Unilateral Action by Oil-Producing Countries: Possible Contractual Remedies of Foreign Petroleum Companies

At the end of 1982, Mobil Oil Corporation (Mobil) withdrew from its Libyan oil exploration and production concessions. Subsequently, Mobil filed an arbitration claim against the Libyan Government, alleging that government action had effectively destroyed the economic value of Mobil's concession. This arbitration raises substantial questions of transnational contract law. Part I of this Note provides the factual background to the Mobil-Libya dispute and a review of the major issues involved.

Part II discusses the right of a host government to set export prices. Part III considers whether a host government may take unilateral action even though the concession agreement includes a stabilization clause. Part IV examines the issue of "creeping expropriation." Part V analyzes the effect of the doctrine of permanent sovereignty over natural resources on the issues raised by the Mobil-Libya dispute. The Note concludes that when an oil concessionaire continues to operate in the host state for an extended period following the host government's alleged breach of contract, the concessionaire should be held to have effectively waived its claims for breach of the concession agreement.