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Lawyers, other representatives, expert(s), tribunal’s secretary

Interlocutory Award (Award No. ITL 59-129-3)


The present Interlocutory Award addresses the standard of compensation to be applied in determining any compensable damages resulting from expropriation as discussed in the previous Interlocutory Award in this Case. Interlocutory Award No. ITL 55-129-3 (28 October 1985). The Tribunal found in that Interlocutory Award, inter alia, that it has jurisdiction over "the direct Claim of SEDCO, Inc. for its shareholder interest in SEDIRAN Drilling Company" ("SEDIRAN") and that this shareholder interest "was expropriated by the Islamic Republic of Iran on 22 November 1979."
The previous Interlocutory Award fully summarizes the previous proceedings in this Case. Subsequent thereto, however, Claimant SEDCO, Inc. ("SEDCO") has further addressed the present issue in a submission filed on 13 December 1985, "Calculating Liquidation Value of Sediran Drilling Company as at 22 November 1979." On 19 December 1985 the Agent of the Islamic Republic of Iran filed a letter urging, inter alia, that this submission be rejected as untimely and prejudicial to Respondents. By its Order filed 6 January 1986 the Tribunal accepted Claimant's submission in part and rejected it in part, and also invited Respondents to file any further comments they might have on it by 14 March 1986, which was done.


Claimant contends that its expropriation claim is governed by Article IV(2) of the Treaty of Amity, Economic Relations, and Consular Rights between the United States of America and Iran ("Treaty of Amity"):1
Property of nationals and companies of either High Contracting Party, including interests in property, shall receive the most constant protection and security within the territories of the other High Contracting Party, in no case less than that required by international law. Such property shall not be taken except for a public purpose, nor shall it be taken without the prompt payment of just compensation. Such compensation shall be in an effectively realizable form and shall represent the full equivalent of the property taken; and adequate provision shall have been made at or prior to the time of taking for the determination and payment thereof.
In SEDCO's view, Article IV(2) requires payment of the "Full Equivalent of the Property Taken," meaning "the fair market value of expropriated property, a value which includes lost profits."2 In Claimant's view the Treaty of Amity was in force at the time of the expropriation and continues to be in force today.
Alternatively, SEDCO claims to be entitled to full ("prompt, adequate and effective") compensation by virtue of customary international law. SEDCO contends that in the case of an ongoing business enterprise like SEDIRAN the full market value means going concern value including not only net assets but also good will and anticipated future earnings.3
Noting that in any event "unlawful takings are subject to the strictest compensation requirements," Claimant argues further that the expropriation of SEDIRAN was unlawful on three grounds: (1) because Iran failed to pay compensation, (2) because consequently it violated the Treaty of Amity, and (3) because Iranian law was incorrectly applied to SEDIRAN.
Respondents deny the applicability of the Treaty of Amity as a result of (1) the changes in U.S.-Iranian relations since the Iranian Revolution, (2) the signing of the Claims Settlement Declaration and (3) the fact that the Treaty of Amity's protections allegedly do not extend to non-U.S. nationals. Moreover, Respondents argue, the reference to "just compensation" to be found in the Treaty of Amity "embodied nothing but the prevailing principles and rules of international law and that international law has experienced a lot of evolutions so far, and therefore the 'just compensation' notion evolved along with the international law and, above them all, in line with U.N. Resolutions." The standard of "full" (or "prompt, adequate and effective") compensation in fact has never been the standpoint of international law, Respondents assert. Customary international law, according to Respondents, requires "appropriate" compensation to be measured in the light of all the circumstances of the case, and assessed with "unjust enrichment" as the guiding principle. Should any enrichment on the part of Respondents entitling Claimant to compensation be found, such compensation should be calculated according to the net book value of the company, a valuation basis allegedly widely used in compensation settlements in the oil industry.


IV. Award of the Tribunal

For the foregoing reasons,


SEDCO, INC. is entitled to be compensated, as claimed, for the full value, if any, of its equity interest in SEDIRAN Drilling Company which was expropriated on 22 November 1979.

The quantum of compensation and the rate of interest will be determined in a subsequent Award.

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