My legal views on this Case--which I took up with my colleagues in this Chamber in the course of our many deliberative sessions and in our exchanges of memoranda--focus on several principal points:
First, I dissent to this Award on its very basis, because the Tribunal held that it had jurisdiction, even though no cause of action had arisen therein as of the date of the Declaration, and awarded against the Respondent for the face value of promissory notes that were in fact time notes--and at that, before they fell due. Second, is a discussion of state control over independent private companies, a matter which is the subject of Article IV, para. 3 of the Declaration. In my opinion, the most incorrect aspect of the majority's decision (coming in para. 42 of the Award) is that it has negated certain fundamental rules of private law and public international law dealing with responsibility. Third, having found against the Respondent in this way, the Tribunal deducted two of the Claimants' confirmed debts--viz. the taxes on interest and the price of the barges--from the amount awarded. The Respondents did not file any counterclaim in this connection, having only requested that this amount be deducted from any award, by way of set-off. While the Tribunal did correctly carry out this set-off, it did not adequately set forth its legal reasoning for doing so. Finally, the interest granted in the Award constitutes a further point where I disagree with the majority. In addition, I have set forth some brief remarks in connection with the issue of nominal and beneficial ownership of the shares, since this matter was addressed in the Award itself.
The majority accepted two important points in respect of these notes. First, at the time the promissory notes were issued, SEDCO and SISA had no intention of collecting upon them in the foreseeable future. Paragraph 32 of the Award. Second, prior to November 1981, neither SEDCO nor SISA "made a call on" the promissory notes which they have now claimed on before this Tribunal. Paragraph 28 of the Award. Quite astonishingly, however, the majority has held that these two points are immaterial to the jurisdictional issue. In my opinion, the majority has committed a major error as a result of having disregarded the legal ramifications of these two matters--i.e., it held that it had jurisdiction over debts that were not outstanding, and made an award thereon in favor of the Claimant.
"This rule [non-requirement of a prior demand to maintain a suit] may not apply, however, where there is something on the paper, or in the circumstances under which it was given, to show that it was not the intention that it should become due immediately... in which case an actual demand or call is necessary."6
Having recourse to Williston's interpretation (footnote 3, supra), it must be said, in connection with the promissory notes at issue, that because the condition for their maturation, i.e., that they be called, had not materialized as of the date of the Declaration, the notes were therefore not due as at that date. It is thus clear that SEDCO and SISA would not have had a cause of action, in the absence of an outstanding debt at that date.8 Notwithstanding this fact, the majority found Iran liable for payment of the amount of the promissory notes, and in actuality assumed jurisdiction over unripe debts.
To determine whether or not Thorne was authorized to sign the notes, we must obviously refer to the resolutions of the Board of Directors. The Minutes filed in this Case indicate that while Thorne was expressly named in the annual resolutions of the Board of Directors as a holder of the right of signature, his name was omitted from the resolutions of the General Assembly and Board of Directors for the period 1977-78 (the period when the notes were issued). Yet, the Award disregards this fact and, still more astonishing, it states in para. 43, in fine, that even if Thorne was not authorized, an award for recovery on the notes could still be granted!
In order to find support in the Declarations for its position, the majority has cited two passages therefrom, in the first footnote to paragraph 42. One of these passages is from Article VII, para. 3 of the Claims Settlement Declaration (viz. the term "Iran" also includes entities controlled by Iran), which relates to the ratione personae jurisdiction of the Tribunal and thus does not specify the extent of the Government's responsibility as regards the merits of a claim. The other is a passage from the Undertakings (viz. Iran intends to pay all of its debts, as well as those of its controlled institutions), which is a highly erroneous and misleading invocation. For the Undertakings were entered into only with respect to the U.S. banking institutions claims and have no bearing upon the other claims, such as that of SEDCO in the instant Case. A sense of curiosity thus impels one to ascertain the majority's purpose in presenting this misleading citation in the footnote to para. 42. Had the majority simply intended to give a correct interpretation of the term "controlled entities," it would have noted the express language of Paragraph B of the General Declaration, which holds the key to an understanding of this term, stating that the United States' agreement to establish this Tribunal was predicated on the idea that the Tribunal would entertain claims brought against Iran and "Government" entities. Thus, what is meant by a "Government-controlled entity" is, an entity over which the Iranian Government has taken ownership--and not every entity over which it has merely selected a supervisor or appointed a provisional manager.
I shall now give a general analysis of previous Awards on the issue of control, in order to demonstrate the deficiencies in the majority's finding in para. 42.
Until now, the majority has taken the position, in its past Awards, that the term "control" in Article VII (paras. 2, 3, 4) involves a qualitative predominance and, in the words of Chamber Three, "control over management."9 In those cases covered by Article VII, paras. 3 and 4, and involving government control over an entity, the majority has still made a finding of "control over management" even where such control came about because the Government had appointed a provisional manager in order to put a firm's affairs in order.
