• As the subsequent discussion will show, the jurisdictional issue to be decided here consists of many factual and legal elements, which maybe compared to many Stones, which, in the end, will form a completed mosaic. None of the Stones taken alone, carries enough weight to form the shape or outcome of the "mosaic". Rather, each stone or element (factual and legal) has its own significance, its position and inter-relatedness, and must be considered and weighed as such. The mosaic, i.e. the outcome of the present analysis, therefore, is the result of the shape and weight of all its stones".
The prescription on it's face sounds sensible enough, but the mosaic which is proposed to be made is simply the denial of jurisdiction. It makes a good sense co rely on a cumulative effect of a multitude of elements, where no single element offers a decisive solution. The problem, however, arises once a sensible prescription is used with a mental predisposition of a conservative nature. It is indeed curious chat a Tribunal refuses its jurisdiction on the basis of a mosaic argument, while admitting that the mosaic is made out of many stones and "none of these stones taken alone carries enough weight to form the shape or outcome of the mosaic". The Majority Award makes such a "mosaic" to deny jurisdiction in spite of the fact that there is always a strong presumption in favour of arbitrability in commercial contexts and there is no restrictive interpretation of jurisdiction in international commercial arbitrations.
SUMMARY OF FACTS
a) The description of the nine contracts under consideration as contained in para. 1-7 of part A of the Majority Award is correct.
All of the nine contracts had a single purpose and followed the same general objective of providing Iran with a comprehensive Air Defence Network.
b) The First Contract, contained an arbitration provision which was subsequently revised and amended.
c) The Second Contract, was to provide radome protection for GPS-11 radars acquired under the First Contract.
d) Contracts Nos. 3, 4 and 7, referred to the letter of 27 June 1973, which in turn referred to the "prior and current contracts", i.e. Contracts Nos. 1 and 2.
e) Contracts Nos. 8 and 9, were for the procurement of equipments and spare parts for radar systems provided under previous contracts.
The Parties wanted that any and all disputes arisen out of, or related to, or connected with their relationship be finally settled through arbitration.
"Would include an arbitration agreement in the first of the series of their contracts, and this agreement would not be repeated in the subsequent contracts" (see: Claimant's Third Memorial, page 62; see also Skeleton Argument of Claimant's Counsel, dated 3 July 1995, page 9).
The earliest documents submitted to the Tribunal of the direct contract between the parties is Defendant's letter dated November 25, 1969, proposing "to extend intensive technical coverage to Iran" (Exh. C-43).
The second document in the chronological order is the letter of December 24, 1969 from "commander of the Imperial Iranian Air Force to Chief of the Army General Staff" Referring to a conference held in Tehran, where the Defendant's representatives made presentation concerning their Mobile Type Radar Systems proposed for Iran. (Exh. C-20)
Thirdly is Memo dated 1.3.1970 concerning a meeting held in Tehran "to Discuss IIAF Operational Concept For Mobile Type Radar" which confirms "The forthcoming visit of Westinghouse personnel to Iran" and proceeds with discussion of an "operational concept". Considered as "binding for future mobile radar acquisition" adding that:
"...the mobile radar package must be compatible with expected future automation of the air defence system". (Exh.C-44)
Fourthly in the same chronological order is Defendant's Letter of 27.11.1970, proposing to bring a team of it's personnel to Iran to study:
"The problems of automating and netting of all ground-based radars... in order to meet future requirements in this respect..."(Exh. C-24)
On 1971 Parties decided to enter into two series of contracts which I have referred to in "Summary of Facts" as "Depot Contracts" and "Radar Contracts". Each series started with a mother contract concluded in the year 1971 which embodied an arbitration clause. The subsequent contracts in both series which continued until the Iranian Revolution and the collapse of the Shah's regime in 1978 did not include such a clause.
The individual contracts in each series were made in the form of sale and purchase contract.
The delivery of three systems acquired under contract No.1 did not start until July 1974 (See Claimant's Third Memorial, page 19; see also Exh. C-45, Defendant's letter dated 16.7.1974).
