Case 7 doc 150-T-Award (29 June 1984)
CASE NO. 7
AWARD NO. 141-7-2
I. The Claims
The Claimant, TIPPETS, ABBOT, McCARTHY, STRATTON (“TAMS”) is a United States engineering and architectural consulting partnership. TAMS and Aziz Farmanfarmaian and Associates (“AFFA”), an Iranian engineering firm, created and equally owned TAMS-AFFA, an Iranian entity created for the sole purpose of performing engineering and architectural services on the Tehran International Airport (“TIA”) pro¬ject. This performance was based on a contract entered into on 19 March 1975 by TAMS and AFFA on the one hand and the Civil Aviation Organization (“CAO”) on the other.
TAMS presents four claims to the Tribunal. First, TAMS claims against the CAO on the basis of the TIA contract for its share of the billed and unbilled amounts allegedly due TAMS-AFFA under that contract and for amounts retained as good performance guarantees by CAO from invoices that were paid to TAMS-AFFA. Second, TAMS claims against the Govern¬ment of Iran for the value of its fifty-percent interest in TAMS-AFFA which it alleges was expropriated by the Govern¬ment of Iran. In the event the Tribunal should hold that its first claim against CAO is excluded from the jurisdic¬tion of the Tribunal by the forum selection clause, then TAMS asserts that the value of TAMS-AFFA would include TAMS-AFFA’s accounts receivable from CAO under the TIA contract. Third, TAMS seeks a cash deposit it maintained with Bank Melli and which it alleges was wrongfully retained
by Bank Melli. Finally TAMS seeks the cancellation of bank guarantees and undertakings related to the TIA project. TAMS originally presented a fifth claim for personal pro¬perty allegedly expropriated, but it later withdrew that claim.
The Respondents deny the jurisdiction of the Tribunal on various grounds and deny any liability to the Claimant on the claims. The CAO counterclaims, alleging inadequate and defective contract performance by TAMS. The Respondents deny that TAMS-AFFA was expropriated and allege that its value had by 1979 become negative. TAMS-AFFA counterclaims for a share of the debts it allegedly owes to third parties.
The Claimant has satisfied the Tribunal that it is a national of the United States. During all relevant periods of time it has been a partnership registered in the State of New York, and all the partners have been citizens of the United States. The Tribunal is also satisfied that all named Respondents, except TAMS-AFFA, are included within the definition of “Iran” in Article VII, paragraph 3 of the Claims Settlement Declaration.
In view of the other holdings of the Tribunal on jurisdictional issues, which are set forth below, the Tribunal does not need to decide whether, TAMS AFFA is included within the definition of “Iran” in Article VII, paragraph 3 of the Claims Settlement Declaration or whether the Claimant’s ownership interests in TAMS-AFFA were suffi¬cient at the time the claim arose to control TAMS-AFFA.
2. Jurisdiction over the TIA Contract Claim
Under Article II paragraph 1 of the Claims Settlement Declaration the Tribunal has jurisdiction over a claim arising out of a contract unless such claim arises under “a binding contract between the parties specifically providing that any disputes thereunder shall be within the sole jurisdiction of the competent Iranian courts ……
Article XIX of the TIA contract provides:
All the disputes that arise between the parties hereto over this Contract or the interpretation of its contents that cannot be settled through negotiation or correspondence, shall be primarily referred to a committee consisting of the highest authority of the executive agency (or his deputy) and the Consultant for settlement and in case they fail to settle the dispute on the basis of this Contract and the relevant regulations, the dispute shall be settled throu h com etent Iranian courts and in accordance with Iranian Laws…. emphasis added] .
A similar clause in the BHRC contract in T.C.S.B. Inc. and -Iran Interlocutory Award 5-140-FT (5 Nov. 1982) was
found to divest this Tribunal of jurisdiction. 1 The Tri¬bunal finds no significant distinctions between the
clause in the instant case and the clause in the BHRC contract. While the Claimant argues that disputes “over” the contract are more limited than disputes “arising out of” the contract, the Tribunal is not convinced that there is any significant difference. Therefore the claim and the counterclaims based upon the TIA contract are dismissed for lack of jurisdiction.
3. Jurisdiction over the Bank Guarantees and the Related Undertakings
Article II paragraph 1 of the Claims Settlement Decla¬ration provides that the Tribunal has jurisdiction over claims which “arise out of … contracts (including trans¬actions which are the subject of letters of credit or bank guarantees) •… ” The Tribunal therefore as an initial matter has jurisdiction over the subject matter of this claim.
The BHRC forum selection clause provided: All disputes arising out of this Subcontract, or the interpretation and understanding of its provisions between the parties, which cannot be settled through amicable negotiations or correspondence, shall first be referred to a committee composed of a representative of each of the Employer, Housing Organization, and Subcon¬tractor. In case no agreement can be reached or if one of the parties does not agree with the judgment of the majority of the committee, the dispute will be settled according to the laws of Iran by reference of it to competent courts of Iran.
The bank guarantees and related undertakings at issue in the instant case however, were entered into pursuant to obligations created by the TIA Contract, and the claim to have them cancelled is ancillary to the claim on that contract, in that the basis for the relief requested is breach of that contract, not the contracts between TAMS-AFFA and the banks. For the reasons stated in the preceding section, claims based on the TIA contract are excluded from the jurisdiction of this Tribunal. Therefore,TAMS’ claim for cancellation of bank guarantees and related undertakings is dismissed for lack of jurisdiction.
Inasmuch as the claim against the banks is excluded from the jurisdiction of the Tribunal as TAMS-AFFA, rather than the Claimant, was the contracting party with the banks with respect to these guarantees, the counterclaims for maintenance charges must also be dismissed for lack of jurisdiction.
4. Jurisdiction over the Claim for Property Interest in TAMS-AFFA
TAHS has also filed a claim based on the alleged taking of its property interest in TAMS-AFFA. The subject matter of such a claim (i.e., “expropriation or other measures affecting property rights …”) clearly is within the Tribunal’s jurisdiction.
The Tribunal therefore has jurisdiction over TAMS’ claim for its property interest in TAMS-AFFA.
5. Jurisdiction over the Claim for Bank Deposit
TAMS lastly claims $24,601, the dollar equivalent of an October 1979 rial deposit with Bank Melli Iran. Bank Melli has stated that TAMS does currently possess such a deposit in the amount of IR 1,736,840. Bank Melli further states, however, and Claimant admits, that TAMS made no demand for such monies prior to 19 January 1981. Inasmuch as no demand was made, there was not, as is jurisdictionally required by Article II, paragraph 1, of the Claims Settlement Declara¬tion, a claim outstanding on 19 January 1981. See Harza Engineering Company -and-The Islamic Republic of Iran Award No. 19-98-2 (30 December 1982).
The Tribunal therefore dismisses for lack of juris¬diction the claim of TAMS for its bank deposit.
6. Jurisdiction over TAMS-AFFA’s Counterclaims
Respondent TAMS-AFFA contends that its value is nega¬tive and counterclaims for payment by the Claimant of its share of debts allegedly owed by TAMS-AFFA to third parties. In view of its holdings below on the merits, the Tribunal does not need to decide in this case whether it has juris¬diction over such a counterclaim. However, to the extent that TAMS-AFFA purports to present a counterclaim for taxes and social security premiums allegedly owed separately by TAMS to the Iranian authorities, it lacks standing to assert such a counterclaim, so it is unnecessary to decide whether in this case such a claim would be within the jurisdiction of the Tribunal.
