Reference no: EM132115855

"The Big Co. is incorporated and headquartered in Country K, but the majority of shares are owned by shareholders who are nationals of Country M. In 1980, the Big Co. obtained an oil concession in Ruraltania that was valid for forty years. The concession contained a "stabilization" clause providing that the concession could not be altered except by the consent of both parties. To exploit the concession, Big Co. set up a local subsidiary, Little Co., that was incorporated in Ruraltania but wholly owned by Big Co. Two years ago, a major political change occurred in Ruraltania. A new government terminated all foreign-owned concessions, including that of Big Co., but excluded one Japanese offshore oil concession. By decree, the new minister for oil was authorized to fix the compensation-if any-due to foreign companies. The ordinary courts were abolished and replaced by revolutionary tribunals.

The manager of Little Co., himself a national of Country K, criticized the new policy in a television interview, and the next day a group of university students took over Little Co.'s offices, burning and destroying files and other property and injuring the manager. It took nearly two weeks for the Ruraltanian authorities to evict the students. Country K and Ruraltania are parties to an Arbitration Treaty, and they agree to submit the dispute to arbitration. Country K files a claim for the following: (a) the reinstatement of the concession, or (b) compensation to cover the full cost of all assets and installations, lost profits for the next twenty years, interest on the above effective from the date when the concession was terminated, and, in either case, (c) compensation to cover the property damages to Little Co. and the injuries suffered by the manager. How should the arbitration tribunal rule? Discuss."

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