibility.
- Even when specific performance or restoration may be theoretically available in State contract disputes, monetary compensation may be the practical and primary form of reparation for wrongful expropriation of concession rights.
- The law of the arbitral seat governs key procedural questions, including finality of awards and any limited grounds for revision; absent defined authority, an arbitrator cannot reopen a final award merely because errors are alleged.

## Conclusion

The arbitration held Libya liable for unlawfully nationalizing BP’s concession rights in breach of the concession and international law, awarded monetary compensation as the effective remedy, and later confirmed under Danish procedural law that the final merits award could not be reopened through the arbitral process.


BP Expl. Co. (Libya) Ltd. v. Gov’t of the Libyan Arab Republic, 53 I.L.R. 297 (Arb. 1973 & 1974)