I have carefully studied your letter and would kindly ask you to indicate and substantiate in writing (i) the authorities (including statutes, cases and literature) which would permit the Tribunal to decide on 'a re-opening or continuation of the first stage of the proceedings', (ii) the alleged 'substantive and procedural errors', and (iii) how and to what extent such errors affect the conclusions of the Award. Pending receipt of your answer, which I expect to obtain as soon as possible, no date can be set for the requested hearing.
Until the tribunal has finally adjourned, it is not lacking in jurisdiction to re-examine and correct its decision upon a proper showing by a party. While the error should be clear, substantial and of prejudice in order for it so to act, it should not dismiss any petition for rehearing upon the ground of lack of authority and res adjudicata.
As regards procedural requirements Carlston said (at p. 36):
The tribunal must respect the law governing its creation and defining its powers as laid down in the compromis, and it must likewise observe certain other established rules of a fundamental character which inherently, under the generally accepted rules of law and justice, regulate the conduct of any judicial body. By creating the tribunal and presenting their controversy to it for decision States do not renounce these rights as a consequence of the rule that the award shall be final.
And later he states (at pp. 38-9):
The question is rather: Does the departure constitute a deprivation of a fundamental right so as to cause the arbitration and the resulting award to lose its judicial character? Unless its effect is to prejudice materially the interests of a party, the charge of nullity should not be open to a party. Thus, the denial of a fair hearing, of an adequate opportunity to present its case, will justify a party in taking the position that the ensuing award is void.
And again (at p. 40):
One of the most elementary procedural rights is the right of a party to be heard, to present its arguments and proofs. A number of writers are in agreement that if that be denied the award may be considered null.
On the effect of substantive error Carlston concluded:
A decision which manifestly fails properly to apply a rule for decision laid down in the compromis or an applicable rule of international law having a material bearing upon the outcome of the case involves an excess of jurisdiction and is therefore void. (op. cit., p. 140).
(2) The said breaches were and are ineffective to terminate the Concession Agreement, which remains in law valid and subsisting;
(3) The Claimant is entitled to elect, at any time so long as the Respondent's breach continues, to treat the Concession Agreement as at an end;
(4) The Claimant is entitled to be restored to the full enjoyment of its rights under the Concession Agreement;
(5) The Claimant is the owner of its share of any crude oil extracted from the area of the Concession Agreement after as well as before 7 December 1971 and of all installations and other physical assets, and the Libyan Government has no right to any such oil, installations or physical assets, which it can enjoy or transfer to any third party;
(6) Performance of the Claimant's obligations under the Concession Agreement is suspended for so long as the Libyan Government remains in breach thereof.
the BP Nationalization Law, and the actions taken thereunder by the Respondent, do constitute a fundamental breach of the BP Concession as they amount to a total repudiation of the agreement and the obligations of the Respondent thereunder.
All the Declarations requested by the Claimant to be made by the Tribunal turn upon the issue of the effect of the breach of contract which, as determined earlier, has been committed by the Respondent.
Second, in its Conclusions, the Tribunal expressly states (Award, pp. 99-100) that the rejections of Requested Declarations Nos. 3 and 6 are a consequence of the decision on Requested Declaration No. 2 and impliedly finds that the rejection of the major part of Requested Declaration No. 5 is a consequence of the same decision.
It may be argued that the Claimant does not in fact ask for an order of restitutio in integrum, but merely for a declaratory statement as to its legal position under the BP Concession and with respect to certain property and that the issue of whether restitution in kind is an available remedy therefore is not presented. Such a distinction, subtle though it is, may be relevant for a proper understanding of the decisions of international tribunals (see further below). The Tribunal holds, however, that no such distinction should be made. If it is found that the Claimant is entitled to be restored to the full enjoyment of its rights under the BP Concession, and is the owner of the oil and assets referred to, then the Claimant is entitled to an order for specific performance, or alternatively, a declaratory award of entitlement to specific performance. The question arising for decision therefore should be formulated as set forth in the first sentence under this paragraph (ii).
... where in any proceedings against the Crown any such relief is sought as might in proceedings between subjects be granted by way of injunction or specific performance, the court shall not grant an injunction or make an order for specific performance, but may in lieu thereof make an order declaratory of the rights of the parties.
that it is arguable that when an international contractual obligation is unlawfully abrogated by one party, the other party may regard the agreement as still existing.
It then proceeds to observe that "the stated principle of the continuing validity of the agreement rests only on a basis of extreme generality"—a remark which would appear to be inappropriate in an award which must resort to "general principles of law". The Tribunal then goes on to repeat the error by saying that "the important question is what remedies would be available to the party claiming the continuance of the agreement."
