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Saudi Arabia v.

Arabian American Oil Company (Aramco)


Facts:
The present case is an arbitration relating to the interpretation of the 1933 Concession
Agreement between the Government of the State of Saudi Arabia (Government) and Aramco
giving Aramco exclusive rights to transport oil extracted from its concession in Saudi Arabia.
Article 1 of the 1933 Concession Agreement provides that The Government hereby grants to
the Company on the terms and conditions hereinafter mentioned, and with respect to the area
dened below, the exclusive right, for a period of 60 years from the eective date hereof to
explore, prospect, drill for, extract, treat, manufacture ,transport, deal with, carry away, and
export Petroleum Thus, under the Concession , Aramco has the exclusive right:
1.to search for petroleum ( explore and prospect )
2.to extract oil ( drill for and extract )
3.to rene petroleum and produce its derivatives ( treat and manufacture )
4.to transport petroleum, to sell it abroad, and to dispose of it commercially ( transport, deal
with, carry away and export )
Article 22 of the 1933 Concession Agreement provides that It is understood, of course, that
the Company has theright to use all means and facilities it may deem necessary or advisable in
order to exercise the rights grantedunder this contract so as to carry out the purpose of this
enterprise
Subsequently, in 1954, the Government concluded the Onassis Agreement which gave the
Saudi ArabianMaritime Tankers. Ltd (Satco) a 30 years right of priority for the transport of Saudi
Arab Oil.
The central point in dispute submitted to the Arbitration Tribunal is to determine what rights
were conferred uponAramco by the Concession Agreement particularly as regards the transport
of Saudi Arab oil by Aramco
. Government argument : The Concession Agreement purports to authorize Aramco to explore
areas supposed tocontain oil deposits, and in case of discovery, to extract and produce the oil, but
not to transport by sea . Theterm transport in Article 1 only contemplated the internal transport
from the site of the extraction to the port ofloading or the Ras Tanura renery for manufacture. It
cannot mean external transport, outside the limits of SaudiArabia. The exclusive right of
transport by sea was not included within the expectations of the parties, as noexpress stipulation
to this eect was included in the Agreement.
The Arbitration Tribunal notes the good faith of the Parties as regards the resolution of the case.
ISSUE
WON Aramco has the right to transport oil by sea.
HELD
YES. The exclusive right to export granted to Aramco necessarily implies the right to transport
oil by sea.

The Arbitration Tribunal cannot adopt the argument of the government without straining the
meaning of the texts.
The terms used in Article 1 of the Concession Agreement to indicate the content of Aramcos
exclusive right must be understood in their plain, ordinary and usual sense which is the sense
accepted in the oil industry.
In its capacity as first concessionaire, Aramco enjoys indeed exclusive rights which have the
character of acquired or ' vested ' rights and which cannot be taken away from it by the
Government by means of a contract concluded with a second concessionaire, even if that
contract were equal to its own contract from a legal point of view. The principle of respect for
acquired rights is one of the fundamental principles both of public international law and of the
municipal law of most civilized States.
To transport to carry beyond persons or things i.e. from one place to another, whatever the
distance betweenthem. It does not imply and special means of transportation. Consequently it
can apply to land, water or seatransport. In connection with the oil business, the methods adopted
by the oil industry cannot be ignored
According to principles in interpreting concessions, any restriction on the rights granted
by a general clausemust be expressed in a clear and unequivocal manner if it is to be
invoked against the concessionaire. InArticle 22, only the transportation by air was
expressly excluded. The mere absence of the words seatransport cannot mean its
exclusion.
The government further claims that the right of transport across boundary of the
territorial waters is granted tothe concessionaire in one direction onlywhich is in order
to reach Saudi Arabia and not in order to take itsoil and products away from the country.
The arbitration tribunal holds that such contention is not supported by various texts which
constitute theConcession and overlook the practical utility for Aramco to transport oil
outside the territorial waters.
The 7984 Oshore Agreement provides that Aramco enjoy an exclusive right to transport
not only within theterritorial waters, but also across boundary which separates the waters
from the high seas.
Furthermore, it is impossible to imagine that the parties would want to give the
concessionaire an exclusiveright to transport restricted to the territorial waters while deny
this right as regard transportation overseaswhich is the only kind of transportation of real
interest to the concessionaire.
The legal construction resorted to by the Government appears to be contrary to the nature
of things, to theneeds of commerce, to the real intention of the parties, as well as the
wording of various agreementspertaining to the concession