Iran-United States Claims Arbitration: Debates on Commercial and Public International Law

© Copyright 2012 Khalil Khalilian, LL.M.; LL.D.

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the written prior permission of the author.

ISBN: 978-1-4669-6454-9 (sc)

ISBN: 978-1-4669-6456-3 (hc)

ISBN: 978-1-4669-6455-6 (e)

Library of Congress Control Number: 2012919723

Trafford rev. 10/22/2012

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Contents

Chapter One

PROCEDURAL RULES AND PRACTICES

Section One

GENESIS AND STRUCTURE OF THE TRIBUNAL

1.   Legal and Historical Background

2.    Members of the Tribunal

a)   Excess of Power

b)   Challenge Process

(1)    Role of the Appointing Authority

(2)    Functions during Pendency of Challenge

c)    Returning Arbitrator

d)    Opinions and Statements by Arbitrators

e)    Opinions on Amicable Settlements

f)    A Peculiar Declaration

3.    Rules of Procedure

Section Two

JURISDICTION

1.    Introductory Topics

a)    Source

b)    Competence over Competence

c)    Inherent Power and Equitable Discretion

d)   Decision on Merits before Ruling on Jurisdiction

e)   Severability of Arbitration Clause from Contract

2.    Eligible Parties

a)    Private Persons before International Tribunals

b)    States versus Private Persons

c)    State versus State (Interstate Claims)

d)    Government-Controlled Entities

e)    Dual Nationals

(1)    Time Factor and the Standards of Dominant Nationality

(2)    Relevance of Non-Dominant Nationality

f)    Corporations: Issue of Nationality

(1)    Evidentiary Material for Parent Corporation

(2)    Evidentiary Material for Subsidiary

(3)    Interpretive Case No. A/20

(4)    Non-stock, Non-profit Organizations

(5)    Partnership (Locus Standi of Partners)