The first question is whether the BP Nationalization Law put an end to the BP Concession for all practical purposes or whether the agreement continues in effect, and entitles the Claimant to call for specific performance of it...
The issue of the continuing validity of the BP Concession, examined in the light of the general principles of law, also turns largely upon the question whether and to what extent under the commercial laws of representative nations specific performance is a remedy available to the innocent party at its option.
And the same fusion of ideas is to be found in the first paragraph on p. 93.
Hence it is clear even from a brief examination of the few legal systems considered in the foregoing that there does not exist a uniform general principle of law that an agreement continues in effect after having been repudiated by one party but not by the other, and no uniform general principle of law pursuant to which specific performance is a remedy available at the option of an innocent party, especially not a private party acting under contract with a Government.
The second part of the conclusion refers, as already stated, to a proposition not raised by the Claimant and irrelevant to Requested Declaration No. 2.
the real issues of substance which require a resolution by the Tribunal are novel in character and scope in that they have not previously been scrutinised judicially
represents a complete misconception of the Claimant's case. There is nothing novel about it. Criticism of this part of the award stems from the manner in which the Tribunal has sought to test the legal continuity of a contract by whether or not an order for specific performance should be made.
the parties to an agreement, even if one of them is a State, must, however, be presumed to have intended to create an effective remedy.
(Award, p. 16.)
There is a distinct measure of contradiction between this statement and the subsequent conclusion that one party to the contract may by its own conduct, and by virtue of its character as a State, deny to the Claimant all legal remedies except recourse to a claim for damages (which, as the Tribunal fails to point out, may itself be frustrated by a refusal of the defendant State to honour the Tribunal's award).
... the Claimant ventures to suggest that in view of the Respondent's default of appearance it is particularly desirable and perhaps even necessary that the Sole Arbitrator should seek from the Claimant clarification of any uncertainty, obscurity or doubt by which he may be troubled. The Claimant would therefore respectfully urge the Sole Arbitrator to put to the Claimant, either orally or in writing, any points on which he may desire further information, evidence or argument. The present economy of the Claimant's argument stems from its view that this is a relatively simple and straightforward case which should not be burdened with argument or material not directed to the essential issues.
If the Sole Arbitrator were to make an order for the division of the case into two parts, the Claimant would-propose in general terms to limit its Memorial in the first part to a statement of facts coupled with legal argument directed to supporting a request for a declaration covering the following matters:.
(2) The Libyan Nationalization Law of 9th December, 1971 was a breach of the Libyan Government's obligation under the Concession Agreement;
(3) The said breach was ineffective to terminate the agreement, which remains in law valid and subsisting;
(4) The said breach entitled the Claimant to reparation in the form either of:—
(a) Restitutio in integrum together with damages; or
(7) As a breach of international law, the action was a nullity to which recognition must not be accorded by the organs of any State;
(8) Any crude oil extracted from the area of the Claimant's Concession, and any products thereof, are the property of the Claimant to which, until such time as reparation is duly completed, the Claimant is entitled to lay claim. The value of any crude oil or products recovered by the Claimant prior to the completion of reparation shall be brought into the final accounting with the Government.
As can be seen, the Claimant refers in items (4) and (6) to its entitlement to damages. It would not be the intention of the Claimant in the first stage of the proceedings to do more than seek from the Sole Arbitrator a declaration in general terms approximating to those set out in items (4) and (6).
As the Sole Arbitrator will appreciate, the statement above of the declarations which will be sought by the Claimant cannot at this stage represent the Claimant's final views on this matter; and accordingly the Claimant reserves its right to amend the content of these declarations, though always respecting the general division suggested above.
(2) The Arbitration proceedings shall be divided into two parts, the first dealing with the merits of the Claim and the second with the assessment of possible damages.
(4) The Memorial shall contain....
(ii) the Claimant's request for an Interim Award in respect of the merits of the claim, divided, as the case may be, into alternative submissions and containing a full statement of the relevant facts and law.
The jurisdiction of the Tribunal, as defined in Clause 28, and the law applicable to the proceedings necessarily confine its task to a consideration of the claims and submissions formulated by the Claimant, and the Award therefore rules exclusively on them.
However, as already stated, the Tribunal has not limited its task to a consideration of claims formulated by the Claimant, but has reformulated them in such a way as quite fundamentally to alter them. To the extent, therefore, that the Tribunal has examined submissions not formulated by the Claimant it has, on its own statement of its jurisdiction exceeded its competence; and its Award is in those respects ultra vires and consequently void.