III. The Merits
1. The Claim for Deprivation of Property
The TAMS-AFFA partnership was established in August 1975 as a 50/50 partnership. Equal shares of the IR 1,000,000 capital were held by each partner, and TAMS-AFFA was managed by a four-member coordination committee, two members of which were appointed by each partner. Article 6 of the articles of partnership required that any decision by TAMS-AFFA required the consent of at least one member appointed by TAMS and at least one member appointed by AFFA. Authority to sign documents creating obligations for TAMS¬AFFA was vested in two persons, one appointed by each partner. The evidence indicates that TAMS-AFFA operated on the prescribed principle of joint control until 1979.
As a consequence of the Iranian revolution, work on the TIA project stopped almost completely in the December 1978-January 1979 period. Prior to further significant discussions between TAMS-AFFA and the CAO concerning the future of the TIA project, the Plan and Budget Organization of the Government of Iran on 24 July 1979 appointed a temporary manager for AFFA. The Farmanfarmaian family was one of the fifty-one individuals or families whose enter¬prises were placed under Government management pursuant to Paragraph 15 of the Law for the Protection and Development of Iranian Industry. Although the appointment named only AFFA, there seemed to be some confusion as to whether the new manager was manager only of AFFA or also of TAMS-AFFA.
The Official Gazette published the appointment on 11 August 1979 as that of the manager of TAMS-AFFA, and the new manager assumed the right to sign checks on TAMS-AFFA’ s accounts by himself and make personnel and other decisions without consulting TAMS.
During the months of August through November 1979 T.M1S representatives in Iran managed to rectify at least par¬tially these violations of the partnership agreement. They restored, for example, the practice of two signatures on checks, and they obtained the cooperation of the Government¬appointed manager in their ultimately successful efforts to be paid some 34 million Iranian rials owed to them by TAMS-AFFA and to obtain permission to convert that sum to dollars for export from Iran to the United States. However, the crises in the relations between the United States and Iran that developed in November 1979 reversed this trend. The last remaining TAMS representative with signature authority apparently left the country in December 1979. TAMS wrote and telexed TAMS-AFFA on several occasions in January and February 1980 concerning further work on the TIA project but received no responses. After December 1979, TAMS-AFFA ceased all communication with TAMS, neither reporting to it on the status of the TIA project and TAMS¬AFFA’s finances nor responding to its letters or telexes. It seems evident from the pleadings filed by TAMS-AFFA in the present case that TAMS-AFFA continues to function, although doubtless at a reduced level of employees and
expenditures, and that it is being managed by the Government-appointed successors to the original Government-appointed manager.
In light of these facts, the Tribunal concludes that the Claimant has been subjected to “measures affecting property rights” by being deprived of its property interests in TAMS-AFFA since at least 1 March 1980 and that the Government of Iran is responsible, by virtue of its acts and omissions, for that deprivation. The Claimant is entitled under international law and general principles of law to compensation for the full value of the property of which it was deprived. 2 The Tribunal prefers the term “deprivation” to the term “taking”, although they are largely synonymous,
A deprivation or taking of property may occur under
international law through interference by a state in the use
2See Chorz6w Factory Case (Merits) (Ger. v. Pol.), 1928
P:C:I.J. Ser. A, No. 17, at 47 (Judgement of 13 September); Norwegian Shipowners’ Claims (Nor. v. U. S. ), 1 U. N. Rep. Intll Arb. Awards 307 (1922). The parties in this case have not argued the question of the relevance of the investment protection provisions of Article IV, paragraph 2 of the Treaty of Amity of 15 August 1955 between Iran and the United States.
of that property or with the enjoyment of its benefits, even where legal title to the property is not affected. 3
While assumption of control over property by a govern¬ment does not automatically and immediately justify a conclusion that the property has been taken by the govern¬ment, thus requiring compensation under international law, such a conclusion is warranted whenever events demonstrate that the owner was deprived of fundamental rights of owner¬ship and it appears that this deprivation is not merely ephemeral. The intent of the government is less important than the effects of the measures on the owner, and the form of the measures of control or interference is less important than the reality of their impact.
In the present case, the Claimant and the Government-appointed manager of TAMS-AFFA managed to cooperate suffi¬ciently well in mid 1979 so that such appointment could not by itself in this case be considered an act depriving the Claimant of its property. However, the developments of late 1979 and early 1980, particularly the complete absence of answers to letters and telexes and of any communication from
3see 8 Whiteman, Digest of International Law 1006-20; Christie, What Constitutes a Taking Under International Law? 38 Brit. Y.B. Int’l. Law 307 (1962); and the Lena Gold¬field’s Case reprinted in Nussbaum, The Arbitration Between the Lena Goldfield’s, Ltd. and the Soviet Government, 36 Cornell L.Q. 31 (1950).
TAMS-AFFA to the Claimant, effectively ended such coopera¬tion and deprived the Claimant of its property interests in TAMS-AFFA. If any doubt remained about this question in early 1980, it has been removed by the absence of new developments and the passage of time.
2. The Value of TAMS-AFFA
Claimant in the instant case seeks only the dissolution value of its interest in TAMS-AFFA, i.e. the value of TAMS-AFFA after the collection of all assets and the discharge of all obligations. Thus, the task of the Tri¬bunal is to make its best estimate of the assets and liabil¬ities of TAMS-AFFA as of 1 March 1980. This involves not merely the valuation of bank accounts and fixed assets,but also the valuation of TAMS-AFFA’s accounts receivable, including those under the TIA contract and TAMS-AFFA’s debts, including those to the tax and social security authorities, and potential liabilities such as those repre-sented by the counterclaims under the TIA contract asserted in this case and those that could possibly arise under the
4While tax and social security premium liabilities of TAMS-AFFA must be estimated for purposes of valuing TAMS¬AFFA, the alleged separate tax and social security liability of TAMS, are, of course, irrelevant to the value of TAMS¬AFFA.
That the accounts receivable are those of TAMS-AFFA, rather than those of the individual partners, seems clear from the conduct of the parties to the contract. The invoices were submitted to the CAO by TAMS-AFFA , and pay¬ments were made by the CAO to TAMS-AFFA. Division of revenues between the partners was effected from time to time on the basis of decisions by TAMS-AFFA. The Tribunal notes that, in the pleadings in this case, the Respondents argued that only TAMS-AFFA, not TAMS, could claim under the TIA contract. The establishment of an independent entity and payment of the contract remuneration to that entity were
authorized by Article XX (3) of the TIA contract.While that Article made clear that TAMS and AFFA could not thereby
5Article XX(3) provided: For the purpose of carrying out its obligations, the Consultant may establish an independent entity under the laws of Iran and register the same. Execution of the service of this Contract through such entity shall not be considered as a transfer of this Contract and the Consultant’s obligations shall remain the same as per this Contract and its Appendices thereof. The Consultant may submit a written request to the Client asking for the deposition of the remuneration in the account of such equity.
In determining the value of the accounts receivable under the TIA contract and the related liabilities, the Tribunal recognizes the difficulty of precision in the absence of final and authoritative resolution of the con¬tract disputes between the CAD and TAMS-AFFA, disputes that are outside this Tribunal’s jurisdiction. Similar diffi¬culties arise with respect to determination of TAMS-AFFA’s debts to third parties. It should clearly be understood that this Award involves no adjudication of the rights and obligations of the parties to the TIA contract or of any obligations owed by TAMS-AFFA to the tax and social security authorities of Iran or other third parties. 6
Thus, in making its best estimate of the net value of TAMS-AFFA, the Tribunal is not deciding issues that are excluded from its jurisdiction. It would be un~ust and logically indefensible to completely ignore such assets as the accounts receivable under the TIA contract and such debts as the tax and social security liabilities, even though the adjudication of disputes concerning those assets and debts would be outside the Tribunal’s jurisdiction.
6Inasmuch as the tax and social security premium counter¬claims and the monies owing for work performed on the TIA project could not be presented directly to this Tribunal, the Tribunal’s collateral consideration of those items is not ~ judicata. See K. Carlston, The Process of Inter¬national Arbitration 88 (1946).
