[SUPREME COURT OF ADEN.]

ANGLO-IRANIAN OIL CO. LD. v. JAFFRATE AND OTHERS.^*2

[THE ROSE MARY.]

International Law - Expropriation without compensation - Property of foreign national - Invalidity - Application of principle by domestic tribunal - Oil concession in Iran - British company - Expropriation by Iranian Government - Sale - Oil in tanker at Aden - Claim by company - Jurisdiction of Aden court - Plea of coercion - Whether oil movable - Interest of sovereign State in oil - Plea of purchase in good faith.

By a Convention of 1933 between an English company and the Government of Persia the company were granted the exclusive right to extract oil within the territory of a specified concession in Persia. By laws of 1951, the Iranian Government purported to nationalize and expropriate all property vested in the company by the concession of 1933. Subsequently, by an action in detinue, the company claimed delivery up to them of oil from that concession contained in a tanker in Aden harbour, which had been sold by the Iranian authorities:-

Held, that the company were entitled to the oil, which remained their property, since (1) the Iranian laws of 1951 were invalid by international law, for, by them, the property of the company was expropriated without any compensation; (2) British courts treated international law as incorporated into their domestic law so far as it was not inconsistent with their own rules (per Lord Atkin in Chung Chi Cheung v. Rex [1939] A.C. 160, 168; 55 T.L.R. 184; [1938] 4 All E.R. 786); (3) the principle in Aksionairnoye Obschestvo A. M. Luther Co. v. James Sagor & Co. [1921] 3 K.B. 532; 37 T.L.R. 777, and Princess Paley Olga v. Weisz [1929] 1 K.B. 718; 45 T.L.R. 365, that a court would not inquire into the legality of acts done by a foreign government in respect of property situate in that government's territory applied only where the property was that of the government's own subjects; and (4), accordingly, following international law as incorporated in the domestic law of Aden, the court must refuse validity to the Iranian laws of 1951.

ACTION.

On June 17, 1952, the Rose Mary, flying the flag of Honduras, arrived in Aden harbour with a cargo of about 700 tons of crude oil which had been loaded at Bandar Mashur in Southern Iran. The Anglo-Iranian Oil Co. Ld. brought the present action in the Supreme Court of the Colony of Aden in detinue claiming delivery up to them of this oil, or alternatively a declaration that it was their property. The action was brought against Captain Giuseppe Jaffrate, then master, Compa–ia de Navegaci—n Teresita S.A. of Panama City, Panama, the owners, and Bubenberg A.G. of Spiez, Switzerland, the charterers of the Rose Mary.

*2; This case is reported in the Weekly Law Reports as a reliable full report of it is unlikely to be readily available elsewhere.

The plaintiffs claimed the property in, or the immediate right to possession of, the oil by virtue of the Convention between them and the Imperial Government of Persia concluded on April 29, 1933, by which they were granted the exclusive right within the territory of a specified concession to search for and extract petroleum for a period ending on December 31, 1993. The agreement provided by article 21 that it should not be altered by legislation, and by article 22 that in the event of any disputes they were to be referred to arbitration before an umpire appointed by the President of the Permanent Court of International Justice. The oil in question, the plaintiffs said, was produced by plants established by them in the concession in Southern Iran, and this was admitted by all the defendants.

The owners of the Rose Mary refused to give possession of the cargo to the plaintiffs on the ground that the title to it was in dispute, but said that it was loaded against their instructions. The master pleaded that the Rose Mary entered Aden harbour under duress, and that accordingly the Aden court had no jurisdiction in the matter, and also claimed that the cargo belonged to the charterers.

The charterers also alleged duress, and, alternatively, relied on the Iranian laws of March and May, 1951, which purported to nationalize and expropriate as from May 1, 1951, all property vested in the plaintiffs by the concession of 1933.

Count Ettore della Zonca, managing director of Ente Petrolifero Italia Medoriente (known as E.P.I.M.), was given a power of attorney by the charterers to defend the action on their behalf. His company was originally formed to exploit Mexican oil under the name E.P.I. Mexicano after the nationalization of Mexican oil in 1939, and that the name of the company was changed in January, 1952, to E.P.I. Medoriente. On February 17, 1952, E.P.I.M. entered into a contract for the purchase in the first year of 400,000 tons of crude oil from the National Iranian Oil Company, and the charterers bought 900 tons of that oil from E.P.I.M.

