the sovereignty of States over their natural resources, the last being Resolution No. 3171 of the United Nations General Assembly adopted on December 13, 1973, as well as paragraph (4/E) of Resolution No. 3201 (S. VI) adopted on 1 May, 1974. The said resolutions confirm that every State maintains complete right to exercise full sovereignty over its natural resources and recognize nationalization as being a legitimate and internationally recognized method to ensure the sovereignty of the State upon such resources. Nationalization, being related to the sovereignty of the State, is not subject to foreign jurisdiction. Provisions of the international law do not permit a dispute with a State to be referred to any jurisdiction other than its national jurisdiction. In affirmance of this principle, resolutions of the General Assembly provide that any dispute related to Nationalization or its consequences should be settled in accordance with provisions of domestic law of the State.

81. . . .

The practice of the United Nations, referred to in the Libyan Government's Memorandum, does not contradict in any way the status of international law as indicated above. This Tribunal wishes first to recall the relevant passages for this case of Resolution 1803 (XVII) entitled "Permanent Sovereignty over Natural Resources," as adopted by the General Assembly on 14 December 1962:

3. In cases where authorization is granted, the capital imported and the earnings on that capital shall be governed by the terms thereof, by the national legislation in force, and by international law.

on

4. Nationalization, expropriation or requisitioning shall be based grounds or reasons of public utility, security or the national interest which are recognized as overriding purely individual or private interests, both domestic and foreign. In such cases the owner shall be paid appropriate compensation, in accordance with the rules in force in the State taking such measures in the exercise of its sovereignty and in accordance with international law...

82. The Memorandum of the Libyan Government which has just been quoted relies, however, on more recent resolutions of the General Assembly (3171 and 3201 (S-VI), in particular) which, according to this Government would as a practical matter rule out any recourse to international law and would confer an exclusive and unlimited competence upon the legislation and courts of the host country.

Although not quoted in the Libyan Memorandum, since subsequent to the date of 26 July 1974, Resolution 3281 (XXIX), proclaimed under the title "Charter of Economic Rights and Duties of the States" and adopted by the General Assembly on 12 December 1974, should also be mentioned with the two Resolutions in support of the contention made by the Libyan Government. Two portions of such resolutions are of particular interest in the present case:

-Resolution 3201 (S-VI) adopted by the General Assembly on 1 May 1974 under the title "Declaration on the Establishment of a New International Economic Order," Article 4, paragraph (e):

Full permanent sovereignty of every State over its natural resources and all economic activities. In order to safeguard these resources, each State is entitled to exercise effective control over them and their explotation with means suitable to its own situation, including the right to nationalization or transfer of ownership to its nationals, this right being an expression of the full permanent sovereignty of the State. No State may be subjected to economic, political or any other type of coercion to prevent the free and full exercise of this inalienable right.

-Article 2 of Resolution 3281 (XXIX):

1. Every State has and shall freely exercise full permanent sovereignty, including possession, use and disposal, over all its wealth, natural resources and economic activities.

c) To nationalize, expropriate or transfer ownership of foreign property, in which case appropriate compensation should be paid by the State adopting such measures, taking into account its relevant laws and regulations and all circumstances that the State considers pertinent. In any case where the ques

tion of compensation gives rise to a controversy, it shall be settled under the domestic law of the nationalizing State and by its tribunals, unless it is freely and mutually agreed by all States concerned that other peaceful means be sought on the basis of the sovereign equality of States and in accordance with the principal of free choice of means.

Substantial differences thus exist between Resolution 1803 (XVII) and the subsequent resolutions as regards the role of international law in the exercise of permanent sovereignty over natural resources. This aspect of the matter is directly related to the instant case under consideration; this Tribunal is obligated to consider the legal validity of the above-mentioned resolutions and the possible existence of a custom resulting therefrom.

In appraising the legal validity of the above-mentioned resolutions, this Tribunal will take account of the criteria usually taken into consideration, i....... the examination of voting conditions and the analysis of the provisions concerned.

Id. 62-66.

86. Taking into account the various circumstances of the votes with respect to these resolutions, this Tribunal must specify the legal scope of the provisions of each of these resolutions for the instant case.

As this Tribunal has already indicated, the legal value of the resolutions which are relevant to the present case can be determined on the basis of circumstances under which they were adopted and by analysis of the principles which they state:

-With respect to the first point, the absence of any binding force of the resolutions of the General Assembly of the United Nations implies that such resolutions must be accepted by the members of the United Nations in order to be legally binding. In this respect, the Tribunal notes that only Resolution 1803 (XVII) of 14 December 1962 was supported by a majority of Member States representing all of the various groups. By contrast, the other resolutions mentioned above, and in particular those referred to in the Libyan Memorandum, were supported by a majority of States but not by any of the developed countries with market economies which carry on the largest part of international trade.