In this connection, the Tribunal notes that, if the CAO had paid the invoices submitted by TAMS-AFFA and such funds were part of the undistributed accounts of TAMS-AFFA, then obviously they would be part of the dissolution value of TAMS-AFFA. Similarly, if TAMS-AFFA had paid all its tax and social security obligations, those payments would have reduced the dissolution value of TAMS-AFFA. If payments for work on the TIA project have been wrongfully withheld by an Agency of the Government of the Islamic Republic of Iran and if for the lack of such payment the Tribunal did not include such monies in the dissolution value of TAMS-AFFA, then the Respondent Agency would profit by its own wrong. Con-versely, if TAMS-AFFA wrongfully failed to pay tax and social security obligations and if the Tribunal did not deduct such obligations, then TAMS-AFFA would profit by its own wrong. It is a well recognized principle in many municipal systems and in international law that no one should be allowed to reap advantages from their own wrong, Nullus Commodum Capere De Sua Injuria propria. 7
On the other hand, it would be equally unjust and logically indefensible for the Tribunal to assume that all payments on the TIA project alleged by the claimant to have been wrongfully withheld, were in fact so withheld, or to
See generally, B. Cheng, General Principles of Law as App~d by International Courts and Tribunals 149 (1953).
assume that all tax and social security obligations alleged by the Respondent to be due by TAMS-AFFA are in fact due and were not paid. As stated above, the adjudication of dis¬putes concerning these assets and debts would be outside the Tribunal’s jurisdiction. At the time the claimant was deprived of his property interest in TAMS-AFFA, those disputes did not yet exist. From the statements and evi¬dence submitted to the Tribunal by both parties it appears, on the one hand, that a number of factual circumstances are not in dispute even today, and, on the other hand, that such disputes as do exist are supported only partly by evidence and contain elements of divergent legal appreciation of the facts. Under those circumstances, the Tribunal can make only a very rough evaluation of the assets and liabilities involved, which evaluation IDust take into account the uncertainty of the outcome of any final adjudication of the disputes by a competent court.
Finally, the Tribunal notes that the evidence indicates that TAMS-AFFA owed AFFA approximately IR 47,000,000 more than it owed TAMS for reimbursement of costs, which amount must be deducted before a dissolution value is determined.
On the basis of the foregoing considerations the Tribunal determines the dissolution value of TAMS-AFFA as of 1 March 1980 to be Rials 800,000,000. Thus, the Claimant is entitled to IR 400,000,000 for its fifty percent interest in TAMS-AFFA.
For the above reasons, the Respondent Government of the Islamic Republic of Iran is obligated to compensate the Claimant in the amount of u.s. $5,594,405, which was the equivalent on 1 March 1980 of IR 400,000,000.
considers it fair to award Claimant interest at the rate of 12 percent per year, calculated from 1 March 1980.
Each of the parties shall be left to bear its own costs of arbitration.
AWARD THE TRIBUNAL AWARDS AS FOLLOWS:
The Respondent, Government of the Islamic Republic of Iran, is obligated to pay the Claimant, Tibbets, Abbot, McCarty, Stratton, U. S. $5,594,405, plus interest at the rate of 12 percent per year, calculated as from 1 March 1980 to the date on which the Escrow Agent instructs the Deposi¬tary Bank to effect payment out of the Security Account. This obligation shall be satisfied by payment out of the Security Account established by paragraph 7 of the Decla¬ration of the Government of the Democratic and popular Republic of Algeria of 19 January 1981.
The counterclaims of TAMS-AFFA are dismissed on the merits, except to the extent the counterclaims include a counterclaim for taxes allegely owed by the Claimant to the Iranian tax authorities, which counterclaim is dismissed for lack of standing by TAMS-AFFA to present it. The remainder of the claims and counterclaims are dismissed for lack of jurisdiction.
Each of the parties shall bear its own costs of arbi¬trating this claim.
This Award is hereby submitted to the President of the Tribunal for the purpose of notification to the Escrow Agent.
Dated, The Hague 22-June 1984
In the Name of God
Chairman Chamber Two
Mr. Shafeiei took part in the hearing and deliberation of this case. Having been invited to sign the Award, he
George H. Aldrich
DR. SHAFEI SHAFEIEI’S REASONS FOR NOT SIGNING THE AWARD
On 19 March 1975, The Civil Aviation Organization of Iran
(a Respondent in the present case) on the one part, and TAMS
(the American Claimant in the present case) and Abdol Aziz Farmanfarmaian and Associates (an Iranian partnership) on the other part, concluded an engineering and architectural ser¬vices contract (lithe Contract”) for building the Tehran International Airport. In conformance to that which consult¬ing engineering contracts impose by their nature, the Contract was non-transferable, and the technical services involved therein were to be rendered directly by TAMS and Farman¬farmaian and Associates, partly in Iran and partly in the United States. Several months after the contract was signed, TAMS and Farmanfarmaian and Associates formed a non-profit, non-commercial partnership, in fact with a joint office in Tehran, under the name TAMS-AFFA. The role played by the TAMS-AFFA partnership was merely that of liaison, or at most, of coordinating and carrying out the joint works.
On 20 October 1981, after the creation of this Tribunal, the Claimant filed a Statement of Claim wherein it lodged a
number of claims against the Government of the Islamic Repub¬lic of Iran, several banks, and various organizations of the Iranian Government. It is not necessary to enumerate all of the Claimant’s claims; the two claims which are relevant and important to discuss here are the following:
(a) The first is the Claimant’s contractual claim -¬that is, the claim arising out of the Contract. In this connection, the Claimant alleges that certain invoices it sent for services rendered were not paid, and also that it rendered certain services for which invoices have not yet been sent. On this basis, the Claimant demands a total of $8,885,589.
(b) TAMS’ other claim arises out of the alleged expro¬priation of TAMS-AFFA. TAMS-AFFA did not engage in commercial activities, but it did necessarily have funds in the banks in order to manage its routine affairs. The Claimant has alleged that this partnership was expropriated by the Islamic Republic of Iran. The Claimant has also carried out its own valuation of TAMS-AFFA’s assets and has demanded $514,536.
By virtue of the express provisions of Article XIX of the Contract, the Iranian courts are vested with sole jurisdiction over interpretation of the Contract and over all disputes arising therefrom. The Contract is subject to the laws of Iran, and its controlling language is Farsi (Articles XXIV and XXV of the Contract). In view of the express provisions of the said Articles, and in accordance with Article II, para¬graph 1 of the Claims Settlement Declaration setting forth the condition for the jurisdiction of the Iranian courts, the maj ority has of necessity been compelled to admit that the Tribunal lacks jurisdiction over the Contract and the claims arising therefrom. However, in actuality, it has acqepted those provisions on the one hand while setting out to violate them on the other. The majority has made a presumption that TAMS-AFFA was expropriated, and then, taking the Claimant’s claim and the sums allegedly due from the Contract in
isolation and divorced from the Defence and Counterclaim of CAO, it has regarded the former as constituting a part of TAMS-AFFA’s assets. Out of the total of the sums allegedly due the Claimant, namely $8,889,589, the majority has then awarded it the sum of $5,594,405 plus interest and has refused to entertain CAO’s Defence and Counterclaim for lack of jurisdiction.
