State responsibility - For revocation of, or interference with, concessions - Concession agreement between State corporation and foreign company - Undertaking by Government and State corporation not to cancel or amend concession or hinder its performance - Disputes clause - Provision for reference to arbitration - Application of principle pacts sunt servanda - Responsibility of State corporation for fundamental breach of concession - Measure of damages - Direct and indirect damages - Damages for loss of profits.
"1. On June 16, 1958, the National Iranian Oil Co., Ltd. (herein- after called NIOC 1) and Sapphire Petroleums Ltd. (hereinafter called ' Sapphire a company registered in the province of Ontario, Canada, made an agreement in Teheran. The agreement was signed by the Chairman of the Board of Directors of NIOC, Mr. Entezam, and by the Vice-President and Attorney-in-fact of Sapphire, Mr.
Spiegelmann. Before concluding this agreement, Sapphire had completed a detailed questionnaire concerning their technical and financial capabilities, their capital structure and their organization, in accordance with the Iranian Petroleum Law of July 31, 1957. Their qualifications had been considered sufficient by NIOC, as Mr. Entezam himself confirmed in his letter of February 8, 1958.
2. The preamble to the agreement sets out that NIOC (described in the agreement as the 'first party') wish to expand the production and exportation of Iranian Oil and thus to increase the resources of Iran. For their part Sapphire (described in the agree- ment as the 'second party') are regarded as having the technical competence, the financial ability and the organization necessary for the accomplishment of the operations laid down in the contract. In addition, the parties agree to carry out the agreement in a spirit of good faith and reciprocal good will.