(6)    Derivative Eligibility and Concept of Control

i)    Ineligible Subsidiary and Indirect claim

ii)    Counterclaim to indirect claims

iii)   Disc Company

iv)   Proportional Recovery

g)    Owner of Claim

(1)    Legal or Beneficial Ownership

(4)    Third Party Beneficiary

(5)    Proper Party

3.    Subject Matters

a)    Exclusions

b)    Counterclaims

c)    Claims jure imperii

(1)    The Issue

(2)   Development of Case Law on Tax Counterclaim

(3)   Legal Set-Off

(4)    Transformation of Statutory Provisions

(5)    Expropriation Case Distinguished

d)    Torts and Personal Injuries

e)    Claim of Interest

(1)    General Guideline on Rate of Interest

(2)    Exercise of Discretionary Power

(3)   Interest in Interstate claims

(4)   Compound Interest

(6)    Contract-Based Rate of Interest

f)    Arbitration Costs

g)    Issuance of Exequatur

h)    Interpretative Jurisdiction

i)    Recording of Settlement Agreements

j)    Time Limitation

Section Three

PLEADINGS

1.   Exchange of Submissions

2.   Extension of Deadlines

3.    Admissibility of Late-Filed Documents

4.    Amendment of Claim

a)    Issue of Admissibility

b)    Addition or Substitution of a Party

c)    Changing the Theory of Claim

Section Four

EVIDENCE

1.    Burden of Proof

2.    Failure to Produce Evidence

a)    Prima Facie Evidence

b)   Production of Evidence by Respondent for Claimant

c)   Adverse or Negative Inference

d)    Evidence in Rebuttal

e)    Forged Documents

3.    Admissibility and Relevance of Evidence

a)    Authority of Tribunal

b)    Clarity and Credibility

c)    Proof for Negative Proposition

d)    Presumptive Evidence

4.    Evidentiary Materials

a)    Documentary and Testimonial Evidence

b)    Invoice

c)    Affidavit

d)    Testimony by Witness

e)    Technical Report by Experts

f)    Newspaper Reports

5.    Judicial Notice

Section Five

AWARDS AND DECISIONS

1.    Applicable Law

4.    Decision by Approximation

5.    Conditional Payment of Award

6.    Interim Measures of Protection

7.    Finality of Award

8.    Revisory Process

a)   Interpretation of Award

b)   Correction of Award

c)   Additional or Supplemental Award

d)   Reinstatement of Case

Chapter Two

OBLIGATIONS IN PRIVATE LAW

Section One

FORMATION OF CONTRACT

1.    Proper Law of Contract

a)    Choice of Law

b)    Freedom of Will

c)    Without-Law Contract

d)    General Principles

2.    Offer and Acceptance

3.    Nascence of Obligation by Conduct

4.    Oral Contract

5.    Stipulation of Conditions

6.    Amendment of Contract

7.    Unauthorized Performance

8.    Misrepresentation, Bribery and Fraud

9.    Rules of Interpretation

Section Two

BREACH OF CONTRACT

1.    Liability and Damages

a)    Causal Nexus

b)    Debts Payable on Demand

c)   Duty to Mitigate Damages

a)   Gross Negligence

e)    Inadequate or Defective Performance

f)   Latent Defects

g)   Limitation on Liability Clause

h) Double recovery

2.    Extra-Contractual Liability: Unjust Enrichment

a)    Resort to Restitutionary Theory

b)    Conditions

Section Three

EXTINCTION OF OBLIGATIONS

1.    Assignment of Rights and Subrogation

2.    Impossibility of Performance force majeure)

a)    Concept and Elements of Proof

b)    Attributability of Events

c)    Legal Consequences

d)    Frustration of Venture

e)    Remedies

3.    Termination of Contract

4.    Changed Circumstances

5.    Waiver and Estoppel

Section Four

PARTICULAR FORMS OF CONTRACT

1.    Agency

a)    Agent and Independent Contractor

c)    Direct Liability of Principal

d)    Locus Standi of Agent

e)    Apparent Authority

2.    Loan

a)    Intercompany Loans

b)    Acceleration of Maturity of Debt

3.    Compromis

4.    Guarantee

a)   Letter of Guarantee

b)   Sale Warranty

c)   Retention Monies

5.    Contractorship

Chapter Three

INTERSTATE DISPUTES

Section One

APPLICABLE NORMS AND PROVISIONS

1.    Lex generalis and lex specialis

2.    Interpretation of International Instruments

1.    Illicit Act or Omission Imputable to State

a)    Acts of Official Organs

b)    Entities Controlled by State (Issue of Unlimited Liability)

c)   Unofficial or Unauthorized Acts

a)   Acts of Revolutionaries

2.    Violation of Internationally Binding Documents

3.    Odious Debts

1.    Background

2.    Definition of Compensable Expulsion

Section Four

EXPROPRIATION OF FOREIGN PROPERTIES

1.    Expropriatory Measures

a)    Concept

b)    Creeping Expropriation

c)    Conditions of Expropriatory Measures to be legitimate

d)    Measures Falling Short of Expropriation

2.    Rights Affected by Expropriation

a)   Tangible and Contract Rights

b)   Loan Repayment Potential

c)    Right of Repatriation of Funds

Section Five

REPARATION OF DAMAGES

1.    Diplomatic Protection

a)    Taking up of Nationals’ Claims

b)    Recipients in Small Claims

d)    Exhaustion of Local Remedies

2.    Standard of Compensation

a)    Interchangeable Terms or Different Concepts

b)    Effect of Unlawful Taking

3.    Valuation

a)    Methodology

(1)    Fair Market Value

(2)    Discounted Cash Flow (DCF)

i) Starrett Case (Chamber One)

ii) Amoco International Case (Chamber Three)

iii) Phillips Petroleum Case (Chamber Two)

(3)    Underlying Asset Valuation (Alternative Approach for DCF)