See also Exh. C-30(A), letter of January 5, 1974 referring to Westinghouse letter of October 8, 1973 and its attachment i.e. "list of the spare parts which the IIAF is to supply to the karadj Radar Site".
In this letter it has been further stated that:
"The spare parts which Westinghouse asked IIAF to supply are known to be in IIAF inventory... only spares which are unique to the ADS-4 system are to be supplied by Westinghouse in the two year supply of spares according to Amendment 1 of Contract ESD-003. During this first two year period spares which are known to be in IIAF inventory (the above mentioned list) will be obtained from IIAF stores through normal procedures. It should be noted that the users of the above spares, will in future, include eight ADS-4 Radar systems in addition to GPS-11 and HF 2000 systems".
"We believe that within twenty-seven months, sixteen (16) GPS-11 and ADS-4 sites can be operational and fully supported via the time phased program we suggest. We have structured a program which minimizes GOI costs by maximizing usage of equipment already in GOI inventory.... By month 27 we can have eight (8) ADS-4 and eight (8) GPS-11's operational and supported..."
Phase 1 of this Program was to:
"make maximum use of Westinghouse technical services personnel already contracted by the IIAF for the Karadj (ADS-4), GPS-11 and Integrated Electronics Depot (IED) Programs".
Phase II as suggested was to be "a direct continuation of the Program from Phase I".
"The design... is identical to PPIS being supplied with GPS-11 Tactical Air Defence system soon to go into operation with IIAF (P. 33)".
"The design and operation of the intercome is the same as used in GPS-11 except for the specific modifications. (P.34)".
"These are the same radios that are used in GPS-11 system. This commonality will simplify training and reduce logistic costs" (P.35)".
"Equipment in this system will minimize the logistic support requirements added by this U system..." (P.41).
Reference to TPS-61 radar could be found in Exh. C-59; letter of May 8, 1971 from Defendant where it is stated:
"The Imperial Iranian Air Force will find much compatibility and commonality between TPS-43 TADS equipments and TPS-61.
The printed circuit cards of two radars are generally the same. Over 150 of the cards in the TPS-61 are the same as these used in TPS-43 components.... A maintenance technician qualified on the TPS-43 can be quickly cross-trained to maintain the less complicated TPS-61" It must be observed that TPS-43 radar, referred to in the above letter, was purchased from Defendants under contract No. 1 for GPS-11 (see Exh. C-25, Defendant's letter March 7, 1971; See also Exh. C-43, Defendant’s letter November 25, 1969).
|Serial||Date||Contract No.||Signed for II AF By|
There are also series of 50 Depot contracts (25 main contracts and 25 supplementals) in addition to 21 contracts referred to above, negotiated and signed by the same parties within the same time frame.
The Majority Award has acknowledged this fact in para. 86, stating that:
"Based on the documents on file, the Tribunal must assume that there were indeed no other acquisitions of radar systems as such from other suppliers than Defendant".
The Majority, however, adds immediately that:
"This fact alone, however, does not as such prove that as early as in 1969 to 1971 (i.e., prior to the signing of contract No. 1 on 1 August 1971) Defendant had been chosen as the exclusive supplier for any perceived or upcoming requirements for the purchase of such equipment".
"The witnesses nominated by the Parties did not convince the Tribunal that Prior to 1 August 1971 (under which date Contract No. 1 had been signed) a decision had been made and communicated to Defendant chat Defendant would be the sole and exclusive supplier of radar systems for Iran."(para. 87)
This is, in my view, an inconclusive land may be also an inconsequent) observation. Once the fact with regard to interrelationship between the contracts is established and a further fact is acknowledged also that during 1971-1978 Claimant had no supplier of radar systems other than Defendant, it does little matter whether or not "prior to 1 August 1971 a decision had been made and communicated to Defendant chat Defendant would be the sole and exclusive supplier of radar systems for Iran". The contractual relationship of the Parties under review by this Tribunal starts on 1 August 1971 and extends to late 1978. What happened and what decision was made prior to the said period does not concern this Tribunal except to the extent such early happening and or decision would shed some light on the relevant period of time proceeding 1 August 1971.