87. (2) With respect to the second point, to wit the appraisal of the legal value on the basis of the principles stated, it appears essential to this Tribunal to distinguish between those provisions stating the existence of a right on which the generality of the States has expressed agreement and those provisions introducing new principles which were rejected by certain representative groups of States and having nothing more than a de lege ferenda value only in the eyes of the States which have adopted them; as far as the others are concerned, the rejection of these same principles implies that they consider them as being contra legem. With respect to the former, which proclaim rules recognized by the community of nations, they do not create a custom but confirm one by formulating it and specifying its scope, thereby making it possible to determine whether or not one is confronted with a legal rule. As has been noted by Ambassador Castañeda, "[such resolutions] do not create the law; they have a declaratory nature of noting what does exist" (129 R.C.A.D.I. 204 (1970), at 315).

On the basis of the circumstances of adoption mentioned above and by expressing an opinio juris communis, Resoution 1803 (XVII) seems to this Tribunal to reflect the state of customary law existing in this field. Indeed, on the occasion of the vote on a resolution finding the existence of a customary rule, the States concerned clearly express their views. The consensus by a majority of States belonging to the various representative groups indicates without the slightest doubt universal recognition of the rules therein incorporated, i.e., with respect to nationalization and compensation the use of the rules in force in the nationalizing State, but all this in conformity with international law.

88. While Resolution 1803 (XVII) appears to a large extent as the expression of a real general will, this is not at all the case with respect to the other resolutions mentioned above, which has been demonstrated previously by analysis of the circumstances of adoption. In particular, as regards the Charter of Economic Rights and Duties of States, several factors contribute to denying legal value to those provisions of the document which are of interest in the instant case.

-In the first place, article 2 of this Charter must be analyzed as a political rather than as a legal declaration concerned with the ideological strategy of development and, as such, supported only by nonindustrialized States.

-In the second place, this Tribunal notes that in the draft submited by the Group of 77 to the Second Commission (U.N. Doc. A/C.2/L. 1386 (1974), at 2), the General Assembly was invited to adopt the Charter "as a first measure of codification and progressive development" within the field of the international law of development. However, because of the opposition of several States, this description was deleted from the text submitted to the vote of the Assembly. . . .

89. Such an attitude is further reinforced by an examination of the general practice of relations between States with respect to investments. This practice is in conformity, not with the provisions of article 2 (c) of the above-mentioned Charter conferring exclusive jurisdiction on domestic legislation and courts, but with the exception stated at the end of this paragraph. Thus a great many investment agreements entered into between industrial States or their nationals, on the one hand, and developing countries, on the other, state, in an objective way, the standards of compensation and further provide, in case of dispute regarding the level of such compensation, the possibility of resorting to an international tribunal. In this respect, it is particularly significant in the eyes of this Tribunal that no fewer than 65 States, as of 31 October 1974, had ratified the Convention on the Settlement of Investment Disputes between States and Nationals of other States, dated March 18, 1965.

*

91. Therefore, one should note that the principle of good faith, which had already been mentioned in Resolution 1803 (XVII), has an important place even in Resolution 3281 (XXIX) called "The Charter of Economic Rights and Duties of States". One should conclude that a sovereign State which nationalizes cannot disregard the commitments undertaken by the contracting State: to decide otherwise would in fact recognize that all contractual commitments undertaken by a State have been undertaken under a purely permissive condition on its part and are therefore lacking of any legal force and any binding effect. From the point of view of its advisability, such a solution would gravely harm the credibility of States since it would mean that contracts signed by them did not bind them; it would introduce in such contracts a fundamental imbalance because in these contracts only one partythe party contracting with the State-would be bound. In law, such an outcome would go directly against the most elementary principle of good faith and for this reason it cannot be accepted.

SECTION III: Is the Libyan Government required to perform and give full effect to the Deeds of Concession?

92. It being admitted, as has previously been established, that the defendant Government, by adopting the nationalization measures promulgated in 1973 and 1974, has failed to perform its obligations under the Deeds of Concession entered into with plaintiffs, the question submitted by the plaintiffs leads this Tribunal to consider whether or not the defendant is under the obligation to perform such contracts and to give them full effect. . . .

SECTION V. Operative part:

FOR THESE REASONS,

The undersigned Sole Arbitrator

1. pronounces and decides that the Deeds of Concession in dispute are binding upon the parties;

2. pronounces and decides that the Libyan Government, the defendant, in adopting measures of nationalization in 1973 and 1974, breached its obligations arising from the said Deeds of Concession;

3. pronounces and decides that the Libyan Government, the defendant, is legally bound to perform these contracts and to give them full effect;

4. grants to the Libyan Government, the defendant, a time period of five months running from 1 February 1977 to 30 June 1977 at midnight (GMT) in order that it may bring to the notice of the Arbitral Tribunal the measures taken by it with a view to complying with and implementing the present arbitral award;

5. decides that, if the present award were not to be implemented within the time period fixed, the matter of further proceedings is reserved and that the costs and expenses of the arbitration shall be borne, for the present, wholly by the plaintiffs;

6. decides that the present award shall be, within a period of six months from 1 February 1977, filed with the Registry of the International Court of Justice.