Accordingly the Rose Mary was chartered on March 28, 1952, to carry the oil from the Persian Gulf to Bari in Italy, and the vessel sailed from Bari for the Persian Gulf on April 25. While in port at Bari the shipowners' broker, Mario Cosulich, with whom was Count della Zonca, delivered a sealed letter to the master with instructions that it was to be opened only at Port Said. The letter instructed the master to proceed to Bandar Mashur. The plaintiffs, learning of the intention to load at Bandar Mashur, offered to supply a cargo for the vessel at Kuwait, and she went there, but after receiving a cable in code from Count della Zonca, the master sailed from there, closed his radio, and proceeded to Bandar Mashur. There about 700 tons of crude oil were loaded, for which the master signed bills of lading in which the cargo was shown as consigned to E.P.I.M.

The shipowners, finding that they were unable to make contact

with the ship, requested the plaintiffs to deliver a message by one of their tankers to the master ordering him to proceed to Aden, and the master eventually received those instructions and informed the owners that he was going to Aden. Later three R.A.F. aircraft were instructed to watch for the Rose Maryduring their routine navigational training flights. The master first saw one circling overhead on June 16, and the next day an aircraft circled above the ship for some time until, 40 miles from Aden, the tug Protector came alongside with one M. Martinelli (the representative of Rose Mary's owners) on board. The Rose Mary then proceeded to Aden harbour.

Sir Hartley Shawcross Q.C., John Megaw and E. W. Nunn, for the plaintiffs, contended: (1) There was no possible case of duress; the master was ordered by the shipowners to go to Aden on a bona fide claim that the charter had been broken, and that could not amount to illegal or improper coercion. (2) The concession of 1933 gave the plaintiffs the property in or immediate right to possession of all oil derived from the concession area. (3) As regarded the Iranian nationalization laws, a municipal court would recognize their effect only if they were in accordance with international law. The English Court of Appeal cases, Aksionairnoye Obschestvo A. M. Luther Co. v. James Sagor & Co.¹ and Princess Paley Olga v. Weisz,² regarding Russian expropriation, were plainly distinguishable, since in both those cases the plaintiff whose property was nationalized was a subject of the nationalizing State, and, therefore, no question of breach of international law could arise. The plaintiffs relied on Wolff v. Oxholm,³ In re Fried Krupp A.G.⁴ and Republic of Peru v. Dreyfus Brothers & Co.⁵ (4) The Iranian nationalization laws were a gross breach of international law since (a) the concession itself provided that it should not be terminated by any act of the Persian Government, and (b) the Iranian laws failed to provide for prompt, adequate and effective compensation, as international law required if such laws were to be valid. Numerous sources of international law to that effect included a series of notes from Secretary Cordell Hull on behalf of the United States Government to the Mexican Government after their oil expropriation: Hackworth, Digest of International Law, Vol. 3, pp. 655-62. The plaintiffs relied also on the Norwegian Ships case, in which the Permanent Court of Arbitration at The Hague gave judgment in 1922 against the United States Government in respect of the seizure of ships, and the Chorzow Factory case decided by the Permanent Court of International Justice in 1928.

P. K. Sanghani for the first defendant, the master, contended (1) that the court had no jurisdiction on the ground (a) of duress

1 [1921] 3 K.B. 532; 37 T.L.R. 777.

2 [1929] 1 K.B. 718; 45 T.L.R. 365.

3 (1817) 6 M. & S. 92.

4 [1917] 2 Ch. 188.

5 (1888) 38 Ch.D. 348; 4 T.L.R. 333.

(Sirdar Gurdyal Singh v. Rajah of Faridkote⁶ being cited), and (b) that this was really an action to test the rights of the Iranian Government, which, being a foreign government, could not be impleaded (Vavasseur v. Krupp⁷ was cited); and (2) that whatever the legality of the Iranian laws in international law, the plaintiffs were estopped from contesting their validity by a letter, known as the "Middleton letter," of August 3, 1951, from his Majesty's Government, on their own behalf and on behalf of the plaintiffs, in which they had acknowledged the principle of nationalization.

