HOUSE OF LORDS

 

BUTTES GAS AND OIL CO. AND ANOTHER, RESPONDENTS

AND

HAMMER AND ANOTHER, APPELLANTS

 

BUTTES GAS AND OIL CO. AND ANOTHER, APPELLANTS

AND

HAMMER AND ANOTHER, RESPONDENTS

 

See annotated judgment at [1982] A.C. 888 and [1981] 3 All ER 616

 

 

Conjoined appeals

 

On appeal from Buttes Gas and Oil Co. v. Hammer; Buttes Gas and Oil Co. v. Hammer (No. 3)]

 

 

COUNSEL: Maurice Bathurst Q.C., Anthony Evans Q.C., R. Y. Jennings Q.C. and John Previte for Buttes and Mr. Boreta.

Mark Littman Q.C., Elihu Lauterpacht Q.C., Murray Rosen and A. J. Kolodziej for Occidental.

Colin Ross-Munro Q.C., Murray Rosen and David Lloyd Jones for Dr. Hammer.

 

SOLICITORS: Coward Chance; Herbert Smith & Co.

 

JUDGES: Lord Wilberforce, Lord Fraser of Tullybelton, Lord Russell of Killowen, Lord Keith of Kinkel and Lord Bridge of Harwich

 

DATES: 1981 June 22, 23, 24, 25, 29, 30; July 1, 2, 6, 7, 8, 9; Oct. 29

 

 

“The issue in this appeal was whether certain documents and classes of documents which had been disclosed by Buttes were privileged from production either by reason of legal professional privilege, or because they consisted of confidential communications with, and documents or copy documents obtained in confidence from, a foreign sovereign, namely the Ruler of Sharjah, whose successor, in his capacity as ruler of a friendly foreign state, objected to the documents being produced in these proceedings.

 

“. . . The Permanent Under-Secretary of State at the Foreign and Commonwealth Office subsequently wrote that his department knew of ‘no overriding considerations of the national interest which would warrant intervention by the Crown’ in the proceedings. Her Majesty’s Government had not sought to intervene in the proceedings, hence there was no claim for privilege of the kind formerly known as ‘Crown Privilege.’”

 

 

[*919] Their Lordships took time for consideration.

 

October 29.LORD WILBERFORCE. My Lords, this action and counterclaim arise from the discovery of oil in a “location” (hereafter referred to as “the location”) in the sea bed of the Arabian Gulf. This lies about nine miles from an island called Abu Musa. This island is about 40 miles distant from the southern shore. On that southern shore are two neighbouring Arab Emirates, Sharjah and Umm al Qaiwain (U.A.Q.). The island of Abu Musa is, and at material times was, recognised by both Emirates and by Her Majesty’s Government in the United Kingdom to belong to Sharjah. As the result of various events occurring in 1969-73 Buttes Gas and Oil Co. (“Buttes”) emerged as concessionaire entitled to exploit the location, to the exclusion of Occidental Petroleum Corporation [*920] (“Occidental”): out of this situation, which was unwelcome to Occidental, the present litigation arose. Both companies are incorporated in California, United States of America. (References hereafter to Occidental include reference where appropriate to its local subsidiary in the Gulf, and include, if necessary or relevant, Dr. Armand Hammer, its chairman and coappellant/respondent.)

 

It is necessary to describe the history of the litigation. It was triggered by a press conference given in London on October 5, 1970, by Dr. Hammer. At this conference he accused Buttes (inter alia) of using improper methods and colluding with the then Ruler of Sharjah to backdate a decree by the ruler extending the territorial waters of Sharjah, in respect of Abu Musa, from three miles from the coast of the island to 12 miles so as to obtain for themselves the benefit of the oil-bearing deposit at the location which he claimed was discovered by and belonging to Occidental.

 

On October 18, 1970, Buttes issued a writ against Occidental and Dr. Hammer claiming damages for slander, and obtained leave to serve it out of the jurisdiction under R.S.C., Ord. 11. On July 21, 1971, the Court of Appeal (“first decision”) dismissed an application by the defendants to have this order set aside. Leave to appeal to the House of Lords was refused both by the Court of Appeal and by this House.

 

On April 7, 1972, the defendants delivered their defence and counterclaim. The defence contained a full and elaborate justification of the slander, alleging the backdating of the decree of the Ruler of Sharjah at the request or on the advice of Buttes and setting out a whole sequence of events which, it was said, resulted in operating limits, excluding the location, being imposed on Occidental.

 

The counterclaim repeated the factual allegations in the defence and then alleged that, in or about December 1969 and onwards, the plaintiffs, the then Ruler of Sharjah and others whom Occidental could not then particularise:

 

“wrongfully and fraudulently conspired … to cheat and defraud [Occidental], and further or alternatively to cause and procure Her Majesty’s Government and others to act unlawfully to the injury of [Occidental].”

 

A number of overt acts (as pleaded in the defence) were alleged as a result of which Occidental and its local subsidiary or associate were “permanently deprived of their rights” to exploit the location. They claimed damages amounting to more than U.S.$4,000,000.

 

The counterclaim also alleged that Mr. John Boreta, president of Buttes (joined as defendant to the counterclaim), had libelled Occidental on July 14, 1970, in a report to the shareholders of Buttes in which he said that certain United States proceedings brought by Occidental against Buttes were, in the opinion of Buttes’s attorneys, “wholly without merit.”

 

On July 7, 1972, a summons was issued by Buttes seeking an order that the court should not exercise jurisdiction in respect of certain specified acts being acts of state of the Governments of Sharjah, U.A.Q., Iran and the United Kingdom: alternatively, that certain specified parts of the defence and counterclaim should be struck out or all proceedings stayed [*921] as to any issue arising therefrom on the ground that they raised matters which are acts of state. A further summons, dated November 16, 1972, requested that service of the counterclaim on Mr. Boreta should be set aside. After proceedings before Master Warren and, on appeal, May J. (who acceded in part to Buttes’s application) the summonses came before the Court of Appeal.

 

The decision (“second decision”) of the Court of Appeal [1975] Q.B. 557, was given on December 5, 1974. The court refused to strike out the conspiracy counterclaim or parts of the plea of justification, or the libel counterclaim. Lord Denning M.R. based his decision in the main upon his conclusion that the scope of “act of state” was ill-defined in English law but that it did not extend as widely as in the United States where the courts had refused to entertain an action by Occidental against Buttes in respect of the same issues as those raised in these proceedings. Roskill L.J. held that the power to strike out should be used sparingly and only in a clear case: the present action was not such a case since it involved difficult questions of general importance and the grounds of defence or causes of action were far from obviously bad and unarguable.

 

Against this decision, Buttes and Mr. Boreta sought leave to appeal to this House, but their application was refused by an Appeal Committee on February 27, 1975.