I will not deal here with the first alternative, namely Article VII, para. 2. Nor is it my primary objective, in the present Opinion, to address the issue of whether or not the Tribunal has been essentially correct in that meaning for "control" to which it has to date resorted, for the purpose of interpreting Article VII, para. 3 in the framework thereof.10 Nonetheless, it is worth noting, as a digression, that this same Tribunal has elsewhere correctly given the meaning of "control" as set forth in paragraph 3, since it has held that two conditions must be met, before there can be a finding of control. In Pepsico, Inc. and Iran, Award No. 260-18-1, the Tribunal found, in reliance on its own prior interpretation in Foremost, that "majority share ownership and control of the board establish control within the meaning of Article VII, paragraph 3 of the Claims Settlement Declaration." 13 Iran-U.S. C.T.R. 21. This interpretation is consistent with the principles which govern this Tribunal's jurisdiction, as set forth in the General Declaration.11 For there, the stated objective of the Iranian and United States Governments in establishing the Tribunal was, to adjudicate claims against the Government and state enterprises--and that is all--and since the majority of the shares of a state enterprise are necessarily owned by the state, non-state enterprises that merely have a provisional Government-appointed manager do not fall within the Tribunal's jurisdiction. Nevertheless, despite the Declaration's express language, which leaves no room for interpretation, the Tribunal arrived at a different definition of "control," and thereby allowed numerous claims against Iran.
In such instances the state's responsibility is limited, according to the prevailing principles of international law, to the net value of the expropriated enterprise, even if this value is less than that of all the claimant's rights and claims with respect to the expropriated company.
However, in Cases where no expropriation has taken place but, in the words of Chamber One, "a lesser degree of interference with [proprietary] rights"12 has occurred, the state has been found liable for compensating the injury inflicted by it upon the injured party.
In his Concurring and Dissenting Opinion in Kodak, Charles Brower attempted to add a further element to those concocted ideas16 which have grown up around the Declaration to date, on the basis of the notion that the Iranian Government had an unlimited liability with respect to unexpropriated companies in general. However, he failed to come up with anything from this Tribunal's judicial precedents, apart from twisting the wording of the Award in Flexi-van in footnote 14 to his Opinion, and citing two irrelevant precedents, i.e. Rexnord and Time. It is astonishing that while the Iranian Government's responsibility for a company expropriated by it is limited to that company's assets, for a company over which it has merely appointed a supervisor, this responsibility should surpass this level, and even exceed that of the managers who have abandoned their company. Mr. Brower is stating, in effect, that the less the state interferes, the greater will be its responsibility! Where in the Declaration has the Iranian Government undertaken such an unlimited responsibility? If Iran has accepted its debts and those of establishments controlled by it, the manner of payment of those debts, and the quantum of such payment, should be determined by the governing law (Article V of the Declaration), which the majority has forgotten in the present Award.
The other point, the state's responsibility to pay compensation under international law, is based on the theory of unjust enrichment. As for what the state could possibly have acquired by taking over a company with a net negative value, the extent of the former's responsibility should be determined on this same basis.18
Of course, it is true that the Respondents did not bring any counterclaim in this connection; it is also true that no specific contractual arrangements which might indicate that it had been the Parties' past practice to withhold taxes on interest, were submitted to the Tribunal. Nonetheless, since the Claimant admitted his debt, the Tribunal has deducted this sum from the amount of the award. Paragraph 56 of the Award. In my opinion, the Tribunal's finding, whereby in a contractual claim--i.e., over the promissory notes--it has deducted the said withholding taxes from the amount of the award, is justified on the basis of a specific principle of law.20
I note as well that in this respect the award by the Tribunal, like those rendered by other courts in enforcement of the principle of set-off, constitutes a declaratory award, and not an award which gives rise to rights. This is because that amount of the Respondent's debt represented by the exigible debt owed him by the Claimant had already--i.e., before this Award was rendered--been discharged by force of law. In light of these points, I can surely state, with respect to Mr. Aldrich's Separate Opinion, that in view of the abovementioned reasons, his Opinion cannot rest on sound grounds; he has dissented to the Tribunal's finding whereby it deducted the withholding taxes.
"Transfers of registered stock must be recorded in the share register, and the transferor or his agent or legal representative must sign the transfer in the said register... Any transfer effected without observance of the aforesaid conditions is without validity as to the company and third persons."
Furthermore, in a previous Award (McHarg), the Tribunal rejected the evidence that the shares had been transferred informally, and consequently dismissed the claim based on such transfer, "bearing in mind that WMRT/Iran was incorporated in Iran and therefore that any transfer of its shares is governed by the laws of Iran..."27 Thus, even if the legal system of the United States does find a relevant distinction between the beneficial and nominal owner of shares, no such distinction exists in Iran; and there, naturally, an undisclosed beneficial owner cannot play any legal role as a shareholder in an Iranian company.28