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Phillips Petroleum Co. Iran v. Islamic Republic of Iran
Published online by Cambridge University Press: 27 February 2017
Extract
Phillips Petroleum Co. Iran, a wholly owned subsidiary of Phillips Petroleum Co., brought a claim before the Iran-United States Claims Tribunal against the Islamic Republic of Iran and the National Iranian Oil Co. (NIOC) seeking compensation for the alleged taking of its rights under a joint agreement for the exploration and exploitation of petroleum resources in the Persian Gulf. Chamber Two of the Tribunal concluded that the claimant had been deprived of its property interests during the Iranian Revolution by conduct attributable to the Government of Iran for which respondents were liable to provide compensation. Affirming earlier decisions that the 1955 Treaty of Amity between the United States and Iran requires payment of “just compensation” representing the full equivalent of the property taken, the Tribunal accepted “discounted cash flow” analysis as a central method of determining that value. After making significant adjustments to claimant’s calculations, and considering “all relevant circumstances,” the Tribunal awarded claimant $55 million as the value of the expropriated property, with simple interest at the rate of 10 percent per annum from the date of loss to the date of payment from the Security Account.
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References
1 AWD 425-39-2 (Briner, Aldrich, Khalilian), Iranian Assets Litigation Rep., July 14, 1990, at 17,420. The Tribunal functions under the Declaration of the Democratic and Popular Republic of Algeria concerning the Settlement of Claims by the Government of the United States of America and the Islamic Republic of Iran (Jan. 19, 1981), reprinted in 75 AJIL 422, 424 (1981).
2 Phillips Petroleum Co. Iran v. Islamic Republic of Iran, ITL 11-39-2 (Dec. 30, 1982), 1 Iran–United States Claims Tribunal Reports [hereinafter Iran-U.S. C.T.R.] 487 (1981–82). A related jurisdictional argument, involving the separate nature of the Oil Services Co., had been disposed of in Oil Field of Texas, Inc. v. Government of Islamic Republic of Iran, ITL 10–43–FT (Dec. 9, 1982), 1 Iran-U.S. C.T.R. at 347.
3 Slip op., para. 69 (citing Housing & Urban Serv. Int’l, Inc. v. Government of Islamic Republic of Iran, AWD 201-174-1 (Nov. 22, 1985), 9 Iran-U.S. C.T.R. 313 (1985 II)).
4 Id., para. 79 (citing its earlier awards in Mobil Oil Iran, Inc. v. Government of Islamic Republic of Iran, AWD 311-74/76/81/150-3 (July. 14, 1987), 16 Iran-U.S. C.T.R. 3 (1987 III); and Amoco Int’l Finance Corp. v. Government of Islamic Republic of Iran, AWD 310-56-3 (July 14, 1987), 15 Iran-U.S. C.T.R. 189 (1987 II), summarized in 82 AJIL 358 (1988)).
5 In accordance with Article V of the Claims Settlement Agreement, supra note 1, “changed circumstances” are one of the elements to be taken into account by the Tribunal in choosing the law to be applied in a particular case. Citing its earlier decision in Mobil Oil Iran, Inc., supra note 4, the Tribunal said that changes of the character and magnitude of those brought about by the revolution in Iran
are not without consequence to contractual relationships, but they do not affect the validity of such agreements … . In other words, a revolutionary regime may not simply excuse itself from legal obligations by changing governmental policies, nor take for the public benefit without compensation businesses operated by foreign private persons under the previous regime.
Slip op., para. 86 (citation omitted).
6 Claimant alleged alternatively that respondents’ actions constituted either an expropriation of contract rights or a breach and repudiation of contract. The Tribunal chose to consider them as the former because “the acts complained of appear more closely suited to assessment of liability for the taking of foreign-owned property under international law than to assessment of the contractual aspects of the relationship.” Slip op., para. 75.
7 Id., para. 76 (citing Starrett Housing Corp. v. Government of Islamic Republic of Iran, ITL 32-24-1 (Dec. 19, 1983), 4 Iran-U.S. C.T.R. 122 (1983 III), and AWD 314-24-1 (Aug. 14, 1987), 16 Iran-U.S. C.T.R. 112 (1987 III); Tippetts, Abbett, McCarthy, Stratton v. TAMS-AFFA Consulting Engineers of Iran, AWD 141-7-2 (June 29, 1984), 6 Iran-U.S. C.T.R. 219 (1984 II); Phelps Dodge and Overseas Private Investment Corp. v. Islamic Republic of Iran, AWD 217-99-2 (Mar. 19, 1986), 10 Iran-U.S. C.T.R. 121 (1986 I); and SEDCO, Inc. v. National Iranian Oil Co., ITL 55-129-3 (Oct. 28, 1985), 9 Iran-U.S. C.T.R. 248 (1985 II), summarized in 80 AJIL 969 (1986), and AWD 309-129-3 (July 7, 1987), 15 Iran-U.S. C.T.R. 23 (1987 II)).