(4)    Liquidation Value

b)    Factors Affecting Valuation

(1)    Relevance of Lawfulness or Unlawfulness of Expropriation

(2)    Date of Valuation

(3)    Bearing of Expropriatory Act

(4)    Depreciation Factor

(5)    Lack of Specification or Negative Worth

(6)    Risk Factors

(7)    Discount to Accounts Receivable

(8)    Loan by Partner

(9)    Unrealized Value

(10)    Discounts and Adjustments

c)    Damnum Emergens and Lucrum Cessans

CLAIMS SETTLEMENT DECLARATION

FINAL TRIBUNAL RULES OF PROCEDURE

INTRODUCTION AND DEFINITIONS

SECTION I

INTRODUCTORY RULES

SECTION II

COMPOSITION OF THE ARBITRAL TRIBUNAL Number of Members

SECTION III

ARBITRAL PROCEEDINGS

ACKNOWLEDGMENTS

I should like to express my appreciation to all those who have, in a spirit of fairness and impartiality, contributed to the construction of the massive jurisprudence of the Iran-United States Claims Tribunal.

I also want to acknowledge the granting of permission by Grotius Publication Ltd., Cambridge, England, to make citations from its collection published under the title Iran-United States Claims Tribunal Reports.

Preface

The colossal body of cases presented to the Iran-United States Claims Tribunal (the Tribunal) assigned it such a monumental task of disposing international disputes that one could conveniently look upon it as the largest forum of that particular type ever in existence. This Tribunal was created as an inter-state organization, whose steady and systematic work has now passed its third decade of existence in The Hague.

Established by the Algiers Declaration of January 1981, the Tribunal has yielded so far hundreds of awards of different kinds and nature—interim, interlocutory, partial, final, and conciliatory awards—decisions, refusals, orders and other material such as legal opinions and statements by the arbitrators. From 1983, The Grotius Publications of the University of Cambridge began to publish a multi-volume collection entitled Iran-United States Claims Tribunal Reports (in this book, the Grotius Reports’). So far, thirty-eight volumes have been published and are available to lawyers, academics, and students on the shelves of all law and certain major courts and public libraries across the world. The present work is a manual/reference to navigate through major decisions on subject matters of law and procedure.

Spread over thousands of pages, the legal issues as arbitrated by the Tribunal were so multitudinous, however, that the need was clearly felt to make the Tribunal’s case law much more readily accessible. This was the idea that led the author to go through the materials circulated by the Tribunal.

The present work has emerged as a concise compendium making the study of the Tribunal’s jurisprudence handy, and the legal issues addressed all over the pleadings and submissions systematically accessible. It would serve as a convenient source of study and reference for legal practitioners, law students, and academics in the field of international law arbitration. It would also offer a guide to judicial precedents in a variety of legal findings.

Remarks:

(1)   The parties in almost all the cases presented to the Tribunal are composed of multiple claimants and multiple respondents. It would be, therefore, a tedious, and even baffling, job for elaborating this consice work to name them all in every citations. Therefore, for conveinece, I made out a special style by citing only the abridged names of the main claimants and respondents.

(2)   Ex. Amoco for Amoco International Finance Corporation (Claimant in Case No.56), and Iran for The Government of the Islamic Republic of Iran, National Iranian Oil Company, National Petorchemical Company, and Kharg Chemical Company Limited (all being respondents in the same case).

(3)   The style of making reference to the location of the Tribunal’s decisions in the Grotius Reports, is cited and nested between square brackets with smaller fonts, and mostly put after the final period of paragraph. Ex. [12 IRAN-U.S.C.T.R. 250] The first digits refer to volume and the last ones to page number. There are more than six hundred of such customized references in this book.

(4)   As regards the footnotes, the reference number, matching the sequential order as appeared in the source text of Grotius Reports, is mentioned in footnote in a square bracket to the right of the sequential footnote numbers of this book.

(5)   The award and decision numbers consists of three parts separated by hyphens. The first part is the number of the award or decision, the second refers to the case number, and the third designates the Chambers or Full Tribunal (FT).

Khalil Khalilian

July 2012

Chapter One

PROCEDURAL RULES AND PRACTICES

Section One

GENESIS AND STRUCTURE OF THE TRIBUNAL

1. Legal and Historical Background

The Iran-United States Claims Tribunal came into being under the Algiers Accords¹ executed and ratified by Iran and the United States of America on 19 January 1981. The international document that serves as the instrument governing the status of the Tribunal is denominated Claims Settlement Declaration (the CSD).