A. E. Kazi, for the shipowners, maintained that they had acted in entire good faith and were quite unaware that their ship was being employed for the purpose in question.

M. A. Mansoor, for the charterers, adopted the contentions for the master on the question of jurisdiction, and contended that the concession was in respect of immovable property over which the court could have no jurisdiction (Morgan v. Russell & Sons^7a, and that the case should not be decided in the absence of the Iranian Government. He relied on Aksionairnoye Obschestvo A. M. Luther Co. v. James Sagor & Co.⁸ and Princess Paley Olga v. Weisz,⁹ and contended that the nationalization laws had taken away the plaintiffs' property. He also relied on the Middleton letter, and argued that the compensation offered by the law of May 1, 1951, was adequate.

1953. January 9. CAMPBELL J. In this case the plaintiffs, the Anglo-Iranian Oil Co. Ld., have brought a claim in detinue in respect of approximately 700 tons of crude oil at present in the tanker Rose Mary lying in Aden harbour. This oil they assert is their property. They ask for an order against the first defendant, who is the master; the second defendants, Compa–ia de Navegaci—n Teresita S.A., who are the owners; and the third defendants, Bubenberg A.G., who are the charterers of the Rose Mary, that they deliver up to them the oil; and in the alternative they ask for a declaration that the oil is their property.

The defences of the three defendants may briefly be summarized as follows: The defence of the first defendant is that his ship came into Aden harbour solely as a result of coercion and that this court has therefore no jurisdiction. Secondly he pleads that he had no authority to hand over the cargo to the plaintiffs. Thirdly he denies that the cargo belongs to the plaintiffs. Lastly he pleads that as the plaintiff company is not registered in Aden it cannot institute a suit here. This last plea appears to be quite untenable, was not supported by argument or authority and I reject it now.

6 [1894] A.C. 670; 10 T.L.R. 62.

7 (1878) 9 Ch.D. 351.

7a [1909] 1 K.B. 357; 25 T.L.R. 120.

8 [1921] 3 K.B. 532.

9 [1929] 1 K.B. 718.

The defence of the second defendants, the owners of the ship, is that they have a lien on the cargo of oil in respect of the charter dues and should therefore not be required to hand it over to the plaintiffs.

The third defendants, the charterers, plead that this court has no jurisdiction as they claim that the ship is only in Aden harbour as a result of coercion. They deny that the plaintiffs are the owners of the cargo of oil. They deny that any cause of action has arisen in Aden. Lastly they plead that they should not be ordered to hand over the oil to the plaintiffs as they are bona fide purchasers for value.

I propose to deal first with the issue of coercion. Early in 1952, Count della Zonca, the managing director of an Italian company known as Ente Petrolifero Italia Medoriente, arranged on behalf of his firm to buy oil from the National Iranian Oil Co. (which had taken over the property and business of the plaintiffs in Persia) and contracted to sell a quantity to Bubenberg A.G., a Swiss company. He appears to have had authority to act on behalf of the Bubenberg company almost from the beginning, and arranged for them a time charter of the tanker Rose Mary with Messrs. Cosulich who were acting as agents of the owners. The charter was for the vessel to go to a port in the Persian Gulf, take on a cargo of petroleum products and then to return to Bari. Both parties agreed that the object of the proposed voyage should be kept secret, and the owners were not informed of the details of the voyage. The master, Guiseppe Jaffrate, knew of the object of the voyage, but was told to keep his knowledge to himself. He was given a sealed letter and told to open it at Port Said.

The ship sailed from Bari on April 25, 1952. On May 1, 1952, having arrived at Port Said, Jaffrate sent a letter to his owners which stated:

"I beg to inform you that charterers, Bubenberg Co., Ld., Spiez, have ordered me by letter to proceed to Bandar Mashur in order to load a cargo of crude oil with destination to an Italian port."

