Libya v LIAMCO (Swiss Proceedings)

JurisdictionSuiza
CourtFederal Supreme Court (Switzerland)
Switzerland, Federal Supreme Court, First Public Law Department

(Haefliger, Presiding Judge, Antognini, Fragnire, Leri and Kuttler, Judges)

Socialist Libyan Arab Popular Jamahiriya
and
Libyan American Oil Company (LIAMCO)

International law in general Relation to municipal law Restrictive theory of sovereign immunity in international law Relation to requirements of municipal law for proceedings against foreign States Whether precluding municipal law from requiring close connection between case and forum State in any proceedings against a foreign State The law of Switzerland

Jurisdiction In general Territorial Exemptions from territorial jurisdiction Foreign States Restrictive theory of sovereign immunity Whether part of international law Whether precluding rule of domestic law that foreign State always immune unless there is a close connection between the case and the forum Enforcement of arbitration award Whether fact that arbitration held in forum State sufficient connection The law of Switzerland

Jurisdiction In general Territorial Exemptions from territorial jurisdiction Public ships and other property of foreign States Bank deposits Immunity from attachment to enforce arbitral award When immune Requirement of close connection between case and State in which attachment sought The law of Switzerland

Disputes Arbitration Enforcement of arbitration award by proceedings in municipal courts Requirment of Swiss law that any proceedings against a foreign State have a close connection with Switzerland Whether fact that arbitration held in Switzerland sufficient connection to permit proceedings for enforcement The law of Switzerland

State responsibility Nature and kinds of For revocation of, or interference with, concessions or concessionary contracts Nationalization of oil concessions Arbitral award of compensation against State in favour of foreign company Enforcement Attachment of State's assets Whether State entitled to sovereign immunity Requirement of close connection between case and State in which attachment sought Whether fact arbitration held in that State sufficient Relationship between international law and municipal law The law of Switzerland

Summary: The facts:LIAMCO sought to enforce the arbitration Award given in its favour on 12 April 19771 by obtaining orders of attachment against the property in Switzerland of Libyan governmental authorities. The Award was granted a certificate of enforceability by the Cour de Justice of Geneva, making it equivalent to an enforceable judgment of a Swiss court.2 In summary proceedings, the Zurich District Court issued an order of attachment for the amount of the Award applicable to all financial assets of Libya and Libyan governmental organizations at six banks domiciled in Zurich. Pursuant to this order, the Debt Collection Office, Zurich 1, seized various Libyan assets and granted LIAMCO a writ to pay against Libya. Libya appealed to the Federal Supreme Court.

Held:The appeal was allowed and the order of attachment, the seizure of assets and the writ to pay were annulled.

It was unnecessary to determine whether Libya had acted iure gestionis or, by the arbitration clause in the concessions, had waived its immunity, since Swiss law did not permit proceedings against a foreign State unless there was a close connection between the subject matter and Switzerland. In the present case, although the arbitration had taken place in Geneva, it had only done so, because the Sole Arbitrator had so decided. That decision did not create a sufficient legal relationship with Switzerland where, as was the case here, the subject matter at issue in the arbitration had no connection with Switzerland.

Although the restrictive theory of sovereign immunity was now part of international law, international law did not preclude Swiss law from imposing a requirement of a close connection between a case and Switzerland before sovereign immunity could be overridden even in the case of a commercial transaction or a case in which immunity had been waived.

The following is the text of the judgment of the Court:

A.a) Law No. 25 of the Kingdom of Libya of 21 April 1955 established in its Article 1 that all crude oil in the ground belongs to the State and that nobody should be entitled to remove crude oil from the ground without permit or concession. On 12 December 1955 the Kingdom of Libya granted to the Libyan American Oil Company (LIAMCO) (hereinafter LIAMCO), Concessions 16, 17 and 20, among others, which entitled the latter to remove oil from the ground in certain defined areas for a period of 50 years. The concessions signed by both the Petroleum Ministry and by LIAMCO contained an arbitration clause in their Article 28. According to this clause, all disputes in connection with the granted concessions are to be decided by an Arbitration Board. If one of the parties should not appoint art arbitrator when requested by the other party to do so, the Presiding Judge of the International Court of Justice shall, according to this provision, appoint a Sole Arbitrator who shall choose the seat of the Arbitration Board and make a final decision in the dispute.

b) On 1 September 1969 the Republic was proclaimed in Libya. By Laws No. 66 of 1 September 1973 and No. 10 of 11 February 1974 the State of Libya subsequently expropriated all concession rights and oil pumping and producing facilities of LIAMCO which, according to the aforesaid laws, was to receive compensation, with the amount of compensation being determined by a commission consisting of three members, with the Libyan Ministers of Justice, Finance and Petroleum each appointing one member.

c) In the middle of November 1973 LIAMCO demanded an arbitration proceeding in accordance with Article 28 of...

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