With respect to the analysis of facts and their legal implications the Tribunal has had the benefit of argument presented by the Claimant alone. However, the Tribunal has felt both entitled and compelled to undertake an independent examination of the legal issues deemed relevant by it, and to engage in considerable legal research going beyond the confines of the materials relied upon by the Claimant. The conclusions in the Award, therefore, are based on a broader consideration of the issues than that permitted by the format of the Claimant's argument in support of its claims. Thus, the Tribunal to the greatest extent possible has endeavoured to eliminate any inherent adverse effects for the Repondent of its decision not to appear as a party in the proceedings.
Equality of arms. The principle of the equality of arms (I'égalité des armes; Waffengleichheit) is an expression of the rule audi alteram partem, and implies that each party to the proceedings before a tribunal must be given a full opportunity to present his case, both on facts and in law. This opportunity must be equal between the parties and limited only by the duty of the tribunal to prevent in any form an undue prolongation or delay of the proceedings.
It will perhaps also be helpful to refer to the book by Professor Partsch, Die Rechte und Freiheiten der europaischen Menschenrechtskonvention, where the development of the law is described on pp. 151 ff. and where it is made very clear that the principle applies both to criminal and civil proceedings.
The Applicant has stated, and it has not been disputed by the Austrian Government, that the decisions relating to his detention on remand were given after the prosecuting authority had been heard in the absence of the Applicant or his legal representative on the written request made by them. The Court is inclined to take the view that such a procedure is contrary to the principle of 'equality of arms' which the Commission, in several decisions and opinions, has rightly stated to be included in the notion of fair trial (procès équitable) mentioned in Article 6(1). The Court does not consider however that this principle is applicable to the examination of requests for provisional release.
... presumably the innocent party would retain his altered rights indefinitely.
The Tribunal has not been in a position to form an opinion in this respect except on the basis of the argument presented by the Claimant which appears less than exhaustive.
The Claimant's argument on this point was less than exhaustive—not surprisingly, considering the irrelevance in its view of the second and third questions. But if the Tribunal thought the Claimant's arguments inadequate, it was the duty of the Tribunal so to say. Instead it concluded (at p. 57) that "no certain conclusions as to the position of Libyan law can be drawn on the material available".
While certain trends in the law are discernible, there are no precise and clear rules that provide an obvious answer to any of the issues. The facts must be appraised and the law interpreted and applied in a balanced consideration of the intrinsic merits of the case and the de facto position of the parties.
The Claimant is uncertain as to the meaning of this passage, but in so far as it appears to be attaching weight and significance to the de facto position of the parties, it must be seen as introducing a novel, subjective and extralegal element into the case of which the Claimant should have had notice. Or, to put the point another way, it appears to be departing from the stated applicable law of the Award in favour of a decision ex aequo et bono and is accordingly ultra vires.
(i) The Claimant contends that the Award rendered on 10 October 1972 is incomplete and that, in consequence, the proceedings must be re-opened and continued in order to enable the Sole Arbitrator to complete his Award.
(ii) The incompleteness of the Award arises from the fact that it is partially void in that the Tribunal's conclusions upon requested Declarations Nos. 2-6 are invalid.
(iii) This invalidity is the consequence of
(a) certain substantive and fundamental errors of law affecting the abovementioned parts of the Award; and
(b) certain grave defects in the procedure followed by the Sole Arbitrator in connection with those parts of the Award.
(iv) As to (a), the fundamental errors of law were: first, the treatment of the requests for Declarations Nos. 2 and 4 as if they were the equivalent of a request for an order of specific performance; second, the holding that a party violating its obligations under a contract may by its breach bring the contract to an end; and, third, the refusal to deny legal effects to a measure rightly held to amount to a violation of international law.
(v) As to (b), the grave defects in procedure were: first, the treatment of the Claimant's requests for Declarations 2 and 4 as if they were an application for an order of specific performance; and, second, the failure of the Sole Arbitrator to adhere to the principles of natural justice in the hearing of the case by reason of his consideration, to the detriment of the Claimant, of a whole line of argument and of authorities of which the Claimant was not informed and to which the Claimant was given no opportunity to reply.
(vi) The duties and powers of the Sole Arbitrator in relation to a request for the reopening and continuation of the proceedings in the present case are governed by Danish Law—the law to which the Sole Arbitrator, by his choice of Copenhagen as the seat of the arbitration, expressly subjected the arbitral proceedings.
(vii) The position in Danish law is set out in the annexed opinion of Professor Foighel and Professor Philip. This Opinion makes it clear that in Danish law
(a) an award suffering from the substantive errors and procedural faults of the present Award would be regarded as partially void;
(b) the dissatisfied party should, in the first place, turn to the arbitrator to seek a re-opening of the proceedings and the completion of the award; and
(c) it would be the duty of the arbitrator, in the circumstances of the present case, to grant the application for a re-opening and continuation of the proceedings and to complete the Award by eliminating the causes of its partial invalidity.
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