The reaction of the owners on receiving this letter was to write to the Bubenberg company on May 12, 1952, saying that they considered that the proposed voyage was a breach of clause 2 of the charter and warning them not to put into execution the orders given to the master. Messrs. Cosulich, who up till then appear to have acted in a somewhat equivocal manner as owners' agents, then joined forces with the owners and jointly and severally they issued a stream of letters and radio messages to Jaffrate telling him not to go to Bandar Mashur or Abadan. They told him that the charter was cancelled and to proceed to Kuwait and load another cargo there. He received another stream of messages from Bubenbergs, E.P.I.M. and Count della Zonca telling him to carry out his first orders and not to put into Aden. He did in fact go to Bandar Mashur, and on May 27, 1952, he loaded approximately 700 tons of crude oil, which it is not disputed was

won from the plaintiffs' concession area. He started his return journey a few days later, and came into Aden harbour on June 17, 1952.

Jaffrate has given evidence and stated that but for coercion he would have passed Aden and gone on to Suez. He said that he was frightened by two matters: the first was the receipt of two radio messages from his owners on May 31 and June 5, 1952, threatening him with disciplinary action and legal proceedings if he refused to carry out their orders; the second was the arrival overhead on both June 16 and 17, 1952, of an R.A.F. aeroplane. On the second day the aeroplane circled round him for two hours, and he says that he thought that he might be bombarded. On the afternoon of June 17, 1952, and while 40 miles from Aden, he was met by the tug Protector, which had on board Martinelli, the owners' representative, who came on board the Rose Maryand told him to go into Aden. This he did.

Is this story of Jaffrate as to his state of mind true? In my view it is not. [His Lordship reviewed the evidence and continued:] To find that Jaffrate had decided since the beginning of June to follow the owners' instructions seems to be in accordance with the probabilities. In English law there is no doubt whatever that in a time charter the ownership and also the possession of the ship remain in the original owner through the master and crew, who continue to be his servants. It is unnecessary to give a decision as to what would be the ruling on this point where the law to be followed would be that which is applicable when a ship which is owned by a company registered in Honduras and herself registered in Panama is chartered by a Swiss company in Switzerland and sails under an Italian master from an Italian port to load a cargo from Persia. I think that there is a presumption that the English rule is universal from the very nature of a time charter. It is consistent with this time charter. It would follow, therefore, that Jaffrate would only be doing the normal and probable thing if he decided to follow the owners' and not the charterers' orders, and this is what I think in fact he did. For these reasons I find that the plea of coercion fails and does not deprive this court of jurisdiction.

The second main issue is whether or not the plaintiffs have proved that this cargo of oil is their property. They say that their title to it is by virtue of a concession granted to them by the Persian Government as the result of an agreement entered into in 1933, and which was due to expire in 1993. By article 21 of the agreement it was laid down that the concession should not be annulled by the Government and the terms therein contained should not be altered either by general or special legislation in the future, or by administrative measures, or any other acts whatever of the executive authorities.

On May 1, 1951, an Oil Nationalization Law was put into effect by the Persian Government. Although there is evidence that there was in existence another oil concession in Persia which

had not produced any oil, it is not disputed that the law was passed to nationalize the plaintiff company only.

The plaintiffs contended that this Oil Nationalization Law was contrary to international law as being expropriation without compensation, and was really only confiscation, and that, as this court was bound to administer international law where it was appropriate, it should refuse to recognize any act which was contrary to international law. It must be decided, therefore, whether this expropriation was with or without compensation.

The provisions of the Oil Nationalization Law concerning the matter of compensation are articles 2 and 3. By article 2:

"The Government is bound to dispossess at once the former Anglo-Iranian Oil Company under the supervision of the mixed board. If the company refuses to hand over at once on the grounds of existing claims on the Government the Government can, by mutual agreement, deposit in the Bank Milli Iran or in any other bank up to 25 per cent. of current revenue from the oil after deduction of exploitation expenses in order to meet the probable claims of the company."

It is hopeless to suggest that this, construed in its grammatical sense, is an offer to pay compensation. If it is loosely construed, and with every bias in favour of the contention of the defendants, I can only find that it consists of no more than a suggestion that at some future time the matter of compensation may be considered, and that it gives the Government power to deposit in a bank a proportion of the future profits of the expropriated business against that contingency. The proportion may apparently vary between 0 and 25 per cent. of the current revenues. By article 3:

"The Government is bound to examine the rightful claims of the Government as well as the rightful claims of the company under the supervision of the mixed board and to submit its suggestions to the two Houses of Parliament in order that the same may be implemented after approval by the two Houses."

