## Facts

- Libya granted 14 petroleum concessions (1955–1968) to Texaco Overseas Petroleum Company (TOPCO) and California Asiatic Oil Company (Calasiatic), both U.S. corporations.
- The concessions included a stabilization-type clause limiting unilateral impairment of contractual rights and an arbitration clause providing for arbitration of disputes, with appointment by the President of the International Court of Justice if party appointment failed.
- Libya issued decrees nationalizing 51% of the companies’ interests (Sept. 1, 1973) and later the remaining 49% (Feb. 11, 1974, effective Sept. 1, 1974).
- TOPCO and Calasiatic invoked the arbitration clause, alleging the nationalization measures violated Libya’s concession obligations.
- Libya refused to participate, arguing that nationalization was a sovereign act not subject to arbitration and that nationalization extinguished the concessions and any arbitration agreement.
- A sole arbitrator, Professor René-Jean Dupuy, was appointed pursuant to the concessions’ appointment mechanism.
- The tribunal issued a preliminary award (Nov. 27, 1975) addressing jurisdiction and related threshold matters, leaving substantive liability and remedies for a later merits phase.

## Issues

1. Whether the arbitration clause in the concessions remained valid and operative after Libya’s nationalization decrees.
2. Whether an arbitral tribunal had jurisdiction to hear claims challenging the legal effect of a sovereign act of nationalization under concession obligations.
3. Whether the tribunal could proceed and issue a binding preliminary award despite Libya’s refusal to appear or participate.
4. What general approach to applicable law would govern the arbitration at the threshold stage (including the role of international law and general principles alongside Libyan law).

## Decision

- The tribunal held it had jurisdiction under the concessions’ arbitration clause.
- The tribunal concluded the arbitration agreement survived the nationalization measures and could not be nullified unilaterally by Libya’s decrees.
- The tribunal rejected the objection that disputes involving nationalization, as an asserted act of sovereignty, were inherently non-arbitrable.
- The tribunal determined the proceedings could continue despite Libya’s nonappearance, subject to basic procedural fairness and notice.
- Merits questions (including whether nationalization breached the concessions and what remedies followed) were reserved for the later merits award.

## Legal Principles

- An arbitration clause is separable from the underlying contract; alleged termination or invalidation of the main contract does not, by itself, extinguish the arbitration agreement for resolving disputes arising from that relationship.
- A state party cannot defeat an agreed arbitral process by unilateral domestic acts, including decrees asserting sovereign authority, when the dispute falls within the contractual arbitration clause.
- Disputes concerning whether a state’s nationalization measures comply with contractual undertakings and relevant legal standards may be submitted to arbitration when the parties have consented.
- A respondent’s default or refusal to participate does not bar arbitration from proceeding where the tribunal is properly constituted and the respondent has been given notice and an opportunity to be heard.
- In concession-based arbitration, the tribunal may treat domestic law as informed by, and applied together with, international law and general principles where the contractual framework contemplates an international arbitral forum and constraints on unilateral legislative change.

## Conclusion

The preliminary award confirmed that Libya’s nationalization decrees did not terminate the parties’ consent to arbitrate, that the tribunal could decide contractual and related legality disputes arising from nationalization despite sovereignty-based objections, and that the case could proceed even in Libya’s absence, with merits reserved for a subsequent phase.


Tex. Overseas Petrol. Co. v. Gov’t of the Libyan Arab Republic (Prelim. Award Nov. 27, 1975)