Following the victory of the Islamic Revolution in the mid-February of 1979, the dramatic deterioration of the relationship between Iran and the United States began to intensify. On 4 November 1979, the U.S. Embassy in Tehran was seized by a number of students supporting the cause of the Revolution. Their action received enthusiastic support in mass demonstrations, not failing to receive also the approval by the Leader of the Revolution and a number of official authorities. The detainment of 52 members of the Embassy staff, as hostages, was also a consequence of this event.

On 14 November 1979, in the aftermath of the seizure of the United States Embassy in Tehran, the President of the United States issued Executive Order No. 12170, which blocked the transfer of all Iranian assets within the jurisdiction of the United States or being in the possession or control of persons subject to the jurisdiction of the United States. Subsequently, the United States Department of the Treasury issued a series of Iranian Assets Control Regulations implementing the Executive Order No. 12170 (31 C.F.R. Part 535). Section 535.504 of the Regulations, as amended on 4 December 1979, authorized judicial proceedings against Iran and Section 535.418 of 19 December 1979 clarified that the general authorization for such judicial proceedings included pre-judgment attachment. Later, United States nationals filed hundreds of claims against Iran in United States and foreign courts. In many of these cases, the claimants obtained judicial attachments on Iranian assets that had already been blocked and frozen by the United States President’s Executive Order.

The hostage crisis lasted for 444 days. In the fall of 1980, Iran and the United States initiated negotiations, through Algerian intermediaries, with a view to resolving the crisis between the two countries. In this regard, the preamble of the Declaration one reads as follows:

The Government of the Democratic and Popular Republic of Algeria, having been requested by the Governments of the Islamic Republic of Iran and the United States of America to serve as an intermediary in seeking a mutually acceptable resolution of the crisis in their relations arising out of the detention of the 52 United States nationals in Iran, has consulted extensively with the two governments as to the commitments which each is willing to make in order to resolve the crisis within the framework of the four points stated in the Resolution of November 2, 1980, of the Islamic Consultative Assembly of Iran. On the basis of formal adherences received from Iran and the United States, the Government of Algeria now declares that the following interdependent commitments have been made by the two governments …

Iran’s conditions for resolving the crisis were formulated by the Majlis, the Iranian Parliament, on 2 November 1980, in a Resolution stating Iran’s position concerning the release of the members of the United States diplomatic staff detained in the Embassy campus in Tehran. This Resolution constituted the basis of the Iranian position throughout the negotiations. The third of the conditions enumerated in the Resolution refers to litigious questions at hand before United States judicial instances. The Majlis requested:

The cancellation and annulment of all economic and fiscal decisions and measures against the Islamic Republic of Iran, the implementation of all requisite administrative and legal measures for the cancellation and annulment of all claims of any sort or kind of the American government and American agencies and companies against Iran, the implementation of all requisite administrative and legal measures to ensure that no new legal, penal, or financial claim of any kind be raised by any official or non-official natural or juridical persons of the American government and/or by American agencies and companies. And, should any claim be raised in any court against Iran and Iranian nationals in connection with the Iranian Islamic revolution, the seizure of the American conspiracy center, and those arrested therein, and a decision against Iran or Iranian nationals be rendered, the American government undertakes and guarantees to be answerable therefor and undertakes and guarantees to pay the damages and reparations arising therefrom. [Quoted in Award No. 590 (28 Dec. 1998)

In response, the United States declared itself to be prepared to establish, with the Government of Iran, a legal apparatus which would lead to the resolution of all claims and litigation asserted by U.S. nationals, including U.S. companies, and by agencies, instrumentalities and controlled entities of the U.S. Government against Iran.

On 19 January 1981, Iran and the United States adhered to the Algiers Declarations: the General Declaration and the Claims Settlement Declaration. Article I of the Claims Settlement Declaration provides:

Iran and the United States will promote the settlement of the claims described in Article II by the parties directly concerned. Any such claims not settled within six months from the date of entry into force of this Agreement shall be submitted to binding third-party arbitration in accordance with the terms of this Agreement. The aforementioned six months’ period may be extended once by three months at the request of either party.

