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

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
Judgment Date20 June 1980
Judgment citation (vLex)[1980] EWCA Civ J0620-1
Docket Number1970 B. No. 6486
Date20 June 1980

[1980] EWCA Civ J0620-1

In The Supreme Court of Judicature

Court of Appeal

On Appeal from the High Court of Justice

Queen's Bench Division

(Mr. Justice McNeill)


The Master of the Rolls (Lord Denning)

Lord Justice Donaldson and

Lord Justice Brightman

1970 B. No. 6486
Buttes Gas and Oil Company
Plaintiffs (Respondents)
Armand Hammer
First defendant (Appellant)
Occidental Petroleum Corporation (By Original Action)
Second Defendant (Appellants)
And Between:
Occidental Petroleum Corporation
Plaintiffs (Appellants)
Buttes Gas and Oil Company and John Boreta

(By Counterclaim)

Defendants (Respondents)

MR. N. E BATHURST, Q. C., MR. A. H. M. EVANS, Q. C. and MR. J. PREVITE (instructed)by Messrs. Coward Chance)appeared on behalf of Buttes Gas and Oil Company and John Boreta (Respondents).

MR. M. LITTMAN, Q. C., MR. E. LAUTERPACHT, Q. C., MR. M. ROSEN and MR. A. J. KOLODZIEJ (instructed by Messrs. Herbert Smith & Co.) appeared on behalf of Occidental Petroleum Corporation (Appellants).

MR. C. W. G. ROSS MUNRO, Q. C. and MR. M. ROSEN (instructed by mess.)Herbert Smith & Co.) appeared on behalf of Armand Hammer (Appellant).


Abu Musa is a small island in the Arabian Gulf. Early in 1970 oil was discovered nine miles off its shore. Each of two American oil companies claimed the right to exploit it. They started litigating about it in October 1970. Now ten years later the action is nowhere near trial. It has only reached the stage of discovery of documents. On this interlocutory point the argument before us took nine days, with five leading counsel and as many juniors. We have had excursions into the Law of the Sea - of territorial waters and the continental shelf - into sovereign immunity and diplomatic immunity - into the rules of court - and goodness knows what else. No expense has been spared. No stone left unturned. The judge exploded. Even at that stage, when the application was before him, he said that the length of the proceedings "is outrageous and comes perilously near to an abuse of the process of the court". Even more when it reaches us nearly a year later. Still we must go on with it. It looks like outdoing Jarndyce v. Jarndyce except that these litigants are not likely to run out of money.


Discovery of documents is an important step in the course of an action. Each side has to disclose to the other the documents which he has in his possession, custody or power relating to the issues in the action. These issues are defined by the pleadings. To these I will turn. But to make them intelligible, I have drawn a map. I would also ask the reader to go back to the previous time when this case was before us. It is reported in (1975) 1 Queen's Bench 557.


The two companies are Occidental and Buttes. Each of them claimedunder a local Ruler. In November 1969 Occidental was granted an oil concession by the Ruler of U. A. Q. In December 1969 Buttes was granted an oil concession by the Ruler of Sharjah. Each of these oil concessions was made with the approval of Her Majesty's Government - which at that time controlled the external affairs of these Rulers.




I would not like to attribute any blame to Her Majesty's Government, but in some ways they contributed to the misunderstanding that arose. The source of the trouble was a map which was annexed to the oil concession which the Ruler of U. A. Q. granted to Occidental on 18th November, 1969. The "concession area" was defined by reference to a map attached to the concession. It appeared to show the "concession area" as extending from the coast of the mainland outwards for thirty - seven miles up to the three-mile limit of the Island of Abu Muss. This concession agreement was executed by the Ruler of U. A. Q.. "in the presence of D. McCarthy, Head of the Arabian Department, foreign and Commonwealth Office". It was executed by Mr. Armand Hammer on behalf of Occidental.




By contrast the concession granted by the Ruler of Sharjah to Buttes on 29th December, 1969 had no map attached to it. The "concussion area" was defined by words only. It was "all 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 seabed and subsoil lying beneath the waters of the Arabian Gulf continuous to the said territorial waters". That agreement was approved by Her Majesty's Government in the belief that the territorialwaters of Sharjah were three nautical miles: that the island of Abu (1usa was within the jurisdiction of the Ruler of Sharjah: and consequently that the concession area to Buttes only extended as far as the three-mile limit round Abu Musa. That was, however, only the belief of Her Majesty's Government, There was nothing in the concession to support it. The "concession area" was defined as extending to the "territorial waters" without saying whether they were three miles or twelve miles.