This is a quite extraordinary argument, nobody has ever suggested that the contracts were made under duress or Iran was deprived of it's liberty to conclude or not to conclude a deal with Defendant. Claimant and Defendant were of course both free not to enter into contract, but once they exercised their free will by making a new contract for the radar acquisition, the new contract was considered as a further step, in a step by step implementation of IRAN’S air defence coverage network and as such subject to the conflict resolution mechanism agreed upon in Contract No. 1.
"the lack of documents supporting Claimant’s explanation as to the passing of an internal decision to use Defendant as exclusive supplier for Iran's radar requirements, coupled with an overall appreciation of the different witness statements (briefly summarized above) must lead to the conclusion that, even if a decision had been made in the sense chat Defendant will be the sole supplier of radar equipment- which alleged decision, however, remained without a legally sufficient proof-
such a decision was not communicated or otherwise, in any sufficient manner, made known to Defendant at the time of entering into Contract No. 1.
In any event, and this must suffice here, claimant was not able to furnish a legally sufficient proof as to the existence of such a communication.
1) Claimant "had indeed selected Defendant to be or become it's supplier for radar device"
2) Defendant was made aware of "such a decision at the time when entering into contract No. 1 i.e., on or prior to 1 August 1971.(See Majority Award Para. 213(I),(II) and (III)
My objection to the above view is based on three considerations as follows:
This awareness and intimacy is demonstrated by the documents in file including C-20, C-24, C-43 and C-44 to which I referred above in my discussion of the Parties "precontractual Relationship".
According to this proposal, Claimant was expected to give, "access to classified information as required by the program manager to effectively carry out these responsibilities". (C-61)
One might start with general assertion that arbitration is the most preferred and commonly accepted method of dispute settlement in international transactions. This could only be taken as a starting point, to be followed by an investigation into the nature and characteristics of the specific contract (or contracts) in question. Furthermore the search should include specifically the examination of the practice of the relevant parties in each case. In other words, borrowing from legal terminology of lex generalis and lex specialis, one should include in this examination both practice generalis and practice specialis.
One party to the Radar Contracts (the Defendant party) was a private entity, while the other party (Claimant) was a sovereign State.
This bold contention which is not based on any documentary evidence is not sustainable for the following reasons:
The argument that Defendant did not attempt to include an arbitration clause in contracts 4-9 because such a clause was already rejected in contract 3 is against the whole position of Defendant that these contracts were stand-alone contracts, each independent and complete in itself.
We know so many of contracts signed by the Government authorities of Iran during the same period of time, which contained arbitration clauses. Samples of such contracts have also been submitted to this Tribunal under C-52.
Seven out of the eleven Contracts exhibited in C-52 are made between IIAF and British Aircraft corporation Ltd, each containing an Arbitration clause under ICC Rules, The remaining contracts consist of:
- Contract dated 23 October 1977 between IIAF and Cubic Corporation of U.S.
- Contract dated 5 August 1975 between IIAF and TPW Systems International of U.S.
- Contract dated 10 August 1977 between IIAF and Stanford Technology Corporation of Switzerland, and
- Contract dated 30 April 1978 between IIAF and Teledyne Industries Inc. of U.S.
The examination of Exhibit C-52 in the Majority Award is another clear example of a negative attitude which transpires throughout the jurisdictional discussion.
(b) The fractional contract between TRWSI and the IIAF (signed by on party only) makes, on page 9, reference to an arbitration in the sense that "the arbitration body will be composed of two representatives of each party and one representative of the MAAG Office in Tehran. The place of arbitration shall be in Tehran and the arbitration decision shall be final, binding and non-appealable". This provision is certainly not a typical arbitration clause in that two of the "arbitrators" were in fact representatives of Parties."