The majority award does not deal with the facts and contentions of the Parties in a manner properly reflecting the realities involved; and it makes no mention of the Respon¬dent’s objections to the jurisdiction of the Tribunal, nor to their defenses on the merits to the various claims of the Claimant, nor to their arguments with respect to the counter¬claim. The maj ority’ s positions and reasoning are entirely mute and ambiguous as well. Overall, the award completely fails to address the numerous legal issues involved in the present claim, and the reader cannot discern the facts at issue or the reasoning underlying the majority’s decision. The maj ority commences in the first paragraph of the award with a discussion of the formation of TAMS-AFFA, whereas this matter is not among the first facts and issues involved in the case. There are other facts preceding the formation of the partnership, which it is necessary to mention and elaborate upon. Moreover, the objective reality of TAMS-AFFA differs entirely from the way in which the maj ority has depicted it and presumed that the partnership was expropriated. The picture which the majority has drawn of TAMS-AFFA is a hypo¬thetical and entirely imaginary one. Even if we were to accept, in arguendo, that TAMS-AFFA has been expropriated, it must first be determined what elements comprised the partner¬ship’s assets. In particular, there arises a question as to whether the monies allegedly due under the Claimant’s consult¬ing services contract ought to be regarded as a part of TAMS-AFFA’s assets. This point raises numerous legal issues. TAMS-AFFA’s legal nature and its role should have been ana¬lyzed in the light of the relevant provisions of the Contract.
For example, a part of the demands which TAMS asserts, as has been noted above, relate to services which have allegedly been rendered but for which no invoice has to date been presented to CAO for payment. Aside from all other matters, is such a claim, on principle, an outstanding claim as intended by Article II, paragraph 1 of the Claims Settlement Declaration, and is it cognizable before this Tribunal? Yet the majority has avoided all these judicial realities by silence and ambiguity and has even gone far beyond the remedy sought by the Claimant itself. There is another issue which is extreme¬ly important to discuss. CAO has denied TAMS’ contractual claim and demands, and it has stated that it has paid TAMS’ fees in proportion to the percentage of work performed and owes TAMS nothing further. CAO has, moreover, lodged a counterclaim, but because the majority lacks jurisdiction over the Contract, as it itself admits, it acts as if it has not seen these defences and counterclaim, and merely takes into account the Claimant’s claim and demands for monies allegedly due in isolation, considering them to constitute a part of TAMS-AFFA’s proven assets.
Amidst all these ambiguities and problems, the reader arrives at page 17 of the award, which is, unlike the preced¬ing murky and obscure pages, entirely lucid and specific, and which reveals the majority’s definite intent and decision to transfer the sum of $5,594,405, plus interest at 12% as from 1st March 1980, from the Security Account of the Government of the Islamic Republic of Iran to the account of the Federal Reserve, New York, for transfer to the American Claimant. No ambiguity whatsoever remains in this regard. It is also essential to point out that the appraisal of the Claimant’s contractual demands was carried out in an entirely arbitrary manner. After dealing with the facts and with the Claimant’s contractual claim and its claim of expropriation in greater detail, I shall turn to an analysis of the facts and legal points involved therein. This examination will commence with a brief mention of the consulting services contract, which
forms the basis of the Claimant’s first claim, and with the Tribunal’s lack of jurisdiction over both the Contract at issue and the claims arising therefrom (I). Following that will come an examination of the claim that TAMS-AFFA has been expropriated. In this section, it will be necessary to provide a short description of TAHS-AFFA, its formation and purpose, and its alleged expropriation. The legal status and role of the said partnership must in particular be determined
(II) . It is also necessary to give a brief account of the mechanism relating to the fees of the consulting engineers, together with CAO’s defence in this regard; this issue forms the subject of section III. This study will demonstrate that the withdrawal from the Security Account of the Government of the Islamic Republic of Iran in favor of the American Claimant in the present case, which is being effected by the Chamber majority, constitutes an illegal and illegitimate withdrawal.
There is nothing to be gained from enumerating all of TAMS’ claims; instead, we shall discuss two of them which are relevant here.
1. The Claimant’s first, and indeed most important, claim is the contractual claim. The object of the Contract was the preparation of the design and architectural plan, provision of consultation services, and execution of the construction of a new airport in Tehran. Pursuant to Article I, paragraph 2 of the Contract, the Consultants consisted of TAMS and Abdol Aziz Farmanfarmaian and Associates, acting with joint and several liability in connection with performance of the obligations undertaken under this Contract.
Furthermore, pursuant to Article XX, paragraph 1 of the Contract:
“ARTICLE XX -RIGHT OF ASSIGNMENT
1. The Consultant shall carry out the obj ect of this Contract via its employees, however, the Consultant shall not assign or transfer, without the Client’s approval the services relating to the Contract or any part of those services to other persons be it legal or natural or his employees.”
The above provisions are in actuality nothing more than confirmation of a simple, logical matter. In a contract for consulting services, the identity and scientific capability of the consulting engineers is a matter of the utmost importance and is regarded as being among the fundamental elements of the contract. Therefore, such contracts cannot be assigned.
“ARTICLE XIX -SETTLEMENT OF DISPUTES
All the disputes that may arise between the parties hereto over this Contract or the interpretation of its contents that cannot be settled through nego¬tiation or correspondence, shall be primarily referred to a committee consisting of the highest authority of the executive agency (or his deputy) and the Consultant for settlement and in case they fail to settle the dispute on the basis of this Contract and the relevant regulations, the dispute shall be settled through competent Iranian courts and in accordance with Iranian Laws.” [sic]
Furthermore, pursuant to Article XXV of the Contract:
“This Contract shall be governed from all aspects by the law of the Imperial government of Iran.”
Provision has also been made in Article XXIV for the official language of the Contract as follows:
“The text of this Contract has been prepared in Farsi and English. In case of discrepancies, except in Appendix A and D, where the English text is valid, the Farsi text shall be valid from the legal and judicial point of view.”
Finally, Article IV of the Contract provides for the duration of the different phases of the Contract.
Completion of construction of the airport was scheduled for 1981; Article IV, paragraph 2, provides that:
“It is understood that the construction activities will be completed by the end of 1980 and the final handover of the project shall take place at the end of 1981.”
With the consulting engineer’s departure from Iran shortly after the victory of the Revolution, all work on the airport project ceased.
2. The suspended Contract is the basis for the princi¬pal claim filed by the American party, and for the counter¬claim filed by the Iranian party. The first concerns the payment of fees allegedly owed by Iran to the American con¬sulting engineers; the latter concerns reparation for damages allegedly resulting from the poor execution and breach of contract by the American party. Further to this, the Iranian defendants object to the Tribunal’s jurisdiction.
The sum total of the Claimant’s alleged demands is as follows:
TAMS’ services to CAO -billed but unpaid US$ 7,058,988 (1) TAMS’ services to CAO -unbilled $ 1,826,601
TOTAL $ 8,885,589
The latter concerns reparations for damages allegedly
resulting from the poor execution and breach of contract by
the American party. In addition to this, the Iranian Respon¬
dents object to the Tribunal’s jurisdiction.
3. The jurisdiction of the Tribunal has been defined in
Article II, paragraph 1 of the Claims Settlement Declaration
“1. An international arbitral tribunal (the
Iran-United States Claims Tribunal) is hereby
established for the purpose of deciding claims of
nationals of the United States against Iran and
claims of nationals of Iran against the United
States, and any counterclaim which arises out of
the same contract, transaction or occurrence that
constitutes the subject matter of that national’s
claim, if such claims and counterclaims are out¬
standing on the date of this agreement, whether or
not filed with any court, and arise out of debts,
contracts (including transactions which are the
subject of letters of credit or Bank Guarantees),
expropriations or other measures affecting property
rights … excluding claims arising under a binding
(1) Of course, the Claimant’s alleged demands were, like TAMS-AFFA’s funds, in Iranian rials, which the Claimant has evaluated at the rate of 70.6 rials to the dollar, but if we consider the exchange rate as of the date of issuance of the Award, which was at least 86.32 rials, then the amount of the remedy sought by the Claimant in connection with the contractual claim and the claim of expropriation, will in fact be as follows:
TAMS’ services to CAO -billed but unpaid $5,773,454
TAMS’ services to CAO -unbilled $1,493,953
TAMS-AFFA undistributed accounts ¬TAMS’ share $ 420,832
contract between the parties specifically providing that any dispute thereunder shall be within the sole jurisdiction of the competent Iranian courts, in response to the Majlis position.”
