## Facts

- Libya granted Texaco Overseas Petroleum Co. and California Asiatic Oil Co. fourteen oil concession deeds between 1955 and 1968, later amended by mutual agreement.
- The concessions included a stabilization clause barring infringement of expressly granted contractual rights except by mutual agreement and limiting unilateral application of later legislative changes.
- The concessions included an international arbitration clause, with default appointment authority vested in the President of the International Court of Justice.
- In 1973 Libya decreed nationalization of 51% of certain concession-related interests, including those associated with the claimants.
- In 1974 Libya issued a decree nationalizing 100% of the claimants’ rights and assets under the fourteen concessions, purporting to transfer interests to the state.
- The claimants invoked arbitration; Libya rejected arbitration and refused to appoint an arbitrator.
- The President of the ICJ appointed a sole arbitrator; Libya did not appear, but was kept informed of submissions and proceedings.
- The arbitration was ad hoc and seated in Geneva; a preliminary award confirmed jurisdiction and the arbitration clause’s effectiveness despite non-appearance.

## Issues

1. Whether the concession deeds were binding contracts and, if so, what law governed them (domestic law alone or a composite including international law and general principles).
2. Whether Libya’s 1973 and 1974 nationalization decrees breached obligations under the concession deeds, including stabilization commitments.
3. Whether nationalization extinguished the concessions and the arbitration agreement, or whether the arbitration clause and contractual obligations survived.
4. What remedies international law required for the breach: restoration of concession rights, compensation, or both.

## Decision

- The arbitrator held the concession deeds were binding and “internationalized,” governed by Libyan law supplemented by general principles of law and rules of international law.
- The arbitrator found Libya breached the concession deeds by the 1973 and 1974 nationalization decrees, which unilaterally infringed stabilized contractual rights.
- The arbitrator held Libya remained legally bound to perform the concessions according to their terms and could not negate them by unilateral decree.
- The arbitrator treated the arbitration clause as autonomous and surviving the nationalization measures.
- The arbitrator ordered, in principle, restitutio in integrum (restoration of the concessions) within a specified period, with compensation contemplated if restitution did not occur.

## Legal Principles

- A state contract may be governed by a composite legal order where the parties’ arrangements contemplate reliance on general principles of law and international law alongside domestic law.
- A state’s recognized right to nationalize does not, by itself, justify disregard of prior contractual undertakings; the exercise of nationalization must conform to international standards, including compensation and respect for acquired rights.
- An arbitration agreement is separable from the main contract and cannot be neutralized by unilateral acts alleged to terminate or extinguish the underlying contract.
- Private entities may invoke international law protections to the extent their contract places their rights within an internationalized framework.
- Restitution is a primary remedy for an internationally wrongful act, with compensation operating as a substitute where restoration is not feasible.

## Conclusion

The arbitral award concluded that Libya’s nationalization measures violated stabilized concession obligations governed by a composite of domestic and international norms, that the arbitration clause survived despite nationalization and non-appearance, and that Libya owed restoration of the concession rights or, failing restoration, compensation.


Texaco Overseas Petroleum Co. v. Gov’t of the Libyan Arab Republic, 17 I.L.M. 1 (Int’l Arb. 1977)