(m) The Support Services Agreement entered into on 5 August 1975 by the Imperial Iranian Air Force and TRW System International Inc., on page 7, makes reference (in Section F) that any dispute "arising under this paragraph F will be handled by arbitration as provided for in Article VIII". However, the page containing that particular Article VIII had not been exhibited by Claimant".
The same negative attitude is also reflected in the Majority Award's remarks concerning the arbitration clause contained in contract of Stanford Technology Corporation providing for a "final arbitration" to be "carried out by an Iranian court'.
They wanted to have a "final arbitration" of their disputes and they wanted the proceeding of such arbitration to be carried out under the sanction of a competent Iranian Court. Adjudication by State Court is not called "arbitration" and decisions of judges in State Courts are subject to the appeal and not "final".
For example there is a correct but inconsequential critism regarding contract dated 7 September 1977 of which Article 18 has been exhibited, whereas according to the Table of contents, Article 17 on arbitration should have been exhibited. The Majority Award has also some vague comments on these exhibits which may be taken as to indicate doubt on the credibility of the evidence submitted therein. (See para. 165 (I) (g), (h), (k) and (l) observing that evidence have been submitted in pages written on a different typewriter, inserted in between). To clarify the situation I have to mention that the seven Contracts in question are amongst in the nine Contracts on which the ICC Case No. 7110 is based. A partial Award has been rendered in this Case, by Iran-US Claims Tribunal which is referred to and discussed under para. 310 and 311 of the Majority Award. This has certainly escaped the notice of the Majority Arbitrators as they made remarks which might be taken as implying some irregularities or possible falsification in the exhibited documents. I have to note further that the extensive oral discussions of the arbitrators at the deliberation stage did not include a detailed examination of Exh. C-52 and the discussion on these exhibits did not appear in the earlier drafts of the Award, therefore, the present arbitrator was always under impression that his co-arbitrators had no problem with the said Exhibit. This is a matter of public knowledge that government authorities of Iran, during the relevant period of 1970-1970 especially after exceptionally big increases in the oil revenue, were very active in concluding contracts of different types and these contracts usually contained arbitration clauses. Numerous contracts of Iran concerning the oil sector have been published in series of "Selected Documents of the International Petroleum Industry" by the Organization of the Petroleum Exporting Countries (OPEC). All of these contracts included an arbitration clause. The Petroleum Laws of 1957 and 1978 expressly provided that disputes arising out of oil Agreements should be resolved through arbitration. Therefore one might say with a good degree of confidence that the Government of Iran during the period 1971-1978 continued to rely on arbitration in its international Commercial Contracts.
"It is striking and you will please bear with us that we need time to really feel comfortable with what has been explained to us from Westinghouse delegates. Comfortable because there is some common understanding that Iran every so often, particularly during the 1970, had agreed to arbitration clause". (Transcription p. 426-71 Exh. C-59
The Majority Award acknowledges "a somehow striking similarity’ between Depot contracts submitted m Exh. C-59 and Radar Contracts at issue in this Arbitration, (para. 168)
1) That Radar Contract No. 2 has been signed by Col. Ashari. The proposition is contradicted by statement in para. 172 that "The Tribunal could not clearly established who signed contract No. 2".
2) That Col. Ashari was against the idea of arbitration and that he was responsible for the elimination of arbitration clause proposed by Defendant.
One must be mindfull of the fact that General Toufanian was most powerful and influential man in Imperial Iranian Army. He was the Deputy Minister of war and he was not the authority to be overruled by an officer of much inferior rank as col. Ashari. If General Toufanian was agreeable to arbitration, then Col. Ashari was not in a position to reject it. It is important to note that the key contracts in both aeries of Radar Contracts and Depot Contracts have been signed by General Toufanian.
Defendant cannot question the other party, why certain provisions of the first contract such as force majeure are repeated in contracts 2-9 while the arbitration clause has been disregarded.
As to the existence of an arbitration agreement between the parties, I concur with the Majority view that it is for Claimant to establish that such agreement existed in a satisfactory form.