 

After the second decision of the Court of Appeal a number of further pleadings have been exchanged. On May 2, 1975, Buttes served a reply to the defence, and Buttes and Mr. Boreta a defence to the counterclaim of Occidental. These pleadings referred to a number of specific documents. While other documents may be material (and indeed are requested to be produced on discovery), those now available enable the issues raised by the action and counterclaim to be analysed far more clearly than was possible in 1975. At various dates further and better particulars of the defence and counterclaim of Occidental have been requested and delivered. A rejoinder has been delivered on January 19, 1979, and an amended reply and defence and counterclaim on May 8, 1980. Moreover, since the second decision there have been important decisions in the United States of America on similar issues.

 

Apart from these proceedings on the substance of the case, issues have arisen as regards discovery of documents. On April 11, 1976, Occidental applied for an order for inspection of 23 documents referred to in Buttes’s reply and defence to counterclaim; Buttes declined to allow inspection of a number of these documents. Occidental persisted in its application for inspection of these and other documents, and after production had, on January 8, 1979, been ordered by Master Warren, McNeill J. in chambers partly allowed Buttes’s appeal, holding that most of the documents were privileged Both sides thereupon appealed to the Court of Appeal. On June 20, 1980, the Court of Appeal (“third decision”) [1981] Q.B. 223, dismissed the appeal of Occidental and allowed that of Buttes, and refused leave to appeal to this House. The grounds given by the Court of Appeal were (i) by Lord Denning M.R., that the court’s powers as to discovery were discretionary, that the case was one for the exercise of judicial restraint since it would be contrary to the comity of nations to order [*922] discovery without the consent of the foreign sovereign concerned – in casu the Ruler of Sharjah; (ii) by Donaldson and Brightman L.JJ. that the courts should recognise a category of United Kingdom public interest immunity relating to copies of confidential documents of a foreign sovereign (the Ruler of Sharjah) in the possession of a third party (Buttes).

 

These judgments clearly gave rise to novel and important questions. Moreover it was said by Occidental to be illogical and unfair in that, while the counterclaim was, by the second decision, permitted to go on, the result of the third decision was to deny to Occidental the means necessary for its prosecution.

 

On November 11, 1980, an Appeal Committee of this House (i) gave leave to Occidental to appeal against the third decision (1980) of the Court of Appeal; (ii) gave leave to Buttes and Mr. Boreta to appeal out of time against the second decision (1974) of the Court of Appeal and discharged the previous order (1975) refusing leave to appeal; (iii) ordered that a fresh summons issued by Buttes and Mr. Boreta on July 11, 1980, should be dealt with on the hearing of the appeal. This fresh summons sought an order that on Buttes undertaking to consent upon application by Occidental and Dr. Hammer (if so advised) to a stay of the slander claim, the counterclaims of Occidental and Dr. Hammer be stayed on the grounds (inter alia) that the said counterclaims raised issues which are non-justiciable by the court and/or which it is contrary to the public interest for the court to adjudicate upon.

 

This narrative has been necessary to show two things, first, that this House is now in a position to adjudicate upon the entirety of the issues raised by the parties at the various stages between 1971 and 1980 and secondly, that since the last substantive decision of the Court of Appeal (the second decision of 1974) the issues have been more clearly defined, and crystallised. This House is now in as good a position as any court is likely to be to form an opinion as to the justiciability of the claims of either side, and the decision has to be made whether the proceedings should be allowed to continue to trial with appropriate discovery or should be terminated by stay or striking out.

 

Only two final preliminary observations. First, though at times some of the arguments addressed seemed to lose sight of this, we are not now trying the merits of the cases or any part of them. We must deal with the applications upon the basis of facts alleged in the pleadings and of such documents as have emerged – resisting, in the latter case, the temptation to try to interpret the documents (many of which are not governed by English law) beyond the parties' allegations. Secondly, it is convenient, and was agreed by the parties, to consider first the general issue of justiciability, decision upon which may make the discovery issues unnecessary to consider. However, the fact that if the action is allowed to proceed, discovery of certain classes of documents may have to be given, may have implications for the prior question, whether the action should be allowed to proceed. To that extent argument heard upon the discovery issue (other than that of legal professional privilege) has been enlightening.

 

I shall now attempt a summarised account of the relevant facts.

 

I have already mentioned that we are here concerned with the territories [*923] of three states, the Emirates of Sharjah and U.A.Q., and the State of Iran. Sharjah and U.A.Q. are neighbours lying on the south side of the Arabian Gulf: they were, at the relevant times, sovereign states in separate treaty relations with the United Kingdom which was responsible for their foreign relations. At all material times Sharjah has claimed title to Abu Musa, and this has been recognised by Her Majesty’s Government and by U.A.Q. Since the 19th century the island has been claimed by Iran.

 

The waters of the Arabian Gulf are less than 200 metres in depth, and so potentially have continental shelf status of some coastal state or states. It is obvious that there may be conflicting claims, and that the position of median or other boundary lines may be a matter of controversy. The Gulf contains a number of islands. Although islands are mentioned in Article I of the 1958 Geneva Convention on the Continental Shelf there is no universal rule as to when, and for what distance, islands can generate a continental shelf for themselves. Further, there are differences as regards the width of territorial waters. Many of the adjoining states, including Iran, claim a width of 12 miles, but three miles was the distance recognised by the United Kingdom and claimed, until the events in question, by Sharjah, as also by other states in treaty relations with the United Kingdom.

 

Following the Truman Proclamation of September 28, 1945, proclamations were made in 1949 by the Rulers of Sharjah and U.A.Q., in identical form, that the seabed and subsoil contiguous to the territorial waters of Sharjah/U.A.Q. and extending seaward to boundaries to be determined more precisely, as occasion arises, on equitable principles, by each ruler after consultation with the neighbouring states, appertain to the land of Sharjah/U.A.Q. and are subject to its exclusive jurisdiction and control. These proclamations were approved by His Majesty’s Government. It is apparent that, while in principle staking the Emirates' claims to continental-shelf rights, they left a number of vital questions to be settled by agreement or adjudication on equitable or other appropriate principles.

 

In 1964 the Rulers of Sharjah and of U.A.Q., again with the approval of Her Majesty’s Government, issued “parallel instruments.” They were in slightly different form, that of Sharjah taking into account the existence of another small territory – Ajman – which lies partly within the territory of Sharjah. Each was, however, headed, in the English version, “Seabed boundary – agreement by the Ruler of (Sharjah or U.A.Q.),” and continued:

 

“I agree that the sea-bed boundary between” [Sharjah and U.A.Q.] [U.A.Q. and Sharjah] “shall be a line starting from a point on the coast near the site of the dead well Mirdar bu Salaf and going out to sea on a bearing of 312 degrees.”