I cannot see that this is really any advance on the previous article. It says that a committee of senators and deputies shall consider the question of compensation. But the plaintiffs would have no rights even if the committee found that they were entitled to compensation, for the approval of the Houses of Parliament would then be necessary. They might approve: but they might not. A fair test to decide whether either of these two articles gives the plaintiffs any quid pro quo for having their business nationalized is to ask whether they would be any worse off if the articles had been omitted. The answer is clearly No. The plaintiffs have to rely for compensation in either case solely on the bounty of the expropriator.

Nor is the position affected by the fact that, some months after nationalization had been carried out, Dr. Mossadeq, the Persian Prime Minister, made another offer regarding compensation in a letter to Mr. Churchill dated September 24, 1952. By this time the plaintiffs had been expropriated without any

compensation. If it were necessary to evaluate this new offer to see whether it could amount to what is ordinarily understood by the word "compensation," the answer must be in the negative. It first insists on an advance payment of £49,000,000 by the expropriatee to the expropriator. Then it sets out that the arbitration shall take into account (1) a calculation of any unpaid taxes owed by the plaintiffs, and (2) a calculation of what extra royalties the plaintiffs would have paid if an agreement (known as the Gass-Golshoyan agreement) which the Persian Houses of Parliament had refused to ratify had in fact been ratified. The arbitration was then excluded from taking into consideration any loss which the company would suffer after the date of nationalization by reason of having its concession shortened from 60 years to 18 years. It could only award compensation for loss of the actual property expropriated.

In discussing what is meant by the word "compensation" in relation to international law it has sometimes been said that it must be "adequate, effective and prompt." The question of adequacy may often be difficult for a court to decide, and no doubt this has caused and will cause considerable trouble in other cases in dealing with the extraterritorial effect of foreign nationalization. But here I can only find to be true the plaintiffs' contention that expropriation has taken place without any compensation and that this is confiscation.

That the courts in England will do nothing to invalidate an act of confiscation by a sovereign State of the property of its nationals is not disputed by the plaintiffs. The cases of A. M. Luther Co. v. James Sagor & Co.¹⁰ and Princess Paley Olga v. Weisz¹¹ are authority for the proposition. What has to be decided is whether the reverse is true when the property confiscated is that of a non-national.

The plaintiffs' contention can be based on two grounds: first, that no State can be expected to give effect within its territorial jurisdiction to a foreign law that is contrary to its own public policy or essential principles of morality; and secondly, that a foreign law that is contrary to international law or in flagrant violation of international comity need not be regarded.

International law is the settled practice of nations. As was said by Lord Atkin in the Privy Council in Chung Chi Cheung v. Rex¹²:

"The courts acknowledge the existence of a body of rules which nations accept amongst themselves. On any judicial issue they seek to ascertain what the relevant rule is, and, having found it, they will treat it as incorporated into the domestic law, so far as it is not inconsistent with rules enacted by statutes or finally declared by their tribunals."

This settled practice can be ascertained from decided cases and from the writings of jurists, and to these I now turn.

10 [1921] 3 K.B. 532.

11 [1929] 1 K.B. 718.

12 [1939] A.C. 160, 168; 55 T.L.R. 184; [1938] 4 All E.R. 786.

The first English case cited on behalf of the plaintiffs is Wolff v. Oxholm¹³ where it was held that payment to the Danish Government of a debt due to an Englishman, by virtue of a Danish order of sequestration, did not operate to discharge the Danish debtor from the claim of the English creditor. In the concluding paragraph of his judgment Lord Ellenborough said¹⁴:

"Considering therefore, that the right of confiscating debts contended for on the authority of these citations from Vattel is not recognized by Grotius, and is impugned by Puffendorff and others, that such confiscation was not general at any period of time, and that no instance of it, except the ordinance in question, is to be found for something more than a century, we think our judgment would be pregnant of mischief to future times, if we did not declare, that in our opinion this ordinance, and the payment to the commissioners appointed under it, do not furnish a defence to the present action; and if they cannot do this of themselves, neither can they do so by the aid of the proceedings in the Danish court. The parties went into that court expecting justice, according to the then existing laws of the country, and are not bound by the quashing of their suit, in consequence of a subsequent ordinance, not conformable to the usage of nations, and which, therefore, they could not expect, nor are they or we bound to regard."

