Iran-US Claims Tribunal

The present article aims to argue indirect expropriation in international petroleum agreements and to analyse the response of international arbitrations. In particular, international arbitral awards by the Iran-US Claims Tribunal, the Yukos case as an Energy Charter Treaty Arbitration and certain North American Free Trade Agreement cases have been examined. The recent trend shows that taking of foreign investors’ property may take place not only through legislation or nationalisation but also by indirect methods that can have the same effect as direct expropriation. Indirect expropriation does not necessarily require transfer of legal title from the international oil company to the host state. Hence, it is difficult to make a distinction between legitimate regulation and measures, which are tantamount to expropriation with the payment of compensation. The identification of an indirect expropriation is complex and depends upon the examination of the legitimate expectations of the investor concerning enjoyment of its investment. Host governments may employ different methods to achieve what amounts to direct taking, but without acknowledging it as such, to avoid legal consequences of expropriation and then payment of compensation.

The Iran-United States Claims Tribunal, established in 1981 as an arbitral body to resolve disputes between the Governments of Iran and the United States—as well as claims by their nationals against these States—has, by virtue of its mandate, played a pivotal role in the development of international law generally and the law of state responsibility in particular. In the absence of an international convention codifying the principles and rules of state responsibility, the Tribunal has drawn upon international judicial and arbitral precedents, as well as the United Nations International Law Commission’s Draft Articles on Responsibility of States for Internationally Wrongful Acts, to elucidate customary international law in key areas. These include the structure and function of the state, attribution of conduct, unlawful expulsions, nationalization and expropriation of property, compensation standards, and state succession in wrongful acts. Through its jurisprudence, the Tribunal has affirmed the customary nature of these rules and clarified ambiguities in their application.

In the case of “Iran’s Foreign Military Sales” (Case B-1), which encompasses six claims and a counterclaim, proceedings have continued for over four decades. A focal point in the process of filing numerous applications and the rulings issued in this case has consistently been the issue of evidence and the burden of proof. This qualitative research aims to address the fundamental question of the approaches taken by the Iran-United States Claims Tribunal  regarding evidence and the burden of proof, as well as the implications of these approaches on the adjudication of Case B-1. The findings indicate that the Tribunal, in each case, has adhered not only to general legal principles - such as ‘actori incumbit onus probandi’ -but also to the unique circumstances and specific conditions of each case, such as the accessibility of evidence, in determining the allocation of the burden of proof. As the parties strive to substantiate the credibility of their evidence before the Tribunal using general principles of international law, which are potentially recognized as applicable law by the Tribunal, they also seek to undermine the credibility of the opposing party’s evidence through various arguments. It is essential for Iran to enhance its precision in referencing the submitted documents and to clarify the technical dimensions, as well as to ensure compliance with the Tribunal’s standards in future rulings, in order to achieve its objectives in other ongoing cases.