This Article sets forth the framework of the Tribunal’s jurisdiction with respect to claims by United States nationals against the Government of Iran, together with their condi¬tions.
It is not necessary to point out that the exclusive nature of a choice of forum made by parties to a contract does not depend upon the specific term “sole jurisdiction”. The simple fact that a forum selection clause was inserted confers an exclusive jurisdiction upon the forum designated by the contracting parties. However, it must be emphasized that any interpretation of Article II, paragraph 1 of the Claims Settlement Declaration must take into consideration the Iranian law authorizing the Iranian Government to conclude the agreement embodied by the Declaration –and indeed, this law was notified to the Government of the United States and is expressly referred to in Article II, paragraph 1.
With respect to the governing law and the competent courts, the provisions of the Contract at issue are entirely clear. The Contract is in all respects subject to the laws of Iran. Interpretation of the Contract, and all disputes arising therefrom, shall be settled by the competent Iranian courts in accordance with Iranian law. In light of the above, the alleged claims of the Claimant, Iran’s Defence, and the counter-defence, which is the subject of the Claimant’s first claim, all lie outside the scope of the Tribunal’s jurisdic¬tion, as has been acknowledged by the majority itself.
As has been shown hereinabove, the Claimant’s first, and in fact most important, claim is its demand for fees in
consideration of services which, it alleges, it rendered in accordance with the consulting services contract. This claim arises directly out of the Contract and has been directed against CAO. However, examination and interpretation of the Contract, and adjudication of all disputes arising therefrom, are outside the scope of this Tribunal’s jurisdiction, and the majority has admitted its lack of jurisdiction in this regard. Another claim has been brought by the Claimant against the Government of the Islamic Republic of Iran, arising out of the alleged expropriation of TAMS-AFFA, 50% of the assets of which belonged to the Claimant, by the Government of the Islamic Republic of Iran. The Claimant has appraised the assets of the partnership itself, fixing its own share at US$ 514,536, and it has demanded payment of that amount by the Government of the Islamic Republic of Iran. The majority has accepted the presumption that TAMS-AFFA has been expropriated, and it has also regarded the monies allegedly due the Claimant on the basis of the consulting services contract –examination of which is outside the jurisdiction of the Tribunal as constituting a part of TAMS-AFFA’s assets, without taking into account CAO’ s Defence and Counterclaim. In this roundabout
fashion, the majority has endeavored to honor these allegedly due claims.
Neither would the expropriation of the TAMS-AFFA entity in itself constitute a basis for the jurisdiction of the Tribunal over the first claim concerning payment of fees for services allegedly rendered by the Claimant under the Contract at issue. The TAMS-AFFA entity was in fact defined as an agent interposed between Iran on one side, and TAMS and AFFA on the other, and as such was responsible for transmitting invoices, notices and documents issued by the latter to the former. The rights and contractual obligations of the Parties to the Contract were independent and would not be affected by expropriation or dissolution of TAMS-AFFA. Furthermore, it is clear that the contractual rights and invoices of TAMS do not constitute assets owned by the entity TAMS-AFFA. These points
will be examined hereinbelow. However, prior to elucidating all other matters relating to TAMS-AFFA, it is necessary to take up the issue of its alleged expropriation.
1.a After signing the consulting services contract relating to construction of the Tehran International Airport in March 1975, the consulting engineers, namely TAMS and Farmanfarmaian and Associates, commenced carrying out the services in Iran and the United States. Thereafter, in August 1975, these two parties formed a joint partnership, named TAMS-AFFA, for the purpose of carrying out, coordinating and providing engineering services. In accordance with Article III of its Articles of Association, the partnership was formed with the sole obj ect of providing professional engineering services and construction engineering services relating to the new Tehran International Airport, pursuant to and subject to the provisions of the consulting services contract. The capital funding of the partnership was approximately 1 million Iranian rials (roughly US$ 15,000), of which 50% belonged to TAMS and 50% to Farmanfarmaian and Associates. The management of the partnership, decision-making, signing of all documents and checks, and effecting all payments, were jointly carried out by two representatives: one from TAMS and one from Farmanfarmaian and Associates. In addition, on 16 October 1975, the partnership was registered with the Iranian Regis¬trar of Companies as a non-commercial partnership, under No. 1674. Coinciding with the revolutionary events in Iran, performance on the consulting services contract fell into abeyance, and in this context, the purpose of the partnership was frustrated. The Farmanfarmaian family fled Iran, where¬upon the conduct of TAMS-AFFA’s ordinary and routine affairs fell into disorder. TAMS-AFFA was not engaged in commercial activities, nevertheless it did have an office with a number of staff and the sudden departure of its directors created problems with respect to paying the salaries and settling the accounts of its employees, and paying the rent, utility bills and other expenses. Thus, on 24 January 1979, the Government
designated a manager for the partnership in order to resolve these problems. The majority has regarded the Government’s designation of the manager as constituting evidence of expro¬priation of the partnership, without bothering to consider the facts attending said designation nor taking into account the subsequent events. The facts relating to the said designation and the subsequent events require further elaboration.
over, certain directors of enterprises, many of which were heavily indebted to Iranian banking institutions, fled Iran at its moment of crisis. It was the task of the newly-installed government to avoid social disorganization, maintain order, and prevent economic activity from coming to a halt. It was in this context that the Bill of 19 June 1979 was voted into force by the Revolutionary Council, whereby the Iranian Government was authorized to appoint provisional managers for enterprises abandoned by their directors, whether these latter had ceased to work or had for some reason or another found it impossible to manage the day-to-day affairs of the enterprise.
Article 1 of the said Bill is as follows:
Official Gazette No. 10012 -17/4/1358 (8/7/1979)
Article 1. With regard to manufacturing, indus¬trial, commercial, agricultural and service units belonging to either the public or private sector including firms and institutes with the following activities: industrial and mining, agricultural, contracting, consultant engineering, building and installations, residential building, transporta¬tion and loading and unloading of goods at ports; whose managers or owners have left the said units or worksites, stopped work or cannot be reached for any reason; and at the request of owners or managers of the said units, each of the government ministries, institutes or companies who have entered in some way into dealings with, have some connection with and/or are related to the activi¬ties of the said units, are permitted to appoint, with the Ministry of Labour and S.ocial Affairs’
knowledge, one or more persons as managers, members of board of directors or observers for management and/or observation over affairs in order to prevent closure of same.
These provisions clearly indicate the reasoning behind the Bill for the Designation of Managers. Once appointed, these managers personally direct the enterprise and do not act in the capacity of agents of the Iranian Government. The Iranian Government is not entitled to exercise the slightest degree of control over the enterprise, nor may it revoke or cancel any decisions taken by the provisional managers. In accordance with the said Bill, the Government of Iran named Mr. Azad Zarrin Nejad as provisional director for AFFA on 24
July 1979. His letter of appointment was as follows:
“Since the principal directors of Abdol Aziz Farmanfarmaian and Associates have abandoned their firm, by virtue of the Bill Concerning Appointment c.;-r-Provi sional Director (s) to Supervise Produc¬tive, Industrial, Commercial, Agricultural and Services Units both in the public and private sectors approved at the Islamic Revolutionary Council’s session of 24.3.1358 (June 14, 1979), and in order to prevent closure of the firm, you are, with the prior approval of the 1-iinistry of Labour and Social Affairs, hereby appointed as the provisional director of the firm to manage it with due and full observance of the abovementioned Bill, a copy of which is enclosed herewith.
Your salary and total fringe benefits will be determined and advised later. Should you encounter any difficulties in practice, please report the matter so that action may be taken thereon.