The essential question in this Case, however, is not the existence of an agreement to arbitrate, but the scope of reach and application of such agreement: whether the arbitration agreement of Radar Contract No. 1 should be read and interpreted in a way to encompass the entire relationship of the parties concerning various radar contracts or the said agreement should be confined to the single contract in which embedded?
Clearly, this is a question of interpretation which requires a careful evaluation of relevant elements of fact and Law.
1. I refere to what is rightly observed by Majority Award in Par. 204 that:
"under various factual and legal situations, an agreement to arbitrate must sometimes be affirmed even though an arbitration clause as such is not existent between the actual parties to an arbitration. Thus, the absence of an arbitration clause, taken as such, is not as yet an insurmountable obstacle against affirming arbitral jurisdiction".
2. I refer also to various passages wherein the Majority Award has advocated not to take a "formalistic" or processualistic approach in this case.
3. I think the arbitrators are bound to establish, to the extent possible, the intention of the parties to a contract and interpret it accordingly.
Here we have the express and explicit evidence of the Party's choice of arbitration as the dispute resolution mechanism. This was agreed upon right at the outset of their contractual relationship. No evidence exists co indicate that they have subsequently changed their mind in favour of different mechanism.
Reference may be made to Case: Pattern Securities Corp. v. Diamond Greyhound & Genetics Inc. 3 Cir. 1987 where the Court said:
"as a matter of federal law any doubts concerning the scope of arbitrable issue should be resolved in favour of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay or like defence to arbitrability, and if doubts arise as to whether this dispute is arbitrable or not, such doubts must be resolved in favour of arbitrability".
• the contract being part of the IBEX program was rooted in military co-operation, and even belonged to highly secret intelligence gathering system. As such it touched on specially sensitive aspects of the state partner’s defence interests and policy. In this particular situation the political relationship between the states concerned was of greater importance than the ordinary commercial relations, and in this case even more than with regard to contracts for the sale of less sensitive military equipment on services". (Award No. 191-59-1)
Defendant's relying in the present case on arguments such as the existence of integration clauses in each contract and absence of an arbitration clause in contracts 2-9 in the circumstances whereunder the contracts were drafted by Defendant and Claimant had no active role to play, invokes the principle of good faith and alerts the Tribunal to be watchful. Several other objections raised by Defendant in the course of proceedings also indicate the obstructive nature of its whole attitude in dealing with Claimant’s Claims.
Defendant's contention that each of the nine contracts (1-9) should be considered as a stand-alone contract, not related to the others, was also based on this argument. Thus, Defendant in its Response Brief, page 38, states that Claimant "has ignored the fact that the parties to the nine contracts were not the same and that fact alone precludes a finding of a single transaction".
Although this objection was later withdrawn in the course of proceedings, the mere fact that it was initially raised costs serious doubt or. Defendant's good faith.
The three objections, as outlined above, are all designed to escape jurisdiction and obstruct the proceedings. They are deprived of any substance and require the Tribunal to treat more cautiously the Defendant’s explanations with regard to the presence of integration clause or the absence of an arbitration clause in contracts 2-9, etc..
This date is very significant. The Defendant proposal for ADS-4 Radars daces 15 June 1973, and they say chat it was in response to RFQ (Exh. D-43). Obviously this could not be possible because the last signature in RFQ is dated seventeen days later. Also Mr. Geikler's letter referring to RFQ is dated June 27. 1973 which again is several days before the date of the last signature on the said document i.e., July 2, 1973.
Even if we suppose that the so-called RFQ was in fact sent cut to various companies, it could not have obviously been any sooner than July 2, 1973! This confirms the Claimant's statement chat the RFQ was indeed a mere formality and that Westinghouse was going to be the contractor for the Karadj radars from the very beginning when the decision to provide Iran with an air defense system was made.
