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 Majestys
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 Majestys 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
Majestys 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 Buttess
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 Buttess 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 Buttess 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 Buttess 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 courts 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
Majestys 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
Majestys 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
Majestys 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 Majestys 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 abovementioned 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 Sharjahs 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
Occidentals counterclaim for conspiracy.

This being the situation between Sharjah and U.A.Q., both Iran and Her Majestys
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 Majestys 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 Majestys 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
Majestys 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
Majestys 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, Occidentals 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 nonjusticiable 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 Moambique [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
Majestys 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 Majestys 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 Moambique [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 Moambique 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 Occidentals 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 Moambique 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
Majestys 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.
Littmans 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 Majestys

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 Majestys 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 Majestys 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 Majestys
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 Majestys 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 Queens
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 Majestys Government had and retained until
1971 control over Sharjahs 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 Majestys 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 Majestys Government
is set out most fully and clearly in two letters. The first is a letter to Occidentals
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 Sharjahs territorial waters, to a claim by Sharjah to jurisdiction
over the same area [viz. the location"]. It is clear from this letter that Her
Majestys Government did not authorise, or approve, the extension, by decree, of
Sharjahs territorial waters to 12 miles from Abu Musa.

The letter explains the position of Her Majestys Government vis--vis the 1969 (?
1970) decree at considerable length. It is clear that Her Majestys 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
Majestys 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 Majestys 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 states
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 Majestys 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 Sharjahs
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 Majestys 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 Majestys 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 Majestys 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. Littmans contention. The

issues as to the extent and nature of Occidentals rights cannot either be said to
have been solved in advance for the courts by Her Majestys Government through
its attitude to the various relevant transactions, nor be said to be capable of being
solved by a request to Her Majestys Government for an executive certificate or
statement. Her Majestys Government regarded the whole matter as lying in the
international sphere, subject at most to such influence as Her Majestys
Government could bring to bear, but not susceptible of decision by Her Majestys
Government. The issues are, as Her Majestys 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
Majestys 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 Occidentals 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 Sharjahs 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. Ltds
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 Sharjahs 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) Luthers 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 Nottinghams 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 kings 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
defendants 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 wellestablished 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 Luthers 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
Buttess motion to dismiss the Federal suit. It found that the essence of
Occidentals 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 coconspirators. 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 Buttess 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 Buttess 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 Occidentals 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 Buttess
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 Qaiwains
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 Qaiwains 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 Occidentals 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. Littmans argument that no indication has been given that Her Majestys
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 Majestys
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 Majestys 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 Majestys 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-mans 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 nonjusticiable 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 Buttess 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 Buttess 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 Buttess 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.