(Signed by) Ali Akbar Moinfar Minister of State for PBO
cc: Abdol Aziz Farmanfarmaian & Associates”
I believe that this appointment was made in the sole
interest of all those involved with AFFA, of which the sudden
disappearance of the directors would otherwise have disrupted the company’s operations.
Furthermore, it has been thoroughly established that the manager appointed by the Government was only a locum tenes for Farmanfarmaian and Associates’ representative in TAMS-AFFA and he did not interfere with with TAMS’ rights in the partner¬ship. Moreover, the reasons for his appointment was that Farmanfarmaian and Associates’ representative had abandoned TAMS-AFFA. The other events subsequent to this appointment are as follows: On 7 October 1979, TAMS presented Mr. Danesh as its representative, and as a result the routine affairs of TANS-AFFA have been managed jointly by the Government representative acting as a locum tenes for Farmanfarmaian and Associates’ representative, and by TAMS’ representative, in accordance with the partnership’s Articles of Association. The memorial filed on 15 September 1983 by one of the Iranian Respondents contains abundant correspondence and documenta¬tion, all of which speaks for the good understanding and full cooperation between the Government’s representative and TAMS, and the joint management of TAMS-AFFA.
In August 1979, the sum of 34,071,978 Iranian rials which had been deposited in TAMS-AFFA’s account in payment of TAMS’ fees was paid out to TAMS.
Particular note should be taken of the honest endeavor of both the government-appointed Iranian manager of AFFA and that of CAO to intervene in Bank Markazi Iran with regard to TAMS’ foreign exchange request in August 1979, the date on which foreign exchange came under strict control. In his letter dated 21 August 1979, addressed to Bank Markazi Iran, the government-appointed manager wrote:
” … I wish to state that in so far as government
regulations may permit, I endorse and support
Tippetts-Abbett-McCarthy-Stratton’s request for
foreign exchange in the amount of Rls. 34,071,878,
CAO, too, as is evident from its letter no. 600-100-11617 dated 3 September 1979 to Bank Markazi, in good faith tried its utmost to assist TAMS to obtain foreign exchange permis¬sion.
As stated hereinabove, the partnership’s affairs were managed jointly by the Governmental manager and TAMS’ repre¬sentative. The last correspondence addressed by TAMS-AFFA to CAO (14 November 1979) bears two signatures. Subsequently, in January 1980, Mr. Danesh, TAMS’ representative, left Iran with no prior notice. Here it must particularly be noted that TAMS-AFFA is a non-profit, non-commercial partnership, and that upon suspension of the consulting services contract coinciding with the occurrence of the revolutionary events in Iran in 1978, the purpose of the TAMS-AFFA partnership was, for all practical purposes, frustrated.
HOw, then, could the appointment of a director by the Iranian Government be construed as expropriating or otherwise affecting the property rights of TAMS? Was it not a measure of protection, in the absence of which TAMS could very well have suffeied disruption? Is it not contrary to the princi¬ples of morality to treat that action as constituting an act of expropriation and holding the Government of Iran liable for it? It is equally important to point out that TAMS-AFFA is a non-profit, non-commercial entity and that a director was required to manage the day-to-day affairs, such as the local payments for water and electricity, and to deal with the personnel abandoned there.
I.c The manner in which the majority has portrayed
“[The] Plan and Budget Organization of the Govern¬ment of Iran on 24 July 1979 appointed a temporary
manager for AFFA. The Farmanfarmaian family was one of the fifty-one individuals or families whose enterprises were placed under Government management pursuant to Paragraph 15 of the Law for the Protec¬tion and Development of Iranian Industry.” (page 8)
This statement gives the reader the impression that the Government’s decision to appoint a manager was carried out for the purpose of expropriating the properties of the Farman¬farmaian family et al pursuant to the Law for the Protection and Development of Iranian Industry. Unfortunately, however, the statement by the majority is absolutely baseless. TAMS¬AFFA was not an industrial company, and the reason for the government’s appointment of a manager was, as is expressly stated in the letter of appointment, due to the fact that the manager appointed by the Farmanfarmaian family had abandoned TAMS-AFFA.
On page 9, the majority also states:
“It seems evident from the pleadings filed by
TAMS-AFFA in the present case that TAMS-AFFA contin¬
ues to function, although doubtless at a reduced
level of employees and expenditures, and that it is
being managed by the Government-appointed manager.”
The object of TAMS-AFFA was to provide professional consulting
services as intended under the consulting services contract. But as the maj ority itself admits, that Contract fell into total abeyance in December 1978 or January 1979. In light of this fact, what possible purpose could there be for continuing with TAMS-AFFA’s work and activities? Still, even if we were to suppose, in arguendo, along with the majority, that TM1S¬AFFA has been expropriated, one fact still remains: namely, that the rights and contractual obligations of the parties to the Contract at issue survive, despite any expropriation or dissolution of the entity, and any amounts owed by CAD to TAMS by no means constitute assets of an entity.
2.a The 19 March 1975 consulting services contract was signed by CAO as the client, on the one hand, and by TAMS and Farmanfarmaian and Associates as the consulting engineer, on the other hand. In accordance with Articles I and XX of the Contract, these entities were the direct and liable parties to the Contract, and the Consulting Engineers did not have the right to transfer the Contract.
The TAMS-AFFA entity has, in fact, been an agent inter¬posed between the contracting parties, responsible for submit¬ting to CAO invoices and documents issued by the consulting engineers, for assuring the communication between the parties, and finally, for receiving the fees and remitting them to the consulting engineers.
The method adopted in practice for carrying out the Contract and the partnership’s work, confirmed the preceding characterization. In its Memorial filed on 29 June 1982, the Claimant itself describes and characterizes TAMS-AFFA in the above manner:
IIThis was a contract entered into directly between TAMS and AFFA, as Consulting Engineer, and CAO, under the direction of PBO (and later assigned to IAF) , as Client. TAMS and AFFA, as specifically contemplated by the Contract, joined to create the TAMS-AFFA entity, and requested that the Client made payment for invoiced services to that entity. In
obligations, the Consultant may establish an independent entity under the laws of Iran and register the same. Execution of the service of this Contract through such entity shall not be considered as a trans¬fer of this Contract and the Consultant’s obligation shall remain the same as per this Contract and its Appendices thereof.
The Consultant may submit a written request to the Client asking for the deposition of the remuneration in the account of such entity.’
(TAMS Statement of Claim, Ex. 1, Art. XX.) Under the terms of the Contract, the obligations of the parties to each other remain fixed, despite the interpositioning of the TAMS-AFFA entity. In accordance with the last sentence of Article XX, TAMS and AFFA invoiced CAO and IAF for their Con¬tract services through the TAMS-AFFA entity. ”
These terms employed by the Claimant itself clearly indicate the legal nature of the TAMS-AFFA entity and the responsibility conferred on it in relation to the Contract of 19 May 1979 concerning the Tehran Airport project. It should also be noted that this responsibility was not irrevocable: at any moment TAMS or AFFA equally could terminate the procur¬ation conferred upon the TAMS-AFFA entity; TAHS-AFFA also could renounce its mandate. It is therefore very clear that any expropriation or disappearance of such an agent would not in the slightest degree affect the rights and obligations of the contracting parties.