8 Id., para. 101 (citing Tippetts, Abbett, McCarthy, Stratton, supra note 7; International Technical Prod. Corp. v. Government of Islamic Republic of Iran, AWD 196-302-3 (Oct. 28, 1985), 9 Iran-U.S. C.T.R. 206 (1985 II); and SEDCO, Inc., supra note 7, ITL 55-129-3).
9 Treaty of Amity, Economic Relations, and Consular Rights, Aug. 15, 1955, United States-Iran, Art. IV(2), 8 UST 900, TIAS No. 3853, 284 UNTS 93. Previous Tribunal decisions to the same effect, and cited in the award, include Phelps Dodge, supra note 7; Payne v. Government of Islamic Republic of Iran, AWD 245-335-2 (Aug. 8, 1986), 12 Iran-U.S. C.T.R. 3 (1986 III); SEDCO, Inc., supra note 7; Amoco Int’l Finance Corp., supra note 4; and Starrett Housing Corp., supra note 7.
10 Slip op., para. 107. On this issue, respondents relied on a statement in INA Corp. v. Government of Islamic Republic of Iran, AWD 184-161-1 (Aug. 13, 1985), 8 Iran-U.S. C.T.R. 373(1985 I), and on Judge Lagergren’s Separate Opinion in that case, id. at 390, which the Tribunal declined to endorse in the present case.
11 Factory at Chorzów (Claim For Indemnity) (Merits), 1928 PCIJ (ser. A) No. 17 (Judgment of Sept. 28).
12 Slip op., para. 110.
13 On this point, the Tribunal cited the Aminoil award, Kuwait and American Independent Oil Co. (Mar. 24, 1982) (Reuter, Sultan, and Fitzmaurice), 66 ILR 518, 606 (1984). The Tribunal in the present case found that there were no equitable considerations that would affect the compensation due.
14 Slip op., paras. 115 and 159–65. The Tribunal’s calculations under this alternative method were comparable to those resulting from its adjustments to claimants’ DCF analysis.
15 Id., para. 138.
16 Id., para. 135 (citing American Int’l Group, Inc. v. Islamic Republic of Iran, AWD 93-2-3 (Dec. 19, 1983), 4 Iran-U.S. C.T.R. 96 (1983 III); INA Corp., supra note 10; Phelps Dodge Corp., supra note 7; SEDCO, Inc., supra note 7, AWD 309-129-3; Payne, supra note 9; and Sola Tiles, Inc. v. Government of Islamic Republic of Iran, AWD 298-317-1 (Apr. 22, 1987), 14 Iran-U.S- C.T.R. 223 (1987 I)).
17 In holding that respondents were, as a matter of law, precluded from bringing two of the counter-claims, the Tribunal reviewed not only its own prior decisions on the issue, but also other international arbitral cases concerning the doctrine of preclusion based on concepts of acquiescence, estoppel and waiver. See id., paras. 197-99.
18 The jurisdictional issues included the impermissibility of counterclaims (1) against parties other than the claimant, (2) not arising out of the same contract, transaction or occurrence as the claims, and (3) not outstanding on the date of the Algiers Accords. See id., paras. 171–90.
19 For Arbitrator Aldrich’s concurrence, see Iranian Assets Litigation Rep., Aug. 11, 1989, at 17,578.
20 For Arbitrator Khalilian’s statement, see id., July 28, 1989, at 17,525.
21 AAT 461-39-2 (Jan. 10,1990), Iranian Assets Litigation Rep., Jan. 12,1990, at 18,289. In a separate statement filed with the Award on Agreed Terms, Arbitrator Aldrich noted that Award No. 425-39-2 remained a “final and binding” Tribunal award, notwithstanding the settlement. He pointed out that as part of the settlement, the respondents had withdrawn their application to annul the previous award, and that all parties had agreed to waive their rights under that award. Since the Tribunal had not completed the ministerial actions required with respect to that award, it was able to accept the settlement for purposes of payment from the Security Account. Those actions, however, could not change the fact that the award on the merits “remains the definitive statement of the Tribunal’s conclusions and reasoning with respect to this Case.” Id., slip op. at 3.
22 Payne, supra note 9; Amoco Int’l Finance Corp., supra note 4; SEDCO, Inc., supra note 7, ITL 55-129-3; Tippetts, Abbett, McCarthy, Stratton, supra note 7; American Int’l Group, Inc., supra note 16; Starrett Housing Corp., supra note 7, ITL 32-24-1 and AWD 314-24-1.
23 See supra note 4 and the summary of that case in 82 AJIL 358, 361–62 (1988).
24 See, e.g., Starrett Housing Corp., supra note 7, AWD 314-24-1 (Chamber 1); SEDCO, Inc. v. National Iranian Oil Co., ITL 59-129-3 (Mar. 27, 1986) (Chamber 3).
25 Starrett Housing Corp., supra note 7, AWD 314-24-1.
26 See, e.g., Amco Asia Corp. v. Republic of Indonesia, ICSID No. ARB/81/1 (Nov. 21,1984), 1986 Int’l Arb. Rep. 601, excerpted in 24 ILM 1022 (1985).