The arbitration mechanism referred to in this Article is the forum designated as the Iran-United States Claims Tribunal, which consists of nine members (the arbitrators) to sit on tripartite panels. The Hague was selected to be the seat of the Tribunal, and the UNCITRAL Rules of Commercial Arbitration were adopted to be the rules of the Tribunal ‘except to the extent modified by the Parties or by the Tribunal.’ The Tribunal was given the authority to adjudicate claims of U.S. nationals against Iran and claims of Iranian nationals against the United States as well as related counterclaims. The Tribunal was further given jurisdiction only over contractual claims involving services or goods between the two Governments.

Like any other international arbitral body created by a common accord of sovereign states, the Tribunal was also accorded the character of an international forum with jurisdiction—as stated above—to make decisions and to resolve specific litigation existing between the two State Parties, or between each of them and the nationals of the other. From almost the very inception of its work, however, the Tribunal was faced with controversy as to its legal characterization, and the question was whether it would function as a typical international tribunal or whether its jurisdiction would be so specific that it must be regarded as an interstate arbitral body. In the latter case, the Tribunal has to be viewed, as far as the litigations of nationals are concerned, as a forum embodying a corpus of diplomatic protection lawsuits. In the former, the Tribunal would not amount to much more than a simple international arbitral center, or at most, one that could be characterized as having a hybrid nature, producing an intermixture of interstate and international commercial arbitrations.

The international nature of the Tribunal has been expressly mentioned in awards and decisions rendered in certain cases. Chamber One, for example, describes in the Bendone-Derossi case the legal nature of the Tribunal in the following terms: This Tribunal is not a national court, it has a specific international character. It is not a manifestation of any one national public authority, and it cannot invest such other awards with any validity or status under any system of national law that those awards do not already possess. [6 IRAN-U.S.C.T.R. 133] However, Chamber Two observes in a dual national case that the role of the Tribunal is similar to a third State’s court [2 IRAN-U.S.C.T.R. 162], a finding which refutes any idea of diplomatic protection that Iranian parties believed to be the sole mechanism having prompted the United States to execute the Algiers Declarations. The United States did so, Iran argues, with a view to solving the problems endangering the interests of its nationals in Iran as a consequence of the advent of the Islamic Revolution in 1979. In the Esphahanian case, Chamber Two holds: In applying international law, the Tribunal finds itself in a position similar to that of a court of a third State faced with the claim of a dual national against one of the States of his nationality. [2 IRAN-U.S.C.T.R. 162] The most spectacular impact of the controversy about the legal characterization of the Tribunal was noticed in the dual national cases See infra, p. 44, and also Diplomatic Protection, infra p. 291.

2.    Members of the Tribunal

The Claims Settlement Declaration established the Iran-United States Tribunal to consist of nine members (arbitrators), three appointed by each Government and the remaining three selected by mutual agreement to be reached by the members designated by the Parties.

It has been customary in the language of the members of the Tribunal, when addressing each other, to show courtesy by using the title judge. This also turned to be an acceptable usage to authors writing books and articles on the Tribunal.

The Tribunal is composed of three Chambers, each consisting of three members, one appointed by Iran, one by the United States, and the third member, serving as a third-country arbitrator, is selected by the party-appointed arbitrators. The third-country member, called also third member and presiding arbitrator, shall be appointed by common agreement between the party-appointed arbitrators. In the event that no agreement can be reached on the designation of the third-party arbitrator, the two States are required by Article 6(2) of the Tribunal Rule to designate a person as appointing authority. As this title suggests, he/she shall have the authority to make the appointment of any third-country arbitrator. The appointing authority is designated also by mutual agreement of the two State Parties. However, if no agreement can be reached either Party may request the Secretary-General of the Permanent Court of Arbitration at The Hague to designate an appointing authority (Tribunal Rules, Art. 6[2]).²