 

It is said to be disputable whether the word “sea-bed” is a correct translation from the Arabic; apart from this, it does not appear how far out to sea the lateral line referred to is intended to go, or what, if any, frontal boundary is contemplated. No map was attached to either declaration, but, later, various maps were produced. One Admiralty chart in H.M. Foreign and Commonwealth Office showed the lateral boundary line skirting Abu Musa at a distance of three nautical miles. [*924] In 1968 Her Majesty’s Government announced its intention to terminate its special treaty relationship with the Emirates and to withdraw British forces from the area within three years.

 

In 1969 the rulers of Sharjah and U.A.Q. invited bids for oil concessions in their offshore seabed. On November 10 Occidental obtained from the ruler of U.A.Q., with the approval of the Foreign and Commonwealth Office, an exclusive concession to explore and exploit the territorial and offshore waters of U.A.Q. and the seabed and subsoil underlying such waters. It is said by Occidental that the concession area was outlined on an attached map based upon the above-mentioned Admiralty chart and shown as including the disputed location, where oil deposits were later discovered some nine miles from Abu Musa, but Buttes contends that no such map was shown to Buttes or the Ruler of Sharjah at the time and was never agreed by them. It made no allowance for any continental shelf round Abu Musa. On December 29, 1969, Buttes obtained from the Ruler of Sharjah the exclusive right to explore and exploit

 

“the territorial waters of the main land of Sharjah … all islands within the jurisdiction of the Ruler and the territorial waters of the said islands and all the area of the sea bed and subsoil lying beneath the waters of the Arabian Gulf contiguous to the said territorial waters over which the Ruler exercises jurisdiction and control.”

 

No map was, it appears, attached to the grant.

 

Buttes contends that this grant included the location by virtue of a decree of the Ruler of Sharjah dated September 10, 1969, whereby he declared the territorial sea of his Emirate as of a width of 12 nautical miles from the baselines around its coasts and islands, and also by virtue of Sharjah’s rights over the continental shelf.

 

Occidental alleges that the decree was in fact made in March or April 1970, that it was back-dated to September 1969, and that this was unlawful and fraudulent. This allegation is central both to the defence of justification of the slander, and to Occidental’s counterclaim for conspiracy.

 

This being the situation between Sharjah and U.A.Q., both Iran and Her Majesty’s Government became involved. Iran had already in 1959 claimed a 12-mile belt of territorial waters for its mainland and islands, and at various dates, 1949-66, issued continental shelf proclamations which in terms extended-to islands owned by it in the Arabian Gulf. In May 1970 Iran reiterated her claim to Abu Musa and demanded that no exploration or other activities take place in the disputed area.

 

In May 1970 Her Majesty’s Government intervened. It recommended to the Ruler of U.A.Q. that he should not permit operations of any kind by Occidental in the area claimed by the Ruler of Sharjah for a period of three months. It was indicated that Her Majesty’s Government hoped for a “third party settlement.” Occidental, however, sent a drilling platform towards the location, but this was turned back by H.M.S. Yarntonof the Royal Navy. After what is described as a show of force by Her Majesty’s Government, the Ruler of U.A.Q. on June 2, 1970, ordered Occidental not to operate within 12 miles from Abu Musa.

 

There followed proposals for arbitration and an attempt at mediation, but these came to nothing. In November 1971, shortly before the intended [*925] British withdrawal from the Arabian Gulf, an understanding was reached between Sharjah and Iran whereby: (a) Neither Iran nor Sharjah ceded its claim to sovereignty over Abu Musa; (b) Iranian troops were permitted to occupy a part of Abu Musa; (c) All parties accepted the existence of a 12-mile territorial sea round Abu Musa, with Buttes as the concessionaire for the area on the terms of its agreement with Sharjah; (d) The revenues resulting from such exploitation were to be shared between Sharjah and Iran, and it appears that Sharjah, in turn, agreed to share its royalties with U.A.Q. This understanding appears to have been approved by Her Majesty’s Government.

 

In January 1972 the Ruler of Sharjah was assassinated, an event which, it is suggested, was connected with his participation in the 1971 understanding.

 

Later, in June 1973, Occidental’s concession was terminated by the Ruler of U.A.Q. acting under a clause in the concession agreement.

 

It is obvious that even these skeleton facts, and many more may be or become relevant, raise far-reaching issues. Before reaching a conclusion whether these admit of adjudication by an English court, I shall summarise the legal arguments.

 

In support of their contention that the proceedings necessarily involved non-justiciable issues, the appellants, Buttes and Mr. Boreta, relied upon a number of distinct arguments.

 

First, they contended that the English courts will not try an action which would require them to pronounce, directly or indirectly, on rights in immovable property situated abroad. They appealed to the decisions of this House in British South Africa Co. v. Companhia de Moçambique [1893] A.C. 602 and Hesperides Hotels Ltd. v. Aegean Turkish Holidays Ltd. [1979] A.C. 508.

 

Secondly, they invoked the doctrine of sovereign immunity, in so far as this excludes actions concerning property which is in the ownership, possession or control of a foreign sovereign state, or in which a foreign state claims an interest: Compania Naviera Vascongado v. S.S. Cristina (The Cristina) [1938] A.C. 485 and United States of America and Republic of France v. Dollfus Mieg et Cie S.A. [1952] A.C. 582.

 

Thirdly, they argued that the English courts will not entertain actions either (a) requiring the interpretation of, or the ascertainment of the precise nature of obligations arising under, transactions between foreign sovereign states: Cook v. Sprigg [1899] A.C. 572; or (b) questioning the validity or effectiveness of foreign legislation; or (c) examining the validity of or motives for, acts of foreign sovereign states in their international relations; or (d) challenging the legality of acts of Her Majesty’s Government outside the United Kingdom and not relating to British subjects.

 

In answer to these, the contentions of Occidental can be summarised as follows. 1. There is no absolute rule forbidding English courts from entertaining questions relating to foreign land. Such questions have, in fact, been considered: see Foster v. Globe Venture Syndicate Ltd. [1900] 1 Ch. 811; more fully reported in 82 L.T. 253 and Duff Development Co. Ltd. v. Government of Kelantan [1924] A.C. 797. Such questions may be, and are, decided by English courts where decision upon them is incidental to [*926] other questions, such as domicile, or is collateral to the main question – Tito v. Waddell (No. 2) [1977] Ch. 106, 262, 271. In the present case a decision upon the title to “the location”: (a) is not necessary in the conspiracy claim; Occidental in fact do not dispute the validity of the decree of 1969 under the law of Sharjah; (b) is rendered unnecessary or is precluded by the attitude taken by Her Majesty’s Government; (c) alternatively can be decided upon evidence. 2. There is no absolute or general rule forbidding English courts from “sitting in judgment” upon or “inquiring into” the validity or nature of a foreign law. In particular the courts may do so when either that law is not confined in operation to the territory of the enacting state, or is contrary to public policy, or to international law. 3. There is in English law no general doctrine of “act of state” which can be applied to the facts of the present case. Nor is there any rule of judicial restraint such as is found in some United States cases. 4. The doctrine of sovereign immunity has no application.