Some of the Depot Contracts were the subject matter of claims and counter claims by Westinghouse and MOD in Case No. 389 before the Iran-US Claims Tribunal. Westinghouse, as the Claimant in the said case, based its counter claims on certain of Depot contracts, while MOD based its claims on certain other of Depot contracts. A counter claim could not be entertained in the Iran-US Claims Tribunal unless it was based on "the same contract, transaction or occurrence that constitutes the subject matter" of the claim. Now MOD argued that the Depot contracts constituted a single transaction while Westinghouse contended that these contracts, individually negotiated and separately signed, constituted "entirely different issues of fact and law with no legal relationship between them".
The Iran-US Claims Tribunal, however, in a unanimousely held Interlocutory Award rejected the contention of Westinghouse. The Tribunal decided that the linkage between the Depot Contracts was "sufficiently strong" to make then a single transaction. The Tribunal considered that:
"The Parties maintained communications with each other throughout the period from 1971 to 1970 cn depot - wide basi3, not simply contract by contract, although questions of their mutual obligations and performance were, of course, determined in each instance by relevant contract".
a) The Depot Contracts presented in exh. C-59 should be taken as a proof of Parties practice. The Parties included an arbitration clause in the first of a series of contracts and did not repeat it in the subsequent contracts.
The arbitration clause embodied in the first Radar contract of 8.8.1971 was not repeated in the succeeding contracts as the arbitration clause embodied in the first Depot Contract was not repeated in the succeeding contracts. This in fact, is another indication why all of nine contracts in the present Case should be considered as of one set or one series of transactions.
b) The Case No. 389 is important not because there was an issue of arbitration provision in that Case, but because there was an issue whether or not the Depot Contracts under examination in the said Case were interrelated. The question of inter-relatedness of the nine Contracts in our Case is also a decisive factor on the matter of jurisdiction.
Iran-US Claims Tribunal found that the Depot Contracts examined in Case 389 constituted a single transaction. This Tribunal should decide the same for the nine contracts of identical pattern which are the subject matters of the instant Case.
c) The integration clause embodied in the Depot Contracts did not prevent Iran-US Claims Tribunal from considering the said contracts as a single transaction. The integration clause of the identical language have also been included in the nine contracts in our case. There is no reason why this Tribunal should attach a greater weight to the same clauses in the present Case, as suggested in para. 213 (VII) of the Majority Award.
"This Agreement supersedes and cancels any previous understandings or agreements between the Parties relating to services covered hereby. It and proposals incorporated by reference herein express the complete and final understanding of the parties with respect thereto and may not be changed in any way except by an instrument in writing signed by both Parties'.
This integration clause is almost identical to a similar clause embodied in each of the nine contracts related to the acquisition of the radar system (see: Majority Award para. 142).
"It is evident that each of the counterclaim contracts was legally separate and distinct from the claim contracts. The Respondent was under no contractual obligation to buy the services and equipment covered by the claim and counterclaim contracts from the Claimant or, indeed even to give the Claimant an opportunity to bid for that work. On the other hand, it is apparent that the claimant, as designer of Depot and supplier of most of the Depot's equipment, had great competitive advantages with respect to receiving any proposed contract for the expansion, modification, or servicing of Depot...
While the various contracts here covered different goods and services and were entered into at different times, all the contracts were linked to the Depot project, with respect to which both Parties were, in practice, committed as whole. As a practical matter, even though the Parties agreed, to conclude separate contracts, the Respondent had no reasonable opportunity to obtain tha desired services from a competitor of the claimant...