2.b From the foregoing it is apparent that the Contract, fees, invoices, claims, etc., must directly belong to TAMS, as party to the Contract. They by no means constitute assets of the entity TAMS-AFFA. Nonetheless, the majority refused to analyze TAMS-AFFA’s legal nature and rule, or to determine the status and ownership of the invoices and claims for debts, merely contenting itself with commenting as follows:
“In this connection, the Tribunal notes that, if the CAO had paid the invoices submitted by TAMS-AFFA and such funds were part of the undistributed accounts of TAMS-AFFA, then obviously they would be part of the dissolution value of TAMS-AFFA …. It is a well recognized principle in many municipal systems and in international law that no one should be allowed to reap advantages from their [sic] own wrong” p. 15) •
It must be remarked that if CAO had paid the said in¬voices, the monies paid therefor would certainly have gone to TAMS, and that there is no way by which they would now
comprise a part of TAMS-AFFA’ s undistributed accounts. For the same reason, the sum of Rls. 34,071,878 which CAO paid into the account of TAMS-AFFA for the last time in payment of TAMS’ fees, was paid to TAMS by the Government-appointed manager of TM1S-AFFA in August 1979. But apart from this issue, it is essential to note the following points relating to this statement by the majority. The majority forgets that it is supposed to be appraising the assets and capital of TAMS-AFFA as an independent juridical person, and that it is not supposed to be appraising the assets and capital of TAMS-AFFA’s partners. In fact, these invoices are the property of TAMS and Farmanfarmaian and Associates themselves, and not to TAMS-AFFA. Furthermore, CAO has no debts to TAMS-AFFA, nor does it have any contractual relationship with i ti if it does have any debts, it owes them to TAMS and Farmanfarmaian and Associates themselves, and these two entities must take action to receive any monies allegedly due them. But worst of all, a part of TAMS’ claim concerns fees for services, for which no invoices have yet been sent to CAO
CAO therefore has no knowledge of them and thus no obligation to pay. How can these claims possibly be construed as constituting a part of TAMS’ assets? The preparation of a company’s balance sheet must be limited solely to that company’s own assets, and the only assets which ought to be taken into account and counted are those which exist and are specified and definite. A balance sheet cannot be prepared on the basis of factors which are uncertain and merely hypothetical, and the property and assets of other entities must not be included in the balance sheet. This is perhaps among the most elementary, and yet the most fundamental, principles of accounting. Furthermore, CAO has denied these claims for monies due and has stated that the consulting engineers’ fees have been paid in proportion to the percentage of work performed, and that it has no further debts; in addition, CAO has brought a Counterclaim. In view of its lack of jurisdiction over this Defence and the Counterclaim, the majority is to be excused, and yet, notwithstanding the above,
it has regarded the Claimant’s alleged claims for monies due in connection with the consulting services contract as consti¬tuting a part of TAMS-AFFA’s assets!
2.c It must also be pointed out that the Claimant itself never considered the Contract, its invoices, its fees and that which was due to it from CAO as being the property of TAMS¬AFFA. Claimant has in fact drawn the distinction between its claim for reimbursement of fees for services it rendered by virtue of the Contract and its claim of expropriation of TAMS-AFFA by the Government of Iran. With respect to this latter, Claimant maintains in its own Statement of Claim that “the largest portion of TAM’s total claims arise out of the contract with CAO for services on the TIA project. It is appropriate to note those claims include only amounts owed to TAMS for services already rendered.” These services have been evaluated at $8,885,589. Concerning its claim based on expropriation of TAMS-AFFA by the Government of Iran, Claimant explains:
“On July 24, 1979, the date of the expropriation, TAMS had interests in the accounts and other items of property of TAMS-AFFA which had not been distri¬buted to the TAMS-AFFA owners TAMS and AFFA. Annexed hereto as Exhibit 10, is a schedule of those accounts and items of property and a statement of TAMS’s share of them. Exhibit 10 shows that TAMS’s interest on July 24, 1979, as adjusted for payments in October 1979, totalled US$ 514,536.”
In Exhibit 10 of its Statement of Claim, Claimant has very well evaluated the debits and credits of TAMS-AFFA to determine the balance and the respective portion owing to it, that is $514,536.
It is to be noted that the majority, having ignored all these facts, has totally altered the sense and remedy sought in the Claimant’s claim. The majority also employs the term “deprivation of property” even though this expression can be found in neither the Algiers Declarations nor the Claimant’s statement of Claim. In addition to all that, the majority made an entirely arbitrary appraisal of the claims for monies owing.
1. The mechanism provided for in the Contract for the Consulting Engineer’s Remuneration.
The object of the Contract at issue was the utilization of the Consulting Engineer’s services by CAO in connection with Tehran International Airport. Consultants’ Services are set forth in Appendix A of the Contract and comprise eight parts:
Article VIII of the Contract states that the remuneration of the consultants for services rendered shall be in accor¬dance with Appendix B of the Contract. Article I of that Appendix relates to the Consulting Engineer’s remuneration for services rendered on the various parts of the Contract. For the Master Plan, a fixed remuneration of Rls. 180,000,000 was set. However, according to Article I, paragraph 2, the Consulting Engineer’s remuneration for Parts II, III, IV and V of the Contract consists of various percentages of The Con¬struction Cost. The Construction Cost and its constituents are in turn determined and specified in Article I, Paragraph
B. Appendix B also contains a table of various percentages. Naturally, the higher the Construction Cost, the higher the Consulting Engineer’s remuneration. Meanwhile, the
percentages relate to the various parts of the Contract so,
consequently, the Consulting Engineer’s fees vary. This
mechanism gives rise to one problem: on the one hand, the
estimation of the Construction Cost, and consequently the
Consulting Engineer’s remuneration, becomes possible only upon
completion of the Project; on th other hand, monthly payments
had to be made to the Consulting Engineers both at the outset
and during the course of the work. What, then, was the basis
for the calculation of these payments? In this connection,
the Note under Article II of Appendix B provides:
Note: In order to determine the amounts of monthly payment relating to the second and third parts of the Consultant’s services, the Consultant shall in due time, which in any case shall not exceed eight months from initiation of the Project, prepare and submit to the Client a Preliminary estimate. After approval by the Client, this estimate shall be the basis for the payment of each installment. Upon completion of each part of the services, a thorough estimate shall be prepared as per stipulation of Appendix II A”, which after ap¬proval shall form the basis for determination and payment of the monthly remunerations. In cases where the previous estimates have been up-dated in the course of each part of services and approved by the Client, the up-dated estimate shall be the basis for the payments. Upon completion of the services, the Consultant’s remuneration shall be calculated on the basis of the Contractors final statement and Construction Cost which shall form the basis for
final payment to the Consultant. (emphasis added)
Based on the above provision, and at the start of the
Project, the Consulting Engineer estimated the final Con¬
struction Cost to be US$ 787,000,000, and later increased this
amount to US$ 1,075,000,000. However, the CAO formally
informed the Consulting Engineer in a letter dated 22 October
1975 that a budget of RLS. 60,000,000,000 had been established
for the entire TIA Project Cost.
It is therefore evident that the cost of construction of
the TIA Proj ect, as referred to in Appendix B, Article I,
Section B, was not intended to exceed the approved budget of Rls. 60 bi Ilion.
Upon notification of the approved budget, the Consulting Engineers prepared a detailed cost estimate in relation to the various parts of the Project, taking into account the budget¬ary limits, and proposed the new estimates to the employer, the CAO. According to this arrangement, the monthly payments were meant to be made on a provisional basis with a view to their being taken into account at the final estimation of the Consulting Engineers remuneration.
2. Determining the Consulting Engineer’s remuneration under the present conditions.
The Claimant has claimed for account stated and services rendered on the basis of its own cost estimate which is at variance with the Construction Cost mentioned in the approved budget. This error could easily be corrected, but the crucial difficulty lies elsewhere. Determining the Consulting Engi¬neer’s remuneration upon completion of the Project need not pose any problems when the Consulting Engineer has fully performed its duties in connection with all parts and when the performance has been approved by the Employer. However, at present, the Project is not completed and the work has been abruptly stopped. Under the circumstances it therefore becomes necessary to: (a) determine the percentage of work performed by the Consulting Engineers in each part of the Contract and then determine its entitlement accordingly; and
(b) evaluate the quality of the work performed. Under the present circumstances, these two factors are fundamental to the determination of the Consulting Engineer’s remuneration. However, there are radical differences among the parties on this issue. The following list contains the percentages of work performed, as contended respectively by the parties in their Statement of Claim and Statement of Defence:
PERCENTAGE COMPLETE CONTRACT PART (October 1979) Claimant Respondent
What the CAO particularly objected to is the quality of the work performed under the Contract. The Consulting Engi¬neer is responsible for the correctness of documents. The Contract specifies in its Article V (B.4) that:
.. The approval of the Client does not release the Consulting Engineer of his responsibility for the correctness and fitness of these documents.”
