1. International Business Law April 4, 2011 Professor Jasper S. Kim 112SIS13 Aynur 102SIS65 Jamola 092SIS Moon Jee young

2. OUTLINE 2 Transaction Diagram Fact Chronicles Analysis the case based on IRAC  Issue  Rules  Application  Conclusion

3. Transaction diagram 3 Libyan Government LIAMCO Defendant Plaintiff 1973 ”Nationalisation” Breach of concession, Nationalization

4. Fact Chronicles 4 LIAMCO and Libya’ s concession for 50 year’s oil related usage 1955 Final agreement for ‘mutual consent for changing terms’ and ‘com mon law for arbitration’ ;Clause 16, 28 1968 Colonel M. Gadafi took over the power 1969 First Nationalization 1973 Completed Nationalization 1974 LIAMCO issued an arbitration clause 1977

5. ISSUE 5 2. Whether arbitration is contrary to sovereignty? 5 1.Whether successor state is bound by the contractual obligations of its predecessor? Whether sovereign is bound by its contractual commitments? 3. Whether private rights and interests can be ignored in the process of nationalization?

6. 6 Successor states must observe treaties that implement general rules of international law A successor state is, as a general proposition, bound by the private contractual obligations of its predecessors Rule of law; the general rule is… Issue I

7. Rule of law; the general rule is… 7 Libyan Civil Code: The contract is the law of the parties. It can’t be cancelled or amended except by their mutual consent or for reasons admitted by the law. (Article 147) A contract shall be performed according to its contents and in the manner which accords with good faith (Article 148) Issue I

8. Rule of law; the general rule is… Islamic Law: Oh, you who believe perform the contracts. (Sura V, verse I) Muslims are bound by their stipulations. Prophet Muhammad (S.A.S.) Traditions (Sunnah) 8

9. International Law: “The contract is the law of the parties” Pacta sunt servanta (General principles) Agreements relative to foreign investments freely concluded by sovereign states or bet ween such states shall be respected in good faith. (UN Res. # 1803, 14/12/1962) 9 Rule of law; the general rule is… Issue I

10. 10 International law While proclaiming the permanent sovereignty of peoples & nations over their natural resources state should respect arbitration agreement s (Convention on UN Resolution No 1803) Rule of law; the general rule is… Issue II Whenever the parties have agreed to arbitrate no party may withdraw its consent unilaterally. (1966 Convention on Settlement of Investment Disputes between States and nationals of other states, article 25)

11. Islamic Law Prophet Muhammad’s (s.a.s) role as an arbitrator, confirmed by Holy Koran 11 Rule of law; the general rule is… Issue II Precedents: Aramco-Saudi Arabia Arbitration of 1958 Sapphire International Petroleum, Ltd v. National Iranian Oil 1963

12. International law Nationalization, as a unilateral act of sovereignty shall respect validly concluded agreements, whether by treaty or contract (general principles) 12 Rule of law; the general rule is… Issue III LIAMCO’s Concession Agreement, Clause 16: Contractual rights expressly created by this Concession shall not be altered except by mutual consent of the parties

13. Application; here in this case… 13 I. As Libyan Arab Republic is successor of Libyan Monarchy, all treaties agreed by monarchy moves to new state. III. The nationalization laws constituted a fundamental breach of the concessions II. Libyan Government address to all oil companies rejecting arbitration as contrary to the heart of sovereignty

14. Conclusion -…sovereign is bound to contractual obligations; -…accept arbitration; -respect concession; -…Libyan government should pay compensation to LIAMCO 14

15. Conclusion Libya was held to be bound by its arbitration agreement and to have breached its concession contracts with LIAMCO. LIAMCO was awarded U.S$ 80,085,677 in damages. 15

16. Conclusion  Clause 28  Cultural and religion diversity  Islamic law 16

17. Discussion points 17 What could be done in advance to prevent these type of misunderstanding?

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