Enabling Private Ordering - the University of Minnesota Law School

2009] UMBRELLA CLAUSES 55
between the investor and Peru, to an award in which Peru owed
to the United Kingdom an international obligation to comply
with its terms, and so to render its enforcement a matter of
international law.” 149 The agreement therefore exclusively
served procedural purposes with respect to the effective
enforcement of an award rendered by the tribunal.
The aspect of providing enforcement for a contractual
agreement between a foreign investor and the host State was
again the main concern in the settlement negotiations between
the Anglo-Iranian Oil Company (AIOC) and the Iranian
Government in the early 1950s, after AIOC’s oil operation in
Iran had been nationalized contrary to the Concession
Agreement between investor and host State. At issue was not so
much whether the breach of the Concession Agreement
amounted to a breach of international law. Rather, the problem
of contract stabilization primarily resulted from defects in the
dispute settlement and enforcement mechanisms for breaches of
the Concession Agreement. On the investor-State level, the
arbitration clause in the concession was ineffective, because it
referred to an appointing authority that had ceased to exist. 150
On the inter-State level, a claim by the United Kingdom before
the International Court of Justice (ICJ) failed because Iran had
only accepted the Court’s jurisdiction relating to breaches of
treaties, not however with respect to customary law. 151 The
enforcement problem as regards the investor-State contract
therefore resulted not from a lack in substantive protection, but
rather from insufficiencies in third-party dispute settlement
mechanisms.
As a consequence, a primary concern in the settlement
negotiations between AIOC and Iran were the protection of the
to-be-concluded settlement arrangements against unilateral
breaches by the State. Lauterpacht, as AIOC’s advisor,
therefore, suggested a double strategy: first, the inclusion of an
internationalization clause in the final settlement agreement
149. Id. at 414.
150. The Concession Agreement designated the President of the PCIJ as the
appointing authority. After the end of the PCIJ, the President of the ICJ refused to
regard himself as the successor of the President of the PCIJ and declined to serve as
the appointing authority under the Concession Agreement. See D. H. N. Johnson,
The Constitution of an Arbitral Tribunal, 30 BRIT. Y.B. OF INT’L L. 152 (1953); Elihu
Lauterpacht, International Law and Private Foreign Investment, 4 IND. J. GLOBAL
LEGAL STUD. 259, 271–72 (1997).
151. Anglo-Iranian Oil Co. (U.K. v. Iran), 1952 I.C.J. 93 (July) (Preliminary
Objections).