a)   Excess of Power

The history of the Tribunal does not show any formal decision that departs from the rule non ultra petita. However, it demonstrates a record of reproaches and criticisms raised by certain members of the Tribunal impugning the conduct of their colleagues. There are instances where a member was thought, by his colleague or even by a State Party, to have been acting beyond his authority. Complaint of bias or injustice to has been reflected in certain arbitrators’ opinions, comments, memoranda, etc., as filed with the Tribunal. Generally speaking, Judge Holtzmann observes in Economy Forms that even the equitable principles of international law ‘do not permit an individual judge to pursue merely personal predilections, and they must not be taken to undermine the established principles of the law.’ M. Hudson, The Permanent Court of International Justice 1920-1942 617 (1943). This is particularly so in a Tribunal established by a treaty which mandates that we shall ‘decide all cases on the basis of respect for law.’ Claims, Settlement Declaration, Article V. [3 IRAN-U.S.C.T.R. 58] See also Competence over Competence infra.

b)   Challenge Process

(1) Role of the Appointing Authority

Any arbitrator may be challenged if such circumstances exist to give rise to justifiable doubts as to his impartiality or independence. Article 10(1) of The Final Tribunal Rules of Procedure (the Tribunal Rules). If challenged, the member may agree to the challenge and subsequently withdraw from office; otherwise, the appointing authority will be called upon, by either State Party, to make a decision on the grounds that have given rise to challenge. The procedure of challenge is set out in the Tribunal Rules, Articles 9-12. The challenged member may chose not to submit to the challenge because of his belief that the grounds brought up by the challenging party do not justify his disqualification.

The Tribunal has experienced a number of cases involving challenge to arbitrators, almost all of which were decided by Mr. Moons, the appointing authority. The case of challenge against Judge Kashani and Judge Shafeiei (the two Iranian members) was, however, an exception; these arbitrators withdrew from office by submitting their resignation notices to their appointing government.3 The United States had challenged them because they had used physical force on a third member of the Tribunal [i.e., Nils Mangard], with the intention of ejecting him bodily from the Tribunal premises, and forbade his return under threat of physical harm. [7 IRAN-U.S.C.T.R. 290] Judges Mangard, Briner and Arangio-Ruiz, all third-country members of the Tribunal, as well as Judge Noori, an Iranian arbitrator, remained in office under decisions rendered by the Appointing Authority to the effect that their challenges were found not sustainable.

Iran filed three challenges to Judge Briner. In the first and third challenges, Iran contended that Judge Briner was lacking certain qualifications required of a third-country arbitrator. In the second challenge, Iran articulated formal opposition to the United States’ nomination of Judge Briner as the President of the Tribunal. In his letter of 13 September 1988, the Agent of Iran states, inter alia:

Mr. Briner’s relationship with Morgan Stanley [the principal expert witness of Amoco Iran Oil Company, the Claimant in Case No. 55], given the circumstances, obviously raises justifiable doubts as to his impartiality and independence and is, thus, a ground for challenge according to the Tribunal’s Rules and fundamental legal principles governing international arbitration. Mr. Briner’s failure to fulfill his disclosure obligation is also an additional basis for challenge. For these reasons, the Government of the Islamic Republic of Iran, for itself and on behalf of the other Respondents in Case No. 55, hereby challenges Mr. Briner with respect to that Case according to Article 10 of the Tribunal Rules. [20 IRAN-U.S.C.T.R. 183]

Under the circumstances, Judge Briner withdrew from Case No. 55. [20 IRAN-U.S.C.T.R. 329] He, however, mentioned in his letter to the Appointing Authority: I should like to stress that this action does in no way imply an acceptance of the validity of the grounds put forward for my challenge. [Ibid.]

Extensive documentation was exchanged between the parties through the office of the Appointing Authority (see 20 IRAN-U.S.C.T.R. 175-330), who then first rendered his decision on the nomination of Judge Briner and then confirmed his eligibility to assume the Presidency of the Tribunal.

Years later, Iran submitted two other notices of challenge (20 May 1999 and 3 June 1999) against Judge K. Sku-biszewski, holding office of both Chairmanship of Chamber Two and the Presidency of the Tribunal. Iran addressed Judge Skubiszewski in the following terms:

These doubts [about your impartiality and independence] have been occasioned by you involving yourself in collecting evidence in Case A28. You committed this unfortunate act by requiring the N.V. Settlement: Bank of the Netherlands, through your legal assistant, to report to you the balance of the Security Account, together with the accrued interest in another account subject of Paragraph 7 of the General Declaration. This balance, you should have been aware, is, the central issue in the parties’ submissions filed with the Tribunal thus far in Case A28.