The next case is Kaufman v. Gerson.¹⁵ A domiciled Frenchman coerced a domiciled Frenchwoman into signing a contract in France by threatening that if she refused to make the agreement he would prosecute her husband for a crime of which he was accused. The contract was valid by French law, but nevertheless an action for its breach was dismissed by the Court of Appeal. Romer L.J. held that

"to enforce a contract so procured would be to contravene what by the law of this country is deemed an essential moral interest."

The third case is In re Fried Krupp A.G.¹⁶ Here a German ordinance of September 30, 1914, forbade transmission of funds to Great Britain and Ireland or British colonies or foreign possessions, and provided that the date for satisfaction of claims relating to property in favour of persons or bodies situated in such areas was deemed to be postponed till further notice. It also enacted that "No interest can be claimed in respect of the period during which the postponement continues." The court found that it was the ordinary rule of German law that such a debt would carry interest at 5 per cent. and refused to make effective the ordinance denying such interest. Younger J. said¹⁷:

"In that state of things it appears to me impossible that any court in this country can recognize a German ordinance of this description, and there is, I think, a choice of grounds on which

13 (1817) 6 M. & S. 92.

14 Ibid. 106.

15 [1904] 1 K.B. 591; 20 T.L.R. 277.

16 [1917] 2 Ch. 188.

17 Ibid. 193.

refusal to do so can properly be based. It may, I think, first of all be said that such an ordinance as this is no part of the general German law, by which the parties to this contract alone agreed to be bound. And even if such an ordinance must be treated as part of that law, it may, I think, properly be held that no such essentially one-sided development of the system could have been within the contemplation of either party to the contract at the time when they entered into it and agreed that their rights thereunder were to be regulated by German law. But, further, this ordinance, with its marked bias in favour of German nationals as against British subjects, can, in my opinion, create in this country no disability upon a person against whom its provisions are directed, and the language of Lord Ellenborough, in Wolff v. Oxholm¹⁸ may, with the necessary modifications, justly be applied to it, so far as it operates to extinguish all German liability for conventional interest, as being one which is not conformable to the usage of nations, and which, therefore, Messrs. Wild could not expect, and which neither they nor we are bound to regard. Whatever ground of decision is chosen, it is, I think, clear that in this court Messrs. Wild's debt carries interest unaffected by the ordinance, and that accordingly this summons must be dismissed."

I have been referred to a number of foreign decisions. In SociŽtŽ Potasas Ibericas v. Nathan Bloch¹⁹ the French Court of Cassation held that decrees of expropriation by the Government of Catalonia were invalid in France on the ground that, as no just compensation had been provided for, they were against French public policy. In Union des RŽpubliques Socialistes SoviŽtiques v. Intendant GŽnŽral Bourgeois Es-qualitŽ et SociŽtŽ la Ropit²⁰ the same court held that

"although the principle that the courts of a State faced with a juridical situation governed by foreign legislation should apply the foreign law must be admitted, this rule is only obligatory in so far as the application of the foreign law and respect for the rights acquired thereby are not incompatible with those principles and provisions of their national law which are held essential for ordre public."

The court then proceeded to disallow the intervention of the Russian Government to get possession of merchant ships which had been nationalized and were berthed at Marseilles.

In relying on French cases, however, it must be borne in mind that the domestic law of France is very explicit regarding the right of private ownership. Article 545 of the Civil Code provides:

"No one in France can be forced to give up his property except in the public interest and in return for a fair and prepaid compensation." ["Nul ne peut �tre contraint de cŽder sa propriŽtŽ, si ce n'est pour cause d'utilitŽ publique, et

18 6 M. & S. 92.

19 (1939) Annual Digest of Public International Law cases, 1938-1940, p. 150.

20 (1928) Annual Digest of Public International Law Cases, 1927-1928, p. 67.

moyennant une juste et prŽalable indemnitŽ."]

