Lonrho Ltd v Shell Petroleum Company Ltd (No. 2)
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE SHAW,LORD JUSTICE BRANDON |
| Judgment Date | 12 February 1980 |
| Judgment citation (vLex) | [1980] EWCA Civ J0212-1 |
| Docket Number | 1980 L. No. 202 |
| Court | Court of Appeal (Civil Division) |
| Date | 12 February 1980 |
[1980] EWCA Civ J0212-1
The Master of The Rolls
(Lord Denning)
Lord Justice Shaw and
Lord Justice Brandon
In The Supreme Court of Judicature
Court of Appeal
On Appeal From The High Court of Justice
Queen's Bench Division
Commercial Court (Mr. Justice Goff)
MR. C. SPARROW, Q. C., MR. G. LIGHTMAN, MR. A. BOYLE and MR. M. BRIGGS (instructed by Messrs. Cameron Kemm Nordon) appeared on behalf of the Plaintiffs (Appellants).
MR. P. CURRY, Q. C., MR. B. DAVENPORT and MR. G. LANGLEY (instructed by Messrs. Slaughter & May) appeared on behalf of the First Defendants (Respondents).
MR. R. ALEXANDER, Q. C., MR. R. BUCKLEY, Q. C., MR. S. RUTTLE and MR. J. SUMPTION (instructed by Messrs. Linklaters & Paines) appeared on behalf of the Second Defendants (Respondents).
This case concerns two commercial giants. On the one side there is Lonrho - a big entrepreneur - which is involved in many enterprises, particularly in Africa. On the other side there are the great oil companies - the Shell Petroleum Company Limited and the British Petroleum Company Limited. These companies are involved in arbitration before most distinguished arbitrators - Lord Cross of Chelsea, Dr. Mota and Sir Henry Fisher.
In the course of that arbitration a question arose as to discovery: that is, as to the lists of documents which Shell and B. P. have to disclose which are relevant to the issues in the arbitration. A point arose about the subsidiary companies. Both Shell and B. P. are multi-national companies which operate in many corners of the earth. In these other countries they nearly always form subsidiary companies to carry on operations there.
This particular case is concerned with South Africa, Rhodesia and Mozambique. The South African and Rhodesian companies were incorporated in those territories respectively. The Mozambique company was incorporated and registered in this country. The question which has arisen is as to whether Shell and B. P. are to disclose the documents of those subsidiary companies. That question has arisen particularly because those companies say that they will not produce the documents or allow them to be inspected. Their own directors say that they will not allow the documents which are in their countries to be produced or inspected. They say that it would be against the interests of the companies to produce them. Furthermore, if they did, it would make them liable to criminal proceedings being taken against them in South Africa or Rhodesia. So theissue in the case is whether Shell and B. P. are bound to disclose the documents of those subsidiaries.
In order that the problem can be understood, I will give an outline of the dispute between the parties. As long ago as October 1962 Lonrho agreed to build a pipeline. It was to go from Beira in Mozambique to Umtali in Rhodesia. As everyone knows, Rhodesia is landlocked. The practical way to bring oil into the country at that time was to bring it by tanker to Beira in Mozambique, and then convey it by pipeline to Rhodesia. That was what was planned by an agreement made in October 1962. Lonrho were to construct the pipeline, which would carry the oil to a refinery in Rhodesia. It was contemplated by that agreement that Shell, B. P. and others would ship oil by that pipeline into Rhodesia. They would pay royalties as a reward to Lonrho for the use of the pipeline. That is how it all started. It was called a Shippers' Agreement. It was between Lonrho on the one side, and Shell, B. P. and a few other companies on the other.
The pipeline was completed in January 1965. Oil started to flow through that pipeline from Beira to Rhodesia. But almost a year later there was trouble in Rhodesia. The people there made a unilateral declaration of independence.
This declaration provoked the displeasure of the United Nations. Sanctions were imposed against Rhodesia: in particular sanctions placing an embargo on any oil going into Rhodesia. If that embargo had been successful, those in control of the illegal regime in Rhodesia would soon no doubt have been brought to their knees.
But oil did get through to Rhodesia during U. D. I.. How did it get through? That is one of the matters which had to beenquired into. It got through, apparently, not from Beira: but perhaps from further down: perhaps from Durban: perhaps from Cape Town. One does not know. Oil somehow got through to Rhodesia.