Iran also set out additional ground for doubts about Judge Skubiszewski’s impartiality. It charged the President with a very much graver offence: that of either having lied or caused the Deputy Secretary-General, his Legal Assistant, to lie about the inquiry of the Bank.

The factual and legal arguments submitted by Iran were far short of convincing the Appointing Authority, Sir Robert Y. Jennings, to render a decision in support of either of the challenges.

(2) Functions during Pendency of Challenge

A procedural question was raised among the Tribunal members as to whether the challenged arbitrator, during the pendency of challenge, should maintain the same position as before so as to continue working routinely, or whether he should be barred from making any decision(s). Opinions diverged.

Iran brought this issue to the attention of the Full Tribunal when it moved for, in January 1982, the disqualification of Judge Mangard owing to a statement by him disparaging to the dignity of the Iranian Government. The Full Tribunal came to halt for a period of time as it believed that unless the challenge was not resolved, the Tribunal had to suspend its routine schedule. [1 IRAN-U.S.C.T.R. 113-14] However, in the case of Judge Briner, the United States disagreed with the proposal put forward by Iran to preclude him from performing his function during the pendency of his challenge before the Appointing Authority. The United States opined that a State Party could not prevent an arbitrator from assuming his function merely by filing a challenge against him.

While the appointing authority had yet to declare the outcome of the challenge, the request by Iran that Judge Briner gives up his function was not granted. In less than two months since Iran had initiated the challenge, the Appointing Authority decided that Iran’s arguments against the position of Mr. Briner were not plausible. [21 IRAN-U.S.C.T.R. 396]

c) Returning Arbitrator

By the addition of a paragraph to Article 13 of the Tribunal Rules, on 7 October 1983, the Full Tribunal approved a motion by Judge Mosk, providing that any arbitrator resigning after a hearing on the merits of a case, remains a member of the Tribunal in that particular case. The new provision was labeled Paragraph 5 to Article 13, which reads as follows: After the effective date of a member’s resignation, he shall continue to serve as a member of the Tribunal with respect to all cases in which he had participated in a hearing on the merits, and for that purpose shall be considered a member of the Tribunal instead of the person who replaces him. [7 IRAN-U.S.C.T.R. 317]

This provision is sometimes referred to as the Mosk Rule after Richard Mosk, the American member of Chamber Three, who brought about the idea of insertion of such a provision in the Rules. The amendment did not, however, meet with the satisfaction of the Government of Iran. The Iranian Agent opposed the Mosk Rule arguing that it would be an undue burden upon the Tribunal’s budget to pay to more than nine members as originally determined by the Claims Settlement Declaration, Article III(1). Though in the same Article, the phrase or such larger multiple of three yields to the possibility of increasing the numbers of the three-arbitrator panels, this could be workable only if both State Parties agreed. The complement to the quoted phrase is as Iran and the United States may agree, but no agreement could be reached from Iran on the returning arbitrator.

The resigning Iranian arbitrators were not unanimous as to the applicability of the amended provision. Conversely, the practice that was followed consistently with respect to other members of the Tribunal in numerous cases over more than a decade was to invite the resigning arbitrator to return for deliberations, providing commentary on draft awards and decisions, and ultimately signing the finalized text of awards. Thus, the rule had been traditionally respected without exception by the Tribunal until 1996, during which a step was taken representing a departure from this rule.