The decisions in the two cases I have just mentioned actually referred to this section. But although in Aden there is no statutory enactment,so far as I know, similar to this section, it is nevertheless part of the common law. The cases therefore have some authority.

In Poland the Supreme Court in Siuta v. Guzkowski²¹ refused validity to a requisition by Ukrainian troops in Poland of horses which they sold to local inhabitants. Its decision was based mainly on article 52 of the Hague Rules which forbids requisitions except for the needs of the occupying forces. Nevertheless, it is applicable here inasmuch as the principle was laid down that whether or not the Hague Rules were binding on the parties (and it would seem they were not binding on the Ukrainains, who were not recognized as belligerents) the Polish courts regarded confiscation such as this contrary to the "cardinal principle of international custom," and if an act was contrary to international custom they would grant it no validity in Poland.

In Germany the Provincial Court of Kassel and the District Court of Waiblingen, when considering in 1947 and 1948 cases relating to the sequestration of property of Germans qu‰ Germans, living in Czechoslavakia, held that such sequestration was contrary to international law, and refused to recognize it. Where such property came into their jurisdiction they ordered its return to its owners. The cases are to be found in the New Juridical Weekly Review, 1947, p. 628, and the Monthly Review of German Law, 1949, p. 163, respectively. The Provincial court of Hildersheim, in a similar case to be found in the S. German Lawyers' Review, 1948, p. 143, came to a different conclusion, but gave no reasons for their decision.

In Italy the Tribunal of Florence in Lucchesi v. Malfsti²² had to decide the subsequent ownership of a motor car which had been requisitioned by the Germans but not for the requirements of the occupying troops. They had seized it from the plaintiff and given it to the defendant on the ground that he was an invalid of the Great War. The tribunal found that the requisition was unlawful, and ordered the return of the car to its former owner. This case, like others previously mentioned, arose out of events which took place in time of war and partly depends on the law of war. But it would seem also applicable to peace time: for, if a court is willing to hold that a seizure is illegal in time of war, a fortiori it would be unwilling to recognize the same in time of peace.

I now come to the Norwegian Claims Case.²³ The Government of the United States of America had in 1917 requisitioned certain Norwegian ships. The two governments submitted the

21 (1921) Annual Digest of Public International Law Cases, 1919-1922, p. 480.

22 Il foro Italiano, Vol. 69, 1944-1946, p. 985.

23 (1922) Hague Court Reports, 2nd series, p. 39 (Annual Digest of Public International Law Cases, 1919-1922).

question of compensation to an arbitration tribunal under the auspices of the Permanent Court of Arbitration at The Hague. Although compensation was the only issue, there are several observations in the award which seem relevant to the present case. It was said²⁴:

"The fifth amendment to the Constitution of the United States provides: 'No person ... shall be ... deprived of life, liberty or property without due process of law; nor shall private property be taken for public use, without just compensation.' It is common ground that in this respect the public law of the Parties is in complete accord with the international public law of all civilised countries. ... Whether the action of the United States was lawful or not, just compensation is due to the claimants under the municipal law of the United States, as well as under the international law, based upon the respect for private property."

In deciding what was meant by the word "compensation" in international law the tribunal said²⁵:

"Just compensation implies a complete restitution of the status quo ante, based, not upon future gains of the United States or other powers, but upon the loss of profits of the Norwegian owners as compared with other owners of similar property."

Lastly it was laid down²⁶ that:

"International law and justice are based upon the principle of equality between States. No State can exercise towards the citizens of another civilized State the 'power of eminent domain' without respecting the property of such foreign citizens or without paying just compensation as determined by an impartial tribunal, if necessary."

In the case of the De Sabla Claim²⁷ the specially appointed Claims Commission inquired into the expropriation by the Government of Panama of land belonging to a national of the United States of America. In its judgment the Commission stated:

"The Commission concludes that the adjudications and the licences granted by the authorities on Bernadino constituted wrongful acts for which the Government is responsible internationally. It is axiomatic that acts of a government in depriving an alien of his property without compensation impose international responsibility."

