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Texaco Vs Libya

In the case of Texaco v. Libya, the Libyan government's decree to nationalize Texaco's interests led to arbitration, where Libya was found to have breached its contractual obligations. The court held that referencing general principles of law is sufficient for the internationalization of a contract, especially to protect private parties from unilateral changes in law. The case highlighted the conflict between applying Libyan law and international law, emphasizing the need for compliance with both in contractual matters.

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Beverlyn Jamison
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156 views1 page

Texaco Vs Libya

In the case of Texaco v. Libya, the Libyan government's decree to nationalize Texaco's interests led to arbitration, where Libya was found to have breached its contractual obligations. The court held that referencing general principles of law is sufficient for the internationalization of a contract, especially to protect private parties from unilateral changes in law. The case highlighted the conflict between applying Libyan law and international law, emphasizing the need for compliance with both in contractual matters.

Uploaded by

Beverlyn Jamison
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Texaco v.

Libya, 17 ILM 1 (1978)

Facts.

A decree to nationalize all Texaco’s (P) rights, interest and property in Libya was promulgated by Libya
(D). This action of the Libyan Government led Texaco (P) to request for arbitration, but it was refused by
Libya (D). A sole arbitrator was however appointed by the International Court of Justice on Texaco’s
request, and Libya (D) was found to have breached its obligations under the Deeds of Concessions and
was also legally bound to perform in accordance with their terms.

Issue.

Whenever reference is being made to general principles of law in the International arbitration context,
can this be held to be a sufficient criterion for the internationalization of a contract?

Held.

Yes. Whenever reference is been made to general principles of law in the international arbitration
context, it is always held to be a sufficient criterion for the internationalization of a contract. The lack of
adequate law in the state considered and the need to protect the private contracting party against
unilateral and abrupt modifications of law in the contracting state is a justification to the recourse to
general principles. Though international law involves subjects of a diversified nature, legal international
capacity is not solely attributable to a state. A private contracting party, unlike a state, has only a limited
capacity and is limited to invoke only those rights that he derives from his contract.

Discussion.

Applying Libyan law or international law in the arbitration proceedings was a conflict encountered by in
this case. Though the contract itself deferred to Libyan law, the court noted that Libyan law does not
preclude the application of international law, but that the two must be combined in order to verify that
Libyan law complies with international law. Even though the right of a state to nationalize is recognized
by international law, this right in itself is not a sufficient justification not to regard its contractual
obligations

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