As a result of some disclosures early in 1967, there was a suspicion that some British companies were concerned. The Government ordered an inquiry. It was conducted by Mr. Thomas Bingham, Q. C. He was appointed on the 10th May, 1977. Almost immediately afterwards, Lonrho issued a writ against Shell, B. P. and a lot of other companies, including some of the subsidiaries (not all of them) in South Africa, Rhodesia and Mozambique. They issued the writ in May 1977. They claimed damages against Shell, B. P. and the others. Against Shell and B. P. they claimed that they had broken the original Shippers' Agreement. They claimed that they had broken it by failing to ship the oil through the pipeline: and said they had impliedly promised they would not ship it from elsewhere. They alleged that Shell and B. P. had shipped it through South Africa: and alleged that it was a breach of contract. In addition - and more seriously - they alleged that there had been a conspiracy by these companies (in breach of the Order of the British Government) to supply petroleum oil to Rhodesia.
That action stood, and was going on. Then, in January 1978, an application was made by Shell and B. P. to Mr. Justice Brightman. They said that there was an arbitration clause in the Shippers' Agreement whereby disputes had to be referred to arbitration. They asked for the writ in the action to be stayed on that account. There is a new Arbitration Act of 1975. Some people think that it is unfortunate, but it is absolutely imperative (in the case of an international agreement containingan arbitration clause) that the case has to go to arbitration. So it seems to me that Mr. Justice Brightman had no option but to stay the action at law, and sent it to arbitration. That is what happened.
In the meantime, in August 1978, Mr. Bingham made his report. It was a most comprehensive report. It has been shown to us. It explained - as far as it could - how the oil got through to Rhodesia during the sanctions period. There was a question of whether or not criminal proceedings should be taken against anyone. But in December of last year, 1979, the Attorney-General declared that he did not think criminal proceedings would lie. So no criminal proceedings have been taken against any of these companies at all. Nevertheless, the arbitration goes ahead. The arbitrators were named in February 1979. Directions were given by those three distinguished arbitrators for the conduct of the arbitration: and quite early on, in February of last year, they ordered that the arbitration should take place between the 23rd June, 1980 and October 1980. Those three or four months have been allocated by the arbitrators - and presumably by the parties - for the determination of the arbitration. No doubt everyone has been making arrangements and fixing dates accordingly for this important arbitration.
The arbitrators ordered lists of documents to be prepared by each side. A massive task. We have been told that the list of one concern alone contains about 130,000 documents. It was a colossal task. Those are the documents which have already been listed. We have been told that Shell and B. P. have provided lists comprising all the documents which are in their possession, power or custody, here in England. Of course, these are their own documents. There are also documents totheir subsidiaries or from them. In fact, they have listed all the documents which they have in London. They are listed and are ready to be disclosed.
Then comes the problem. They did not make lists of the documents in the possession of their subsidiaries in South Africa or Rhodesia. That is the crux of the case. It is interesting to note that, when the Attorney-General said he was not going to prosecute, almost immediately Lonrho were insisting on further and further lists of documents and discovery. They raised the matter on the 18th December, 1979 - just about the time when the Attorney-General made his announcement. They said that the lists which they had been given were insufficient and incomplete. The particular point they made was that the documents of these subsidiaries had not been listed.
An application was due to be heard by the arbitrators on the 19th and 20th January of this year (a Saturday and Sunday). I think that the arbitrators were quite the best people to deal with it. In the ordinary way, they could and would have made an order to decide this discovery point between the parties. But a day or two before the application was due to be heard a letter was written, which Mr. Sparrow told us Lord Cross described as a "bombshell". On the 17th January, 1980 the Treasury Solicitor wrote, saying that he was instructed on behalf of the Foreign and Commonwealth Office. He said that, in regard to quite a number of these documents, the Government might intervene and say that they ought not to be produced on the ground that it was contrary to the public interest. That was the "bombshell" which faced the arbitrators. They were not blown up by it. On the other hand, they decided that theycould not hear the matter fully. Arbitrators have not any enforceable powers. If a party wants an interlocutory order to be enforced, he has to come to the court...
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