Made and drawn up in six original copies and pronounced in Geneva on 19 January 1977.

Id. 63-66, 71-74, 90.

The full text of the Charter of Economic Rights and Duties appears in the 1974 Digest, Ch. 10, § 3, pp. 497–504.

The text of Art. 13, par. 1(a) of the Charter of the United Nations reads as follows:

1. The General Assembly shall initiate studies and make recommendations for the purpose of :

a. promoting international cooperation in the political field and encouraging the progressive development of international law and its codification; The Convention on the Settlement of Investment Disputes between States and Nationals of other States (TIAS 6090; 17 UST 1270; 575 UNTS 159; entered into force for the United States on Oct. 14, 1966) was done on Mar. 18, 1965. For further information concerning the Libyan nationalization measures of 1973 and 1974, see the 1973 Digest, Ch. 9, § 2, pp. 334-335; the 1974 Digest, Ch. 6, § 8, pp. 275-278; and the 1975 Digest, Ch. 9, § 2, pp. 489–491.

For further information on the legal effects of U.N.G.A. resolutions, see ante, Ch. 2, § 4G, pp. 53–56.

On Sept. 26, 1977, the New York Times reported that Libya had agreed to provide the plaintiff companies with $152 million of Libyan crude oil over a period of 15 months and that the companies had agreed to terminate the arbitration proceedings.

The entire text of the Award on the Merits appears in English in 17 International Legal Materials 1–37 (1978).

83

Claims Settlement Agreements

U.S.-Hungary

Subsequent to the signing of the Agreement regarding the settlement of claims between the United States and Hungary on March 6, 1973 (TIAS 7569; 24 UST 522), the National Bank of Hungary began canceling all foreign interest bank accounts owned by all residents of the United States on the grounds that claims based upon such accounts were settled by the agreement.

For background concerning this matter, see the 1975 Digest, p. 492. The key language in the 1973 agreement bearing on the settlement of claims reads as follows:

Article 1

(1) The Government of the Hungarian People's Republic agrees to pay, and the Government of the United States agrees to accept, the lump sum of $18,900,000 (eighteen million nine hundred thousand dollars) in United States currency in full and final settlement and in discharge of all claims of the Government and nationals of the United States against the Government and nationals of the Hungarian People's Republic which are described in this Agreement.

(2) Such payment shall be made by the Government of the Hungarian People's Republic as provided in Article 4 of this Agreement.

Article 2

The claims which are referred to in Article 1, and which are being settled and discharged by this Agreement, are claims of nationals and the Government of the United States for:

(1) property, rights and interests affected by Hungarian measures of nationalization, compulsory liquidation, expropriation, or other taking on or before the date of this Agreement, excepting real property owned by the Government of the United States;

(2) obligations expressed in currency of the United States arising out of contractual or other rights acquired by nationals of the United States prior to September 1, 1939, and which became payable prior to September 15, 1947; (3) obligations of the Hungarian People's Republic under Articles 26 and 27 of the Treaty of Peace between the United States and Hungary dated February 10, 1947, and

(4) losses referred to in the note of December 10, 1952 of the Government of the United States to the Government of the Hungarian People's Republic. In response to inquiries from U.S. citizens concerning these blocked accounts, Fabian A. Kwiatek, Assistant Legal Adviser for Claims of the Department of State, took the following position:

Subsequent to the claims settlement agreement of March 6, 1973, between the Governments of the United States and Hungary, the National Bank of Hungary began canceling all forint [foreign interest] bank accounts owned by all residents of the United States on the grounds that claims based upon such accounts were settled by the agreement. The Department of States does not agree with the interpretation placed on the agreement by the Government of Hungary. It is the Department's view that claims for canceled bank accounts which were established from funds which the property owners agreed to accept as compensation for the property or utilized the proceeds of the account subsequent to its establishment were not settled by the agreement. Canceled bank accounts which were inherited or established from funds not related to the taking of property were also excluded from the agreement. However, the Department recognizes that there may be some canceled bank accounts which were unilaterally established by the Government of Hungary with funds paid for the taking of property which may be legally valid claims under the agreement, assuming the claims are otherwise valid under principles of international law.

At the time the agreement was concluded, the Department was very much aware of the existence of certain blocked bank accounts

257-179 O - 79 - 45