In February 1970 oil was discovered at a point nine miles out from Abu Musa. Each of the oil companies claimed it. Occidental claimed that it fell within their concession area as shown on the map attached to their concession. Buttes claimed it on the footing that their concession area extended - not merely to the three-mile limit - but to the twelve-mile limit round Abu Musa. In support of their claim, Buttes sent a delegation to London. It included their legal adviser, Mr. Northcutt Ely. They saw Mr. Holding of the Foreign and Commonwealth Office. In a letter to him of 20th March, 1970, they said that they wished to know "the breadth of the territorial sea" which the Ruler of Sharjah "can properly claim around the Island of Abu Musa". They said that "a twelve - mile territorial sea belt has been proclaimed by Iran, Iraq, Kuwait and Saudi Arabia. This width of the territorial sea would, therefore, appear to be the prevailing rule of international law in the Arabian Gulf".


As a result of these discussions, Buttes decided that their concession area extended to the twelve-mile limit: that the oil found nine miles out fell within their concession area. So they decided to drill a well there. By a letter dated 23rd March, 1970, Buttes asked the Ruler of Sharjah for his approval of their drilling there. He gave his approval.


Occidental hotly disputed this claim by Buttes. They claimed that they had a right to drill for oil at this point. They relied on the map attached to their concession.


Both sides notified the political agent of Her Majesty's Government stationed at Dubai - of their intention to drill at this nine - mile point. Then followed much diplomatic activity - and sea activity - by both sides. In the end Buttes succeeded: and Occidental failed. Buttes drilled for oil at the nine-mile point and transported the oil to the United States. Occidental started hundreds of actions in the United States against Buttes, claiming that the oil was theirs. But these actions were all stayed: because the United States' courts would not allow them to go on.




When the dispute became acute early in April 1970, the Ruler of Sharjah produced a homemade decree which he said that he had made six months earlier on 10th September, 1969 (before he granted the concession to Buttes). In that decree he had declared that the extent of the territorial waters of Sharjah and the islands was twelve nautical miles. Occidental say that that homemade decree was a fraud. It was not made, they say, until early April 1970, and then back-dated to September 1969 - so as to ante-date the concession of December 1969.


On 5th April, 1970 the Ruler of Sharjah issued a formal decree in which he declared that:


"The Territorial Sea of the Emirate of Sharjah and its Dependencies extends into the open sea to a distance of twelve nautical miles from the base lines on the coasts of the mainland and of the islands of the Emirate".




Buttes in their Statement of Claim complain that on the 5th October,1970, at a Press Conference in London, Mr. Hammer of Occidental slandered them. He said:


1. That the Ruler of Sharjah conspired with Buttes to increase the concession area from three miles to twelve miles, and


2. That the Ruler of Sharjah fraudulently back-dated the decree of 10th September, 1969 so as to give him twelve miles from September 1969, whereas it was in truth not made till late March 1970.


Occidental and Mr. Hammer in their Defence plead that the words were true in substance and in fact: They counterclaim for damages for conspiracy. Also for libel in an earlier letter of Buttes to their shareholders.




The issues that arise are:


First, what was the area of the concession granted by the Ruler of U.A.Q. to Occidental in November 19697


Second, what was the area of the concession granted by the Ruler of Sharjah to Buttes in December 19697


Third, if Occidental was validly granted an area which included the nine-mile point, did the Ruler of Sharjah - in collaboration with Buttes - fraudulently conspire to deprive Occidental of it?




Seeing that each Ruler granted a concession over all the territorial waters that he had, these issues inevitably involve an inquiry into the territorial Jurisdiction of two Sovereign Rulers. Furthermore, the charge of conspiracy inevitably involves an inquiry into the conduct of a Sovereign Ruler in his legislative capacity, i.e. in making his legislative decrees.


If the Ruler of Sharjah had been an ordinary citizen - and not a sovereign - he would have been a necessary and proper party to the action. He would have been joined as a plaintiff - or at any rate as a defendant to the counterclaim. But he has not been joined. No doubt because he isentitled to sovereign immunity. The...

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