 

These respective arguments cover a wide area but I think that in the end they leave for decision a limited number of, admittedly difficult, points.

 

The doctrine of sovereign immunity does not in my opinion apply since there is no attack, direct or indirect, upon any property of any of the relevant sovereigns, nor are any of them impleaded directly or indirectly.

 

I will deal first with the “territorial argument” and the contention that we are here concerned with a non-justiciable dispute as to the title to foreign land. As to this I am prepared to accept much of the respondents' argument. I would agree, in the first place, that this is not just a question arising between private individuals as to the title to, or possession of, foreign land so as to come directly within the rule laid down in the Moçambique [1893] A.C. 602 and Hesperides [1979] A.C. 508 cases: we do not have once more to examine that much criticised rule. The present case is more nearly within the category of boundary disputes between states. As to these it would be too broad a proposition to say that the mere emergence in an action here of a dispute as to the boundaries of states is sufficient to preclude the jurisdiction of the court. The main authorities cited by the respondents' counsel – Foster v. Globe Venture Syndicate Ltd. [1900] 1 Ch. 811; 82 L.T. 253 and Duff Development Co. Ltd. v. Government of Kelantan [1924] A.C. 797 – though as I read them depending essentially upon recognition, are at least instances where the court has without difficulty decided questions depending upon the ascertainment of boundaries, and I would agree that there may be other cases where a question relating to foreign land, even to the title to foreign land, may either be capable of determination as a matter of fact (see per Lord Sumner in the Duff Development case, at p. 827 whom I do not understand as arguing for justiciability in all cases), or may arise incidentally or collaterally to some other question, and may be decided. I need only quote Lord Herschell L.C.’s words in the Moçambique case [1893] A.C. 602, 626: “It is quite true that in the exercise of the undoubted jurisdiction of the courts it may become necessary incidentally to investigate and determine the title to foreign lands; …” words applied by Sir Robert Megarry V.-C. in the great case of the Banaban Islands, Tito v. Waddell [*927] (No. 2) [1977] Ch. 106, 262, 263, (“incidentally” or “as a collateral incident”).

 

But here the question of title to the location does not arise incidentally or collaterally: it is at the heart of the case. It is essential to Occidental’s claim (both in its counterclaim and in its defence of justification) to establish that before the intervention of Buttes and Sharjah it had a right with some degree of legal validity over the seabed at the location – i.e. nine miles from Abu Musa (see the words in its counterclaim, quoted above, “permanently deprived of their rights” to exploit the location). Occidental does not contend, it is true, that the action of Sharjah in extending its territorial waters so as to include the location was unlawful under Sharjah law: and in so far as this is so, the dispute avoids the area of municipal law, or of conflict of (private) law. But that very fact makes it, not more, but less justiciable by a municipal court – either, as Mr. Bathurst Q.C. argued as an a fortiori case to, or as an extension of, Hesperides [1979] A.C. 508, or, as I would rather see it, as an issue in a different, and international dimension. This cannot be decided simply as an issue of fact upon evidence: it calls, on the contrary, for adjudication upon the validity, meaning and effect of transactions of sovereign states. While, therefore, I agree with the respondents that the Moçambique rule is not of itself decisive of this case, we have still to consider whether a wider principle of judicial abstention has to be applied. I reserve this point for discussion later.

 

At this point it is convenient to deal with the argument of Mr. Littman Q.C. mentioned above under 1 (b): this is special to this case. The contention was that what might otherwise have been a non-justiciable question (as concerning transactions between states) became justiciable through the actions of Her Majesty’s Government. It, so Mr. Littman claimed, had set its seal of approval on all the relevant dispositions by Sharjah and by U.A.Q. up to 1971, So that there would be no evidential difficulty, or potential breach of comity, or possibility of embarrassing the United Kingdom in its foreign relations if the court were to pass upon them.

 

In order to appraise this argument, which I found the most formidable of Mr. Littman’s submissions, it is necessary to state some additional facts.

 

1. On March 29, 1973, in response to an inquiry from the Chambers of Master Warren, made in the course of this action, the Foreign and Commonwealth Office supplied a certificate signed by the Foreign Secretary. I must set out the most relevant portions.

 

“Between September 9, 1969, and December 1, 1971, Her Majesty’s Government recognised the State of Sharjah as an independent sovereign State in special treaty relations with the United Kingdom. By virtue of the special treaty relations, Her Majesty’s Government were generally responsible for the conduct of the international relations of Sharjah and for its defence. … Between September 9, 1969, and December 1, 1971, Her Majesty’s Government recognised His Highness Shaikh Khalid bin Muhammed al Qasimi as the sovereign Ruler of the State of Sharjah. Thereafter, between December 2 and 30, 1971, His Highness continued to be the sovereign Ruler of the [*928] State of Sharjah as a member Emirate of the United Arab Emirates. Her Majesty’s Government did not during any part of the period between September 9, 1969, and December 30, 1971, exercise or claim any rights of sovereignty over or in relation to the affairs of Sharjah. However, as indicated in the answer to question 1, Her Majesty’s Government had, until December 1, 1971, general responsibility for the conduct of the international relations of Sharjah. During the period between September 9, 1969, and December 30, 1971, Her Majesty the Queen also had jurisdiction within the State of Sharjah, including the territorial waters thereof and all other areas over which the ruler had jurisdiction, over certain persons and matters, the extent and exercise of which were regulated by the Foreign Jurisdiction Acts 1890 and 1913, by the Trucial States Orders 1959 to 1969 made under those Acts, and by Queen’s Regulations made under those Orders.”

 

On this it was found by May J., in my view correctly, that at the relevant time Sharjah was an independent sovereign state and the ruler the sovereign ruler of that state. On the other hand, Her Majesty’s Government had and retained until 1971 control over Sharjah’s foreign relations.

 

There is no certificate with regard to U.A.Q. or its ruler, but I think we must assume that, if one had been applied for, a certificate to a similar effect would have been given.

 

The later actions of Her Majesty’s Government must be viewed in the light of this certificate. There were a number of interventions, including, as I have mentioned, the approval of the concessions to Buttes and to Occidental. In February 1970 an informal note was given by a Foreign Office official to Buttes stating that “the seaward boundaries of all the offshore areas have never been defined, in the absence of an agreed median line.” At various dates, the Foreign and Commonwealth Office prepared maps and provided them, and information about them, to one or other of the parties but I need not, and in the interest of brevity, ought not to describe them since the whole attitude of Her Majesty’s Government is set out most fully and clearly in two letters. The first is a letter to Occidental’s solicitors of May 8, 1970. In it the Foreign and Commonwealth Office referred to “unilateral action on the part of Sharjah,” to “problems raised by an extension of the breadth of Sharjah’s territorial waters,” to “a claim by Sharjah to jurisdiction over the same area” [viz. “the location"]. It is clear from this letter that Her Majesty’s Government did not authorise, or approve, the extension, by decree, of Sharjah’s territorial waters to 12 miles from Abu Musa.