In 1938 the Government of Mexico nationalized their oil. A long correspondence then took place between the Government of Mexico and Cordell Hull, the Secretary of State of the United States. In many communications the latter contended that confiscation of the property of aliens was contrary to, and would not be recognized by, international law. He argued that confiscation did not cease to be so because there might be the express desire to pay at some time in the future. The plaintiffs invoke this correspondence in aid. They say that it is not only the

24 Ibid. 68, 69.

25 Ibid. 73.

26 Ibid. 73, 74.

27 (1933) Annual Digest of Public International Law Cases, 1933-1934, p. 241.

opinion of the writer, but as he was then Secretary of State it is a statement of the opinion, and thus is an expression of what would be the practice, of the Government of the United States. This may well be, but it is an opinion set out when arguing a brief and as such, I think, it cannot have the weight which should be given to a judicial opinion. It has not got that salutary check upon the writer of the overhanging shadow of a Court of Appeal. But I think that the plaintiffs are entitled to invoke the dispute in their aid by reason of the fact that throughout the argument the Mexican Government do not appear to have denied the main premise of their adversary's argument. They refer to the blood of Mexico's sons shed in the revolutionary struggle, and assert that their acts were inspired by legitimate causes and the aspirations of social justice. But they do not deny the principle of compensation.

The defendants have cited Princess Paley Olga v. Weisz²⁸ and A. M. Luther Co. v. James Sagor & Co.²⁹ as being in their favour. The first of these does no more than lay down the principle, as enunciated by Russell L.J.,³⁰ that

"This court will not inquire into the legality of acts done by a foreign government against its own subjects in respect of property situate in its own territory."

It said nothing regarding property of those not its own subjects.

A.M. Luther Co. v. James Sagor & Co.²⁹ also concerned confiscation of property belonging to subjects of the confiscating government. It was also held that the confiscation was valid and would be upheld by the English court. The dicta in the judgments on which the defendants seek to rely are chiefly those of Scrutton L.J., who said³¹:

"Should there be any government which appropriates other people's property without compensation, the remedy appears to be to refuse to recognize it as a sovereign state. ... But it appears a serious breach of international comity, if a state is recognized as a sovereign independent state, to postulate that its legislation is 'contrary to essential principles of justice and morality.'"

The court was considering the effect of the conduct of a sovereign State in regard to its subjects. If Scrutton L.J. had been specifically considering such conduct in regard to aliens, a far wider question of international law, I feel no confidence that he would have expressed the same opinion. His remarks were a good deal wider than necessary for the decision of the case. On the whole I think that the relevance to this case of a great part of the judgment in A. M. Luther Co. v. James Sagor & Co.³¹ is more apparent than real, and that the case is in no way decisive here.

Santos v. Illidge³² might also appear at first to favour the argument of the defendants. Here the non-delivery of slaves in

28 [1929] 1 K.B. 718.

29 [1921] 3 K.B. 532.

30 [1929] 1 K.B. 718, 736.

31 [1921] 3 K.B. 532, 556, 558.

32 (1860) 8 C.B.(N.S.) 861.

Brazil under a contract made there which was lawful according to Brazilian law was held actionable in England, though the sale would have been criminal in England. The slaves were required by the defendants in Brazil after the passing of the Slave Trade Act, 1824, but before the passing of the Slave Trade Act, 1843. It would seem that the reason why the court did not refuse to entertain the claim was that no statute prohibited the holding of the slaves in Brazil, even though the purchasing of them there might be a felony in a British subject. The well-known case of James Sommersett,³³ where an escaped slave successfully sued out a writ of habeas corpus on the ground that although slavery might be recognized and lawful in the colonies it was not allowed and approved of by the law of England was, therefore, not overruled.

British courts are inclined towards resting international law on practice and precedent rather than on the opinions of speculative writers, however unanimous or eminent they may be. Nevertheless I have examined the opinions of jurists on international law in such of their writings as are available here. The conclusion I arrive at is that Dicey, Oppenheim, Cheshire, Fachiri and Hackforth endorse the view that expropriation without compensation is contrary to international law. I can find no opinions to the contrary, though the defendants have referred me to Martin Wolff.

For the reasons set out above, I am satisfied that, following international law as incorporated in the domestic law of Aden, