FACULTY OF LAW

LEVEL 200
LECTURER: DR JOSIAH DEGRAFT QUANSAH
GROUP 4
GROUP MEMBERS:
1. IDAN CHARLENE TAKYIWA LAW/21/01/0822
2. SHEENA KPORMATSI MAWUFEMOR LAW/21/01/0856
3. ASAREBEA ASARE DONKOH LAW/21/01/0989
4. ERNESTINA TETTEH KORLEKIE LAW/21/01/0855
5. STACY MARFO ACHIAA LAW/21/01/0393
6. CHESLEA OWUSU DUFIE LAW/21/01/0431
7. ABDUL LATIF ABUBAKAR LAW/21/01/1166
8. HASSEL KWESI NTIAMOH LAW/21/01/1376
9. DANIEL NAGNAKIYA NIMPA LAW/21/01/0526
CASE TITLE; [AMOCO INTERNATIONAL FINANCE CORPORATION Vs IRAN ]
FACTS;
Amoco International Finance Corporation is a United States company which brought a claim before
Iran seeking the value of it’s 50% interest in the Kharg Island Chemical Co. Ltd. (Khemco) an Iranian
corporation that the claimant alleged had been expropriated by Iran. The Khemco agreement at issue
in this case, executed by Amoco and NPC on 12 July 1996, was part of the overall business
relationship between the Claimant's corporate affiliates and the Respondents, arising out of their joint
development of Iran's petroleum resources. In the Khemco Agreement, Amoco and NPC agreed to and
defined a structure of interrelated agreements. At the core was the establishment of an Iranian joint
stock company, Khemco, which was to be jointly owned and managed by Amoco and NPC. Khemco
was to receive technical assistance and services from NPC and Amoco in order to design, construct,
install and initially operate the envisioned plant under a separate agreement. It was anticipated that the
natural gas necessary for the operation of the Khemco plant would come primarily from the facilities
on Kharg Island jointly operated by NIOC and PANINTOIL, and the Khemco Agreement was
conditioned on the execution by Khemco of a gas purchase agreement with NIOC and PANINTOIL
on terms and conditions set forth in the Khemco Agreement. The signatories to the Khemco
Agreement were, as noted earlier, Amoco and NPC. NPC was legislatively authorized by Iran to enter
into the Khemco Agreement by the Act Concerning the Development of Petrochemical Industries,
effective 15 July 1965, which vested authority in NPC to "enter into partnership with Iranian or
foreign institutions or companies possessing technical and financial qualifications." This Act also
provided that "[a]ll arrangements and agreements concluded in the implementation of this object shall
be enforced after approval by the High Council of Petroleum Industries, the general meeting of the
N.I.O.C. and the Council of Ministers and upon ratification by the Finance and Economic Joint-
Committees of the Two Houses of Majlis."
These conditions were reflected in the Khemco Agreement itself and the evidence submitted shows
that the contractually required governmental ratification was obtained in due course. Chamber three of
the Tribunal found out that the claimant interest in Khemco was lawfully expropriated by Iran and
therefore held that Iran is bound to pay the claimant one-half of the full going concern of the value of
the company. The Tribunal did not make an award of damages however, as it was declined to rely
exclusively on either party’s proposed method of calculating and schedule further briefing. Khemco is
a 50-50 join venture established in the 1967 by Amoco international a Swiss solidarity of the claimant
and the National Petroleum Chemical Company of Iran (NPC) owned and operated in natural gas
processing plant on Kharg Island. In 1979 the Iranian government announced that it intends to buy out
all foreign shares in petrochemical plants. Negotiations followed for the sale of Amoco international
interest in Khemco but no sale was concluded. Rather, in July 1979 over Amoco international's
objection, the government took control of Khemco's operation and sales. Subsequently, on December
24, 1980, the government issued a decree declaring the agreement by which the Khemco was
established, “null and void”. Formalizing the expropriation of Amoco international's interest in
Khemco. Iran did not vigorously deny that the result of it’s action was the expropriation of the
claimant's interest in Khemco. The key issue the Tribunal focused on were;
1. The lawfulness in the expropriation
2. The expropriate standard of compensation
3. The method of calculation of the compensation
PRINCIPLE IDENTIFIED IN THE CASE
The principle of fair and equitable treatment:
1) In that case, it was found that NPC had breached the applicable Bilateral Investment Trade
(BIT) by not abiding by Iran legislation in the Khemco agreement. The AIFC alleged that
NPC had totally and unequivocally breached and had repudiated the Khemco agreement and
had expropriated Amoco international’s rights there under including the ownership interest in
Khemco, for their own benefit. None of the requirements for expropriation has not been met
when NPC expropriated Khemcos agreement from AIFC. These requirements are;
a. Property has to be taken for a public purpose.
b. State should practice non-discrimination.
c. Property should be taken In accordance with due process of law.
d. It must be accompanied by compensation.

THE PRINCIPLE OF NON DISCRIMINATION

HOLDING
The tribunal held that;
a) The shareholding interest of AMOCO INTERNATIONAL S.A. in Kharg Chemical Company
Limited was lawfully expropriated (taken for public use or benefit) by THE GOVERNMENT
OF THE ISLAMIC REPUBLIC OF IRAN as of 24 December 1980,
b) THE GOVERNMENT OF THE ISLAMIC REPUBLIC OF IRAN shall pay to the Claimant,
AMOCO INTERNATIONAL FINANCE CORPORATION, a compensation measured at fifty
percent (50%) of the going concern value of Kharg Chemical Company Limited as of 31 July
1979, without addition of future lost profits beyond such value
c) Until the Parties to this Case have had an opportunity to present additional documentation, as
determined by the Tribunal, the amount of the compensation to be awarded to the Claimant,
AMOCO INTERNATIONAL FINANCE CORPORATION, will not be decided
d) All Counterclaims raised in this Case are dismissed

CONCLUSION:
The award given by the tribunal in favor of the AMOCO INTERNATIONAL FINANCE
CORPORATION who were the claimants was fair and just because according to the HULL
FORMULA under investment law “the taking of property without compensation is not expropriation
but confiscation”. Though the state has a right to expropriate foreign assets under narrowly defined
conditions however must be done fairly, also expropriation had to be accompanied by prompt,
adequate and effective compensation.