 

The letter explains the position of Her Majesty’s Government vis--vis the 1969 (?1970) decree at considerable length. It is clear that Her Majesty’s Government did not approve of the extension, considered that there were international law questions as to its validity, and expressed its own opinion that there was an agreed sea (sic) boundary based on a three-mile limit of territorial waters around Abu Musa. There was, it states, a whole series of problems in relation to other states in the area, which had to be faced before it was safe to regard the territorial waters of Sharjah as having been effectively extended. [*929] “At the same time,” it was said, “it must be recognised that a claim exists, made on the basis of legal advice, to part of the area of seabed which has been regarded as under the jurisdiction of the Ruler of Umm al Qaiwain. Whatever may be the merits of this claim, the fact that it has been made must be faced and … a means for resolving the problems which it raises must be found. … We do not ourselves wish to propose any particular means of resolving the problem but we remain fully prepared to assist in any way we can.”

 

This paragraph may be read as referring not or not only to an extension of territorial waters but to a continental shelf in respect of Abu Musa.

 

The second letter was written on May 16, 1970, to the Ruler of Sharjah by Her Majesty’s political agent at Dubai. This letter explained that the concession agreement with Buttes, and the agreement between U.A.Q. and Occidental, proceeded and were approved by Her Majesty’s Government on the basis that the breadth of the territorial waters of Sharjah was three miles. I quote the next paragraph:

 

“Having said this, I must at once go on to say that the extent of a state’s territorial waters is to be determined in accordance with international law and a state may treat as its territorial waters those waters adjacent to its shores which international law permits it to treat as territorial waters. It is not necessary for a state to make a declaration claiming its territorial waters or stating the breadth of those waters. But, if it chooses to do so, a state may declare the extent of its territorial waters. Many states (including the United Kingdom, the United States and the Persian Gulf States in special treaty relations with the United Kingdom) have territorial waters of three miles. Many states (including most of the other states in the Persian Gulf, that is the states other than those in special treaty relations with the United Kingdom) claim territorial waters of 12 miles.”

 

It continued by pointing out that there was another aspect of the problem:

 

“As a matter of international law, it is not right for a state simply to extend its territorial waters regardless of the consequences on its neighbours. If there are agreements or settled legal situations with its neighbours, or if vested rights have been acquired in the area, account must be taken of these agreements, situations and rights. In the case of Sharjah, for example, there is a particular problem arising in relation to Umm al Qaiwain, where there is an agreed sea boundary of 1964 between Sharjah and Umm al Qaiwain and where a Concession Agreement was concluded by the Ruler of Umm al Qaiwain and approved by Her Majesty’s Government on the basis of that sea boundary. It is not right simply to ignore the existence of the sea boundary and the Concession Area of Occidental of Umm al Qaiwain. But there is a whole series of further problems stemming from an extension of Sharjah’s territorial waters. There are potential problems with Ras al Khaimah (the Tunbs), Ajman, Dubai and Abu Dhabi (in connection with Sir Abu Nu'Air). All these problems would have to [*930] be faced and sorted out before it would be safe to regard the territorial waters of Sharjah as having been effectively extended.”

 

It concluded by expressing hope of a solution by agreement, and, as stated above, attempts were made to dispose of the matter by mediation.

 

These letters show beyond any doubt that Her Majesty’s Government regarded the issues between Sharjah and U.A.Q. and between their respective concessionaires, as issues of international law, and involving difficult problems as to the width of territorial waters, and by implication of the continental shelf, in the light, not merely of geographical considerations, but of existing arrangements between Sharjah and U.A.Q., and of the interests of other states, amongst which Iran must have been in mind. Even if they can be read as expressing, or implying, an acceptance by Her Majesty’s Government of a three-mile width of territorial waters, they do not, and in view of the claims of Iran could not, involve any recognition. or non-recognition, of continental shelf rights in respect of Abu Musa, or of Sharjah or of U.A.Q. On these questions, Her Majesty’s Government was willing, up to a point, to express its own opinion, but it regarded the matter as one to be solved by diplomacy, or “third-party settlement.” Ultimately, as we know, it was solved temporarily at least, after the use of force, by agreement.

 

These considerations make it impossible to accept Mr. Littman’s contention. The issues as to the extent and nature of Occidental’s rights cannot either be said to have been solved in advance for the courts by Her Majesty’s Government through its attitude to the various relevant transactions, nor be said to be capable of being solved by a request to Her Majesty’s Government for an executive certificate or statement. Her Majesty’s Government regarded the whole matter as lying in the international sphere, subject at most to such influence as Her Majesty’s Government could bring to bear, but not susceptible of decision by Her Majesty’s Government. The issues are, as Her Majesty’s Government saw them, international issues, and it is in that character that their justiciability by a municipal court must be considered. I take up this question, with others, at the end of this opinion.

 

I pass now to the second branch of the argument which is described broadly, as the “act of state” argument. As to this the submissions of the respondents have brought some much needed clarification to a generally confused topic. Not the least of its difficulty has lain in the indiscriminating use of “act of state” to cover situations which are quite distinct, and different in law.

 

In the first place we can segregate that version of “act of state” which concerns action by an officer of the Crown taken outside this country against foreigners otherwise than under colour of legal right: the classic example of this is provided by Buron v. Denman (1848) 2 Exch. 167. The action taken by officers of Her Majesty’s Government, by means of H.M.S. Yarnton, and in bringing pressure to bear upon the Ruler of U.A.Q., might fall into this category. They are not directly attacked in these proceedings, but it is part of Occidental’s case that they were unlawful. However, the question whether these actions can be described as “acts of state” within [*931] this doctrine does not lie at the heart of the dispute and I do not propose to pursue it.

 

A second version of “act of state” consists of those cases which are concerned with the applicability of foreign municipal legislation within its own territory, and with the examinability of such legislation – often, but not invariably, arising in cases of confiscation of property. Mr. Littman gave us a valuable analysis of such cases as Carr v. Fracis Times & Co. [1902] A.C. 176; Aksionairnoye Obschestvo A. M. Luther v. James Sagor & Co. [1921] 3 K.B. 532 and Princess Paley Olga v. Weisz [1929] 1 K.B. 718, suggesting that these are cases within the area of the conflict of laws, concerned essentially with the choice of the proper law to be applied.

 

Two points were taken as regards the applicability of this line of authority. First, it was said that foreign legislation can be called in question where it is seen to be contrary to international law or to public policy; the decree of 1969/70 was so contrary. Secondly, it was contended that foreign legislation is only recognised territorially – i.e. within the limits of the authority of the state concerned.