At the time of the rendering of an award on agreed terms in Cases Nos. A13, A15, and A26 [32 IRAN-U.S.C.T.R. 207], the Tribunal did not invite the resigning arbitrators, including the writer, who had been engaged in the hearing of these cases, to return for the purpose of their commentary on the draft award or the signing the final text of the award. In a letter dated 26 February 1996 to the author, the President of the Tribunal stated that the State Parties, having reached a settlement in these cases, agreed that the Tribunal should rule in its current composition on their joint request for issuance of an award upon agreed terms. In an attempt to account for such a sudden distancing from the Mosk Rule, well rooted in practice, one can easily point to the latitude the creators (the two State Parties) of the Tribunal, enjoy in introducing any new arrangement affecting the Tribunal’s procedural mechanism once they reach a mutually worthwhile agreement. The two States Parties informed the Tribunal, in their joint request for the registration of their settlement agreement as an award on agreed terms in the above-mentioned Cases, that [t]he two Governments have agreed that, for the purposes of these Cases, the Tribunal in its current composition may rule on this Joint Request for an Arbitral Award on Agreed Terms. Ibid., 212. The Tribunal, as any international institution, owes its legitimacy and legal authority to the common accord between the two States; so would they maintain the same freedom of action at any stage of the procedure to converge on new arrangements which could potentially modify any aspect of the procedural structure of the Tribunal.

d) Opinions and Statements by Arbitrators

The opinions or statements written by the arbitrators form part of the literature and documentary materials of the Tribunal. Of course, these materials are not as authoritative as judicial precedents, but they provide, nonetheless, a valuable source of information as well as additional data by which to identify either the merit or the flaws in the Tribunal’s findings. They also contribute to adding the information that the authors have found in the factual or reasoning sections of the Tribunal’s decisions and awards. These opinions have sometimes reflected an arena for polemic and heated debate between the arbitrators themselves—which may be referred to as opinion to opinion by which an arbitrator addresses the points raised by his colleague in somewhat critical, or even decrying, language.

e) Opinions on Amicable Settlements

Where parties in a case settle upon an amicable solution for their disputes and make an out-of-court settlement, thereby terminating the proceedings, there should be, in principle, no room for a judge or an arbitrator to comment upon the merits of the disputes in question. However, members of the Tribunal have sometimes made comments on such settlements by taking legal positions and filing statements or opinions—concurring or dissenting. In some of these cases, the logic beyond an arbitrator’s opinion is quite understandable; the author attempts to explain justifiable grounds for the rendition of award upon agreed terms, or questions whether the Tribunal had any authority to give effect, in a particular case, to the parties’ request thereby closing up judicial avenues of the case. The concern expressed in this regard revolves around the following fact. Within the framework of the Algiers Accords, the mechanism of payment of all the awards rendered against Iran is a very special one. Awards (including awards on agreed terms) are satisfied by payment out of a so-called Security Account, which is a fund detached from Iranian assets and set aside specifically for satisfaction of thousands of settled cases against Iranian Government and its agencies. This represents, in effect, a guaranteed mechanism for payment to all American claimants having succeeded in their pleadings before the Tribunal. The system thus established is more than a simple procedural mechanism of enforcement of the Tribunal’s awards in favor of American claimants, freeing them from any need to seek enforcement through municipal court procedures. Obviously, American members of the Tribunal are keeping a close eye on the Security Account to be protected against any wasteful depletion. Therefore, any joint request submitted by parties to have an award rendered on the basis of their amicable settlement—which must immediately be satisfied out of the Security Account—shall be carefully monitored in the light of procedural criteria. Otherwise, it would lead to an overspending of the Account to the detriment of potential winners, namely other claimants pursuing their cases through the mechanism of regular, adversarial proceedings. This is, in fact, one of the reasons to warrant a statement or opinion by an arbitrator expressing his views concerning an award on agreed terms.

f) A Peculiar Declaration

Judge Ameli filed a declaration in the INA Corporation case wherein he joined Judge Lagergren in his separate opinion dealing with the standard of compensation. He states: Although not being able to join my colleagues in the Award particularly in the form that it was finally issued, I do join in Judge Lagergren’s Separate Opinion. My dissenting opinion will be issued separately. [8 IRAN-U.S.C.T.R. 385] The Separate Opinion filed by Judge Lagergren had addressed a crucial issue of the contemporary international law on the matter of standard of compensation. One wonders, however, that if the two opinions on the standard of compensation were so much coordinated, why the two judges—members of a panel of three—could not