title: Texaco Petroleum v. The Government of Libya: Arbtitration in a critical perspective
Creators: name: Khalifa, Mohamed A.
Publisher: name: University of Glasgow
Year: 1983
Subjects: subject: International law.

description: Arbitration could be studied in two different perspectives; what would be involved in the first perspective is the role that arbitration plays, among other methods, in avoidance of dispute. In this perspective a study would concentrate on the technique of drafting concession agreements, and the priority that would be given to arbitration clauses among the other methods, in addition to the precision and quality of these clauses. In the second perspective one would study arbitration at work, and its actual dealing with procedural and substantive issues. Here arbitration would be the mechanism of applying law to facts, and here is where arbitration would be expected to contribute to international law in so far as investment disputes are concerned. But for an arbitral tribunal to be successful in settling disputes and contributing to international law, a number of conditions (which will be referred to at a later stage of this section) must be present. This paper proposes to deal with arbitration in both perspectives, in the light of the TEXACO Arbitration. Thus the introductory chapter will be dedicated to analysing the role arbitration clauses played in the concession agreements through their historical development. It shall start by the arbitration clauses in the traditional concessions, and analyse the attempt to provide for an international forum through the ICSID convention, and the declining role of arbitration clauses since then, to the stage where arbitration became a mechanism of last resort, giving the primary role to the new technique of dispute avoidance. This technique has been achieved (as will be seen) in what is known as the modern concession, which is a contract divided into several sets of rights and obligations in an elaborate form 50 as to comply with the ongoing relationship between the parties. This new model is, in other words, a set of contracts embodied in a concession, with each contract with a different instrument for conflict avoidance. The parties would execute these mini contracts individually, one after the other: thus any disputes arising from one of these mini contracts would not destabilise the overall relationship. That is the role of arbitration as far as dispute avoidance is concerned in concession agreements. Concerning the second role, i.e. the actual settling of disputes, a combination of factors must be present for an arbitral tribunal to be successful in settling a dispute, and perhaps laying down new rules that may have a measure of significance in the build up of an international economic order, as well as declaring customary rules. These factors are: (1) full participation in the proceedings by all the concerned before an arbitral tribunal formed of three arbitrators or more (2) a clear reference to the law(s) that should govern the proceeding of the tribunal and the substance of the dispute. These factors are vitally important for, without full participation of all concerned the dispute would be presented by one side, and before a sole arbitrator usually (as was the case in the disputes relating to the Libyan nationalisations). In such a case (no matter how hard the arbitrator tried to anticipate the claims and counter claims that might have been submitted by the absent party) the argument would be one sided, A tribunal formed of a number of arbitrators is equally important, because there are different schools of thought relating to the position of individuals and their rights under both concession agreements and international law. An award delivered by a sole arbitrator would, most probably reflect only the opinion of one school, unlike a tribunal with three members which could firmly establish a rule that reflects a general acceptance, and could set precedents for other tribunals to follow. The lack of reference to a particular law to govern concession agreements has generated so many controversies before arbitral tribunals and elsewhere. The argument in short is whether in the absence of choice of law clause, the contract should be governed by the law of the host country alone, or by a combination of that and international law, whether there is a branch of international law to govern relationships emerging from concession agreements, and what should its position be in relation to the municipal law of the host country. These questions may have varying impacts on the outcome of international arbitrations, and they could be answered in different ways, which could be eliminated only by clear and well drafted choice of law(s) clause. This paper will attempt to produce a critical assessment of the TEXACO case by comparing it with other cases, and illustrate the significance of the parties participating .It shall also endeavour to analyse the relationship between international law and the municipal law in the light of the conflicting arbitrations" Recent case law shall be discussed where appropriate to show the recent developments relating to international arbitration and international investment. An assessment shall be made of the changes that have been brought about by these cases, and their significance to both foreign Investors and host countries.