 

In my opinion these arguments do not help the respondents. As to the first it is true, as I have pointed out, that the attack on Sharjah’s decree of 1969/70 is not upon its validity under the law of Sharjah, but upon its efficacy in international law. But this brings it at once into the area of international dispute. It is one thing to assert that effect will not be given to a foreign municipal law or executive act if it is contrary to public policy, or to international law (cf. In re Helbert Wagg & Co. Ltd’s Claim [1956] Ch. 323) and quite another to claim that the courts may examine the validity, under international law, or some doctrine of public policy, of an act or acts operating in the area of transactions between states.

 

The second argument seems to me to be no more valid. To attack the decree of 1969/70 extending Sharjah’s territorial waters, i.e. its territory, upon the ground that the decree is extra-territorial seems to me to be circular or at least question begging.

 

However, though I reject these particular arguments relied on by way of exception to the rule derived from the authorities mentioned above, I do not regard the case against justiciability of the instant disputes as validated by the rule itself. If it is to be made good it must be upon some wider principle.

 

So I think that the essential question is whether, apart from such particular rules as I have discussed, viz. those established by (a) the Mocambique [1893] A.C. 602 and Hesperides [1979] A.C. 508 cases and by (b) Luther’s case [1921] 3 K.B; 532 and Princess Paley Olga v. Weisz [1929] 1 K.B. 718, there exists in English law a more general principle that the courts will not adjudicate upon the transactions of foreign sovereign states. Though I would prefer to avoid argument on terminology, it seems desirable to consider this principle, if existing, not as a variety of “act of state” but one for judicial restraint or abstention. The respondents' argument was that although there may have been traces of such a general principle, it has now been crystallised into particular rules (such as those I have mentioned) within one of which the appellants must bring the case – or fail. The Nile, once separated into a multi-channel delta, cannot be reconstituted. [*932] In my opinion there is, and for long has been, such a general principle, starting in English law, adopted and generalised in the law of the United States of America which is effective and compelling in English courts. This principle is not one of discretion, but is inherent in the very nature of the judicial process.

 

The first trace of it is in the 17th century in Blad v. Bamfield (1674) 3 Swan. 604, 607. The record of the decision from Lord Nottingham’s manuscript contains this passage:

 

“… the plaintiff hath proved letters patent from the King of Denmark for the sole trade of Iceland; a seizure by virtue of that patent: a sentence upon that seizure; a confirmation of that sentence by the Chancellor of Denmark; an execution of that sentence after confirmation; and a payment of two-thirds to the King of Denmark after that execution. Now, after all this, to send it to a trial at law, where either the court must pretend to judge of the validity of the king’s letters patent in Denmark, or of the exposition and meaning of the articles of peace; or that a common jury should try whether the English have a right to trade in Iceland, is monstrous and absurd.”

 

Lord Nottingham records that “I thought fit to put an end to [the case]” and he decreed that the plaintiff should have a perpetual injunction to stay the defendant’s suit at law – a decision clearly on justiciability, and not merely on defence.

 

More clearly as a recognition of a general principle is Duke of Brunswick v. King of Hanover (1844) 6 Beav. 1; (1848) 2 H.L.Cas. 1: a case in this House which is still authoritative and which has influenced the law both here and overseas. There are two elements in the case, not always clearly separated, that of sovereign immunity ratione personae, and that of immunity from jurisdiction ratione materiae: it is the second that is relevant. I find the principle clearly stated that the courts in England will not adjudicate upon acts done abroad by virtue of sovereign authority. Thus Lord Cottenham L.C. states the question, quite apart from any personal immunity, as being whether the courts of this country can “sit in judgment” upon the act of a sovereign, effected by virtue of his sovereign authority abroad. His decision is conveyed in the words, at p. 21:

 

“It is true, the bill states that the instrument was contrary to the laws of Hanover and Brunswick, but, notwithstanding that it is so stated, still if it is a sovereign act, then, whether it be according to law or not according to law, we cannot inquire into it.”

 

and he continues by distinguishing cases of private rights (cf. Luther v. Sagor [1921] 3 K.B. 532). He then said, at pp. 21-22:

 

“If it were a private transaction … then the law upon which the rights of individuals may depend, might have been a matter of fact to be inquired into … But … if it be a matter of sovereign authority, we cannot try the fact whether it be right or wrong.”

 

Lord Campbell is still more definite. The question he says, at p. 27, is as to the validity of an act of sovereignty,” and he expresses the view, at [*933] p. 26, that even if the Duke of Cambridge (i.e. not the sovereign) had been sued, “it would equally have been a matter of state.”

 

It is justly said of this case, and of their Lordships' observations, that they are directed to the question whether a sovereign can be brought to account in this country in respect of sovereign acts, and that such general phrases as “sitting in judgment on,” “inquiring into” or “entertaining questions” must be read in their context. I agree that these phrases are not to be used without circumspection: the nature of the judgment, or inquiry or entertainment must be carefully analysed. It is also to be noted that the acts in question were performed within the territory of the sovereign concerned, reliance is placed on this in some passages; an argument on this I have already dealt with. These qualifications accepted, the case is nevertheless support, no doubt by reference to the issue in dispute, for a principle of non-justiciability by the English courts of a certain class of sovereign acts.

 

The discussion now shifts to the United States. The Duke of Brunswick case, 2 H.L.Cas. 1, was followed in Underhill v. Hernandez (1893) 65 Fed. 577. In the Supreme Court (1897) 168 U.S. 250, Fuller C.J. used the much-quoted words, at p. 252:

 

“Every sovereign state is bound to respect the independence of every other sovereign state, and the courts of one country will not sit in judgment on the acts of the government of another done within its own territory. Redress of grievances by reason of such acts must be obtained through the means open to be availed of by sovereign powers as between themselves.”

 

Again it is a just observation that the words “sit in judgment” must be related primarily to the issue under discussion, viz., whether a remedy could be obtained in the United States for an alleged wrong committed by a foreign government in its own territory. But a principle is nevertheless stated.

 

A few years later Lord Halsbury L.C. uttered the well-known sentence “It is a well-established principle of law that the transactions of independent states between each other are governed by other laws than those which municipal courts administer": Cook v. Sprigg [1899] A.C. 572, 578, a case in which lines of argument similar to those in the present case can be found. An earlier recognition, in an appropriate circumstance, of non-justiciability, had been given by Lord Kingsdown in Secretary of State in Council of India v. Kamachee Boye Sahaba (1859) 13 Moo.P.C.C. 22, 86. These authorities carry the doctrine of non-justiciability into a wider area of transactions in the international field.

 

Fuller C.J.’s principle was taken up and again applied by the Supreme Court in Oetjen v. Central Leather Co. (1918) 246 U.S. 297, 304 and applied to a case involving the title to property brought within the custody of a United States court:

 

“To permit the validity of the acts of one sovereign state to be reexamined and perhaps condemned by the courts of another would very certainly ‘imperil the amicable relations between governments and vex the peace of nations.’” [*934]

 

It is worth noting that this case and that of Underhill, 168 U.S. 250, were referred to in the judgments in Luther’s case [1921] 3 K.B. 532 and Princess Paley Olga v. Weisz [1929] 1 K.B. 718, Scrutton L.J. in the latter stating that English law on the point was the same as American law.