Further, in Article II (B.4 and B.3) of Appendix 2, and particularly under the section specifying the percentages of remuneration for the services rendered in the various parts, it is clearly stated that payment of the last installment of
each part shall be subject to the approval of the respective final report.
ARTICLE XII -CARE AND DILIGENCE
The Consultant shall fulfill his obligations under this Contract using the best professional methods and in accordance with the best technical Standards acceptable to the Client, and shall exercise all his duties subject to this Contract using his utmost care and diligence.
The CAO has submitted evidence according to which it has regularly informed the Consulting Engineer of the deficiencies and inadequacies of the work performed. particularly, in connection with the Detailed Design, the CAO expressly de¬clared in its letter No. 36/41 dated October 3, 1975, that the Consulting Engineer could start the Detailed Design, at solely its own responsibility, since the drawings prepared in connec¬tion thereto involved certain problems, a part of which had been brought to the attention of the Consulting Engineer in the letter No. 1505-2-10/32 dated 27 December 1980. At any rate, the Consulting Engineer performed only 55% of the work, of which only 35% has been approved by the CAO. Furthermore, the Consulting Engineer was never authorized to proceed with the work related to Project Management pursuant to Paragraph 2, Article III. Furthermore, the Consulting Engineer never sent the separate invoices provided under Article II (B.5) of Appendix 2 to signify any management services rendered.
The CAO also submitted a counterclaim, which the majority has dismissed for lack of jurisdiction. Nevertheless, regard¬less of the claims and counterclaims presented by Iran, the determination of the Consulting Engineer’s remuneration involves various problems of a technical, accounting and legal
nature. Confronted with all these difficulties, the majority
merely resorts to absolute silence or assumes an ambiguous position. Amidst that silence and ambiguity, it states:
It should clearly be understood that this Award involves no adjudication of the rights and obliga¬tions of the parties to the TIA contract or of any obligations owed by TAMS-AFFA to the tax and social security authorities of Iran or other third par¬ties.”
1. The claim brought before this Tribunal arises out of a contract signed in Tehran 19 March 1975 by CAO,’ on the one hand, and by Farmanfarmaian and Associates and TAMS (the American Claimant) on the other. The rights and obligations arising from the Contract were directly related to the immedi¬ate signatories to the Contract, and were not transferable. In accordance with Article XIX and XXV of the Contract, the Contract and all contractual relations between the two parties were subject to the laws of Iran, and all disputes arising therefrom lay within the sole jurisdiction of the Iranian courts; and pursuant to Article XXIV, even the controlling language of the Contract was Farsi. Furthermore, by virtue of the forum exclusion clause embodied in Article II, paragraph 1 of the Claims Settlement Declaration, this claim lies outside the scope of this Tribunal’s jurisdiction. In light of the provisions of the Contract, and of Article II of the Claims Settlement Declaration, which specifies and at the same time limits the mandate of this Tribunal, the majority has acknowledged its lack of jurisdiction. But on the other hand, by resorting to another tactic it has contravened all the above provisions.
The Consulting Engineer, the second party to the Con¬tract, formed an entity called TAMS-AFFA in order to provide for liaison and coordination in carrying out the Technical Services which were the subject of the Contract. The majority has wrongly assumed that TAMS-AFFA has been expropriated, and it has then taken note of and counted the sums allegedly due the Claimant under the Contract as if they constituted assets of TAMS-AFFA, in isolation and without any consideration of Iran’s Defence and Counterclaim.
2. The picture provided of TAMS-AFFA by the majority is not any unbiased one, for a large part of the facts and the Respondents’ defences in this regard have been concealed. TAMS-AFFA was registered solely as a non-profit entity with a capital investment of US$ 15,000, and its role was simply that a liaison office between all of the parties to the technical services contract in question. Naturally, upon cessation of performance of the Contract in 1978, the subject and purpose of said entity was frustrated. This non-profit entity is not capable of expropriation, and in particular, as of March 1980, the date postulated by the Tribunal as that of its expropria¬tion, the entity became defunct.
The Government of Iran has taken no action against TAMS’ interests, and at any event, any expropriation or dissolution of TAMS. -AFFA would not be prejudicial to TAMS contractual rights. The Contract, Claimant’s hypothetical contractual rights, and the invoices can under no circumstances be regard¬ed as constituting a part of TAMS-AFFA’s assets. The fact of the matter is that TAMS comes before the Tribunal suffering another problem –namely, Articles XXV and XIX of the Con¬tract and the forum exclusion clause embodied in Article II, paragraph I of the Claims Settlement Declaration –and this
The majority refers in numerous places to international law, but at the same time it ignores many fundamental rules of international law relating to interpretation and execution of international treaties, such as the principle of “useful effect” (” l’ effet utile”) and particularly the principle of interpretation in good faith; and contrary to the above rules, in practice the majority has prevented application of the forum exclusion clause. In a void, it invokes a number of definitions and formulae relating to expropriation from the point of view of international law, but it fails to answer just how this supposed expropriation applies to the present concrete situationi nor does it provide any answer to the legal, technical and financial issues in the present case.
The majority takes up examination of the Contract and the contractual claims, but in order to avoid adjudicating CAO’s Defence and Counterclaims, it states that:
“It should clearly be understood that this Award involves no adjudication of the rights and obliga¬tions of the parties to the TIA Contract or of any obligations owed by TAMS-AFFA to the tax and social security authorities of Iran or other third par¬ties”.
3. At the foot of the Award issued by the majority in Case No. A-18, we Iranian arbitrators have written that this Tribunal, as now constituted, is in no sense impartial and is not competent to adjudicate the disputes of a Third World country with the united states. I perceived this clear and overt lack of impartiality in the adjudication of the present case. Mr. Riphagen ignored all the rules of law and even the most elementary technical and accounting rules. At a certain stage of our study and deliberations, it became thoroughly
arrive at least at a more or less equitable solution, have been to no avail.
I must also note with regret that the appraisal of the Claimant’s contractual claims, which was performed separately and in isolation from Iran’s Defence and Counterclaim, was completely arbitrary. The Contract concerns a highly techni¬cal project, and it is impossible to determine the level of fees without an acquaintance with the contractual mechanism for payment of fees and without a thorough examination of the relevant provisions of the Contract and a technical and accounting-oriented study of the facts. I can honestly testify that Mr. Riphagen studied neither the technical and accounting aspects of the Contract nor Iran’s Defence. The three figures A, Band C were proposed to him, and he selected one of them without knowing what they represented or of what they consisted. Why figute “B” and not figure “A” or “C”? He had no clear answer to the legal issues in the present case, and the Award contains no argumentation or justification, or even the least expla.nation, with respect to the method of appraisa.l.
Because I am entirely convinced that the deliberations and adjudication in connection with the present case were neither just nor impartial, and that the transfer of these millions of dollars to the United States from the account of the Iranian nation is taking place in an illegal and illegiti¬mate manner, I have refused to sign the present award. Should the “award” be automatically enforced, depriving thereby the Government of the Islamic Republic of Iran of its rights to a meaningful defence and legitimate obj ections, then what has taken place as lIinternational arbitration” cannot, in my view, be regarded as anything but a clear instance of misappropria¬tion of the national assets of the Islamic Republic of Iran.