In this sense, the Depot project as a whole consisted of a single transaction. The Tribunal therefore holds that it has jurisdiction over the counterclaims at issue in this Award". (underlinings provided)
Once the outcome of the objective approach rejected, the Majority Award proceeds with the examination of subjective approach arguing that the absence of a positive choice in the contracts should be taken as an implied negative choice meaning that neither party wanted to submit its contract to the other party's national law. The conclusion is therefore that the Tribunal must lock for a 'neutral law'. The solution proposed by the Draft to satisfy this goal is the denationalization of the contracts which, according to the Majority Award, would respond "to both Parties objectively fair and subjectively justified and reasonable expectations". (para. 289)
There are voluminous literature and many scholarly analyses concerning State contracts. I find, particularly, helpful Professor Bernard Audits' classification of these contracts into three categories: The first category relates to the contracts in which the private party placed itself under a regime of public law of co-contracting State, such as the law of French administrative contract. These contracts are subject co the law of the State and, in any case, to the jurisdiction of it's tribunals. The second category is related to the contracts in which the public authority presents itself as a private person. Therefore, it can be specified that the contract is a private contract, a choice of law clause, and a jurisdiction clause remove the contract from the jurisdiction of the law and tribunals of the contracting State.(such as the Loan agreements between the Government authorities and the banking institutions.)
In certain cases also elements in the contract such as providing for good faith practice or reasonable manner or referring to general principles of law night be construed as indications of party's intention to delocalize the contract and to avoid the application of the state party's law.
As for the State Contracts in which no such elements is contained, the application of the law of the contracting State does not seem to be questionable.
The same conclusion could be arrived at also by applying a subjective method test as reflected in the observations by M. Florentino P. Felliciano:
"It is very difficult to presume that a sovereign State would lightly subject itself to the effects of the internal law of another State, or even to international or the general principles of law".
(Institute de Droit Internacional, Annuaire, Vol. 51, Session d' Oslo 1977, Travaux Preparatoires)
There are authorities such as D.W. Bowett and M. Seidle-Hohenveldern who affirm the said presumption.
In Professor Bowett's words "although this is rebuttable it will normally be a difficult presumption to rebut", (see D,W. Bowett, "State Contracts with Aliens: Contemporary Developments on Compensation For Termination or Breach", The British Year Book International Law, 1988)
One could agree with him also when he says that "under the pressure of the needs of international trade, the principle of autonomy of the will of the parties appears today to be much more significant than at the end of the 1920s"; but these points do not mean that the presumption has ever been reversed or lost all of its value and effects.
"Il en est autrement de la question de savoir s'il existe une présomption en faveur de la loi de l’Etat Contractant. M. Seidle-Hohenveldern admet cette presomption sans restriction....Pour H. Mann il ne peut s'agir d'une présumption proprement dite, mais d'un indice relativement important et tel semble être également l'avis de M. Wortley. M. Batiffol est du même avis",
"a presumption in the technical sense but very great weight attaches to the status of the contracting parties", (underlining provided)
professor Batiffol also states:
"Bien que la présomption ait été posé en 1929 par la Cour Permanente de Justice International dans les affaires des emprunts serbes et brésiliens, en France, elle parait aller très loin...".
in Wortly’s view the presumption is admitted,
"Only in the absence of express or implied indications".
Professor Lalive after stating that he does not admit the presumption, immediately tries to explain that:
"Ceci n’est pas contredit par le fait que, en pratique, le droit de l’Etat a été assez souvent jugé applicable, soit à titre de lieu d’ éxécution, soit en vertue du grouping of contrats etc. C’est à dire en vertue des principes classiques du droit international privé".
Now, the first step in a subjective approach is to investigate the degree of autonomy allowed to the contracting parties under the ground law in which the contract is rooted.
There is a distinction between the law governing the contract and the law, or legal order, within the frame of which the contract is made, and from which the contract derives its binding force. It is in this context that the Article 968 of the Iranian Civil Code matters.
This was the question put by professor Dupuy in Texaco Case. That question was pertinent in relation to the said case where the contract included a choice of law clause. The question is even more pertinent in the present case where the parties have abstained from making such a choice.
What did stop the parties from indicating the law which was to govern their relationship?, whereas the contract's 'from their nature and importance, clearly cried out for the need of such a choice of law-clause'?. The key to understand the situation is found by reference to Article 968. The ground law (loi d'enracinement) denied the autonomy to the contracting parties to make a choice. If that is the case, how could the Tribunal assume an implied intention by the parties to subject their contracts to any law other than the law of Iran.