 

Upon the much commented case of Banco Nacional de Cuba v. Sabbatino (1964) 376 U.S. 398 no extended discussion is here appropriate or necessary. The case was one of “act of state” in the normal meaning, viz. action taken by a foreign sovereign state within its own territory. It affirms the doctrine of Underhill, 168 U.S. 250 and Oetjen, 246 U.S. 297. It states (and for this was relied on by the respondents) that international law does not require application of the doctrine of “act of state.” Granted this, and granted also, as the respondents argue, that United States' courts have moved towards a “flexible” use of the doctrine on a case to case basis, there is room for a principle, in suitable cases, of judicial restraint or abstention. Let us see where this has led, in the United States, in relation to the very same situation as that before us. Their courts have given two important decisions.

 

In 1970 Occidental brought two suits in California on allegations closely similar to allegations made in this action: that the Ruler of Sharjah had been induced by Buttes to backdate the decree enlarging the territorial sea to 12 miles to September 1969, that Buttes had induced and procured illegal acts by the United Kingdom and by the Ruler of Sharjah that Buttes had induced Iran to make a claim to “the location.” These were claimed to be common law torts as well as violations of the Sherman Act [Anti-Trust Act 1890].

 

The United States District Court (District Judge Pregerson, March 17, 1971) granted Buttes’s motion to dismiss the Federal suit. It found that the essence of Occidental’s case was to prove a conspiracy, and that characterisation of the case as a boundary dispute clouded the issue. However, it found that Occidental:

 

“… necessarily ask this court to ‘sit in judgment' upon the sovereign acts pleaded, whether or not the countries involved are considered co-conspirators. That is, to establish their claim as pleaded plaintiffs must prove, inter alia, that Sharjah issued a fraudulent territorial waters decree, and that Iran laid claim to the island of Abu Musa at the behest of the defendants. Plaintiffs say they stand ready to prove the former allegation by use of ‘internal documents.' But such inquiries by this court into the authenticity and motivation of the acts of foreign sovereigns would be the very sources of diplomatic friction and complication that the act of state doctrine aims to avert.”

 

It concluded that Buttes’s motion to dismiss should be granted for failure to state a claim upon which relief may be granted. This judgment was affirmed by the Ninth Circuit Court of Appeals (June 23, 1972).

 

In 1974 Occidental brought numerous actions directed towards cargoes of oil shipped from the location, based on similar allegations.

 

The United States District Court in Louisiana (Chief Judge Hunter, July 8, 1975) granted Buttes’s motion for summary judgment against Occidental. The court gave attention to the boundary aspects of the dispute, [*935] which it considered were “intricately interwoven with the ‘act of state' doctrine.” I quote two passages from the judgment:

 

“The entire fabric of [Occidental's] complaint is woven out of attacks on the validity of, or questioning the reasons for, the acts of Sharjah, Iran and Umm [U.A.Q.], with respect to the precise rights which [Occidental] asserts. It traces a series of wrongs of foreign states to reveal why the lease agreement cancellation by Umm was invalid and why neither Sharjah nor Iran had a right to honor the lease contract (concession) by Buttes and its joint venturers.”

 

It listed 10 “acts of state” as appearing in Occidental’s claim and continued:

 

“Practical considerations underlying a specific situation must be precisely examined to avoid conclusions making for eventual confusion and conflict. The instant case presents one of those problems for the rational solution of which it becomes necessary to take soundings. The case before us is this: Sharjah and Iran recognise the Buttes’s concession. Umm cancelled the Occidental concession, but participates in the rentals received from Buttes. In light of this history and what we perceive to be the purpose of Hickenlooper [the Hickenlooper amendment of October 2, 1964, which restricted application of the act of state doctrine], I just cannot bring myself to believe that Congress intended to permit United States courts to tell these three foreign countries: ‘You are wrong and we are right as to the ownership of your offshore waters.'”

 

On appeal by Occidental to the Fifth Circuit Court of Appeals the United States filed an amicus curiae brief (May 1978) to which was attached a letter from the Legal Adviser to the Department of State to the Attorney General. I quote some passages, without apology for their length, because of their obvious pertinence and rationality:

 

“It is our understanding that the disposition of this case would require a determination of the disputed boundary between Umm al Qaiwain on the one hand and Sharjah and Iran on the other at the time Umm al Qaiwain granted the concession in issue to Occidental. It is our view that it would be contrary to the foreign relations interests of the United States if our domestic courts were to adjudicate boundary controversies between third countries and in particular that controversy involved here.

 

“The extent of territorial sovereignty is a highly sensitive issue to foreign governments. Territorial disputes are generally considered of national significance and politically delicate. Even arrangements for the peaceful settlement of territorial differences are often a matter of continued sensitivity.

 

“These conditions are applicable to the question of Umm al Qaiwain’s sovereignty over the continental shelf surrounding Abu Musa at the time of the concession to Occidental and to the subsequent arrangements worked out among the affected states. For these reasons, the Department of State considers that it would be potentially [*936] harmful to the conduct of our foreign relations were a United States court to rule on the territorial issue involved in this case.

 

“We believe that the political sensitivity of territorial issues, the need for unquestionable U.S. neutrality and the harm to our foreign relations which may otherwise ensue, as well as the evidentiary and jurisprudential difficulties for a U.S. court to determine such issues, are compelling grounds for judicial abstention.

 

“We do not believe that this judicial self-restraint should turn on such analytical questions as whether the so-called Act of State doctrine which is traditionally limited to governmental actions within the territory of the respective state can apply to an exercise of disputed territorial jurisdiction. It rather follows from the general notion that national courts should not assume the function of arbiters of territorial conflicts between third powers even in the context of a dispute between private parties. As a result, we are of the view that the court should be encouraged to refrain from settling the extent of Umm al Qaiwain’s sovereign rights in the continental shelf between its coast and Abu Musa at the time of its grant of the concession to Occidental.”

 

The Court of Appeals dismissed Occidental’s appeal (August 9, 1978) and held:

 

“The issue of sovereignty is political not only for its impact on the executive branch, but also because judicial or manageable standards are lacking for its determination. To decide the ownership of the concession area it would be necessary to decide (1) the sovereignty of Abu Musa, (2) the proper territorial water limit and (3) the proper allocation of continental shelf. A judicial resolution of the dispute over Abu Musa between Iran and Sharjah is clearly impossible.”

 

Occidental applied to the Supreme Court of the United States for certiorari and extensive briefs were filed, including again an elaborate amicus brief for the United States. On June 11, 1979, the Supreme Court denied the petition.

