Buttes Gas and Oil Company v Hammer; Buttes Gas and Oil Company v Hammer (No. 3)

JurisdictionUK Non-devolved
CourtHouse of Lords
JudgeLord Wilberforce,Lord Fraser of Tullybelton,Lord Russell of Killowen,Lord Keith of Kinkel,Lord Bridge of Harwich
Judgment Date29 October 1981
Judgment citation (vLex)[1981] UKHL J1029-1
Date29 October 1981

[1981] UKHL J1029-1

House of Lords

Lord Wilberforce

Lord Fraser of Tullybelton

Lord Russell of Killowen

Lord Keith of Kinkel

Lord Bridge of Harwich

Buttes Gas and Oil Company
Hammer and Others
Buttes Gas and Oil Company and Another
Hammer and Another
(Conjoined Appeals)
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 9 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 (UAQ). 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 1969-1973 Buttes Gas and Oil Company ("Buttes") emerged as concessionaire entitled to exploit the location, to the exclusion of Occidental Petroleum Corporation ("Occidental"): out of this situation, which was unwelcome to Occidental, the present litigation arose. Both companies are incorporated in California, U.S.A. [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 co-appellant/respondent.]


It is necessary to describe the history of the litigation. It was triggered by a press conference given in London on 5th October 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 3 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 belonged to Occidental.


On 18th October 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. Order 11. On 21st July 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 7th April 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.$4,000,000.00.


The counterclaim also alleged that Mr. John Boreta, President of Buttes (joined as defendant to the counterclaim), had libelled Occidental on 14th July 1970 in a report to the shareholders of Buttes in which he said that certain U.S. proceedings brought by Occidental against Buttes were, in the opinion of Buttes' attorneys, "wholly without merit".


On 7th July 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, UAQ, Iran and the United Kingdom: alternatively, that certain specified parts of the defence and counterclaim should be struck out or all proceedings stayed as to any issue arising therefrom on the ground that they raised matters which are acts of state. A further summons, dated 16th November 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' application) the summonses came before the Court of Appeal.


The decision (second decision) of the Court of Appeal was given on 5th December 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 27th February 1975.


After the second decision of the Court of Appeal a number of further pleadings have been exchanged. On 2nd May 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 19th January 1979, and an amended reply and defence and counterclaim on 8th May 1980. Moreover, since the second decision there have been important decisions in the U.S.A. on similar issues.


Apart from these proceedings on the substance of the case, issues have arisen as regards discovery of documents. On 11th April 1976 Occidental applied for an order for inspection of 23 documents referred to in Buttes' 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 8th January 1979, been ordered by Master Warren, McNeill J. in Chambers partly allowed Buttes' appeal, holding that most of the documents were privileged. Both sides thereupon appealed to the Court of Appeal. On 20th June 1980 the Court of Appeal (third decision) 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 the Master of the Rolls, 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 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 11th November 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 11th July 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 1971-80 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,...

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