 

The constitutional position and the relationship between the executive and the judiciary in the United States is neither identical with our own nor in itself constant. Moreover, the passages which I have cited lay emphasis upon the “foreign relations” aspect of the matter which appeared important to the United States at the time. These matters I have no wish to overlook or minimise. I appreciate also Mr. Littman’s argument that no indication has been given that Her Majesty’s Government would be embarrassed by the court entering upon these issues. But, the ultimate question what issues are capable, and what are incapable, of judicial determination must be answered in closely similar terms in whatever country they arise, depending, as they must, upon an appreciation of the nature and limits of the judicial function. This has clearly received the consideration of the United States courts. When the judicial approach to an identical problem between the same parties has been spelt out with such articulation in a country, one not only so closely akin to ours in legal approach, the fabric of whose legal doctrine in this area is so closely [*937] interwoven with ours, but that to which all the parties before us belong, spelt out moreover in convincing language and reasoning, we should be unwise not to take the benefit of it.

 

The proceedings, if they are to go on, inevitably would involve determination of the following issues, and here I pick up the strands left over in the preceding discussion:

 

(1) Whether Occidental acquired in 1969 a vested right to explore the seabed at the location within 12 miles from the coast of Abu Musa. This involves consideration of the questions: (a) which state had sovereignty over Abu Musa, (b) what was the width of the territorial waters of Abu Musa, (c) what was the boundary of the continental shelf between (i) Sharjah and U.A.Q., (ii) Abu Musa and U.A.Q., (iii) Iran and both Emirates.

 

These questions in turn involve consideration of the meaning and effect of the parallel declarations of 1964. Did they amount to an inter-state agreement; are they to be interpreted in the light of maps and how are the maps to be interpreted; was the agreement (if any) superseded or modified by later conduct; was it really the intention of the Ruler of Sharjah at that time to give up any continental shelf in respect of Abu Musa; how is any bilateral agreement between Sharjah and U.A.Q. to be fitted in with the claims of other states to the continental shelf in the Arabian Gulf, and how any dispute as to the continental shelf can be decided in the absence of Iran which has asserted claims to the relevant part of the continental shelf? Even if question 1 (b) is justiciable (in view of the attitude of Her Majesty’s Government or otherwise), insuperable difficulties arise as regards question 1 (c).

 

(2) If Occidental did acquire any vested rights as above, how and why was it deprived of those rights? Directly, it was deprived of them by actions of sovereign states, viz. Sharjah, Iran, Her Majesty’s Government and U.A.Q. Consideration of these involves examination of a series of inter-state transactions from 1969-73. If Occidental is to succeed in either its counterclaim for conspiracy, or in the slander action, it is necessary to show that these actions were brought about by Buttes, more exactly by a fraudulent conspiracy between Buttes and Sharjah. This certainly involves an examination of the motives (exclusive or dominant?) for the action of Sharjah in making and, if proved, backdating the decree of 1969/70. It involves establishing that the actions at least of Sharjah, and it appears also of Iran and of Her Majesty’s Government, were at some point unlawful. “Unlawful” in this context cannot mean unlawful under any municipal law (I remind that Occidental does not contend that the Sharjah decree was unlawful under the law of Sharjah), but under international law. As Mr. Lauterpacht Q.C. put it, it involves deciding whether the Sharjah decree was inefficacious, at least for a time, in international law. If, in the absence of unlawful means, it is alleged that the action taken by Sharjah and the co-conspirators was predominantly to injure Occidental (I am not convinced that Occidental makes this case but I will assume it), this involves an inquiry into the motives of the then Ruler of Sharjah in making the decree, and a suggestion that he invited Iran to enter into an arrangement about Abu Musa predominantly in order to injure Occidental. [*938] It would not be difficult to elaborate on these considerations, or to perceive other important inter-state issues and/or issues of international law which would face the court. They have only to be stated to compel the conclusion that these are not issues upon which a municipal court can pass. Leaving aside all possibility of embarrassment in our foreign relations (which it can be said not to have been drawn to the attention of the court by the executive) there are – to follow the Fifth Circuit Court of Appeals – no judicial or manageable standards by which to judge these issues, or to adopt another phrase (from a passage not quoted), the court would be in a judicial no-man’s land: the court would be asked to review transactions in which four sovereign states were involved, which they had brought to a precarious settlement, after diplomacy and the use of force, and to say that at least part of these were “unlawful” under international law. I would just add, in answer to one of the respondents' arguments, that it is not to be assumed that these matters have now passed into history, so that they now can be examined with safe detachment.

 

It remains to consider the practical effect of the above conclusions.

 

There is no doubt that, as found by May J. in his judgment of July 31, 1974, the counterclaim in conspiracy is “really the kernel of this litigation.” For the reasons I have given, this counterclaim cannot succeed without bringing to trial non-justiciable issues. The court cannot entertain it.

 

As regards the libel counterclaim, the innuendo pleaded,i that Occidental had attempted to seize part of or to interfere with Buttes’s oil concession granted by Sharjah knowing that it had no right to do so, involves consideration of the same issues as arise in relation to the rest of the counterclaim and for the same reason cannot be entertained.

 

The plea of justification made by Occidental in the slander action raises the same issues as the conspiracy counterclaim and is for the same reason not capable of being entertained by the court. In these circumstances a problem might arise if Buttes were to insist upon the action proceeding: to allow it to proceed but deny Occidental the opportunity to justify would seem unjust, although Buttes suggests that there are precedents for such a situation being accepted by the court. However, in the event, Buttes has, in its summons of July 11, 1980, offered to submit to a stay on the claim, if the counterclaims are stayed: Buttes should be held to this offer.

 

I suggest that Buttes’s appeal against the order of the Court of Appeal, dated December 31, 1974, be allowed, that that order be set aside and that an order be made on Buttes’s summons of July 11, 1980, that upon Buttes by its counsel consenting to all proceedings on the claim herein being stayed, the counterclaim of the first and second defendants, Armand Hammer and Occidental Petroleum Corporation, be stayed.

 

The stay of the counterclaim would necessarily involve that the pending application of the defendants for discovery and/or production of documents be similarly stayed.

 

LORD FRASER OF TULLYBELTON. My Lords, I have had the privilege of reading in draft the speech of my noble and learned friend, Lord [*939] Wilberforce, and I agree with it. For the reasons given by him I would dispose of the appeal in the way that he has suggested.

 

LORD RUSSELL OF KILLOWEN. My Lords, I also have had the advantage of reading in draft the illuminating speech of my noble and learned friend, Lord Wilberforce. I agree with his reasons and conclusions.

 

LORD KEITH OF KINKEL. My Lords, I have had the benefit of reading in draft the speech of my noble and learned friend, Lord Wilberforce, and agree entirely with his reasoning and conclusions. I would accordingly dispose of the appeal in the manner which he has proposed.

 

LORD BRIDGE OF HARWICH. My Lords, I have had the advantage of reading in draft the speech of my noble and learned friend, Lord Wilberforce. I entirely agree with it and with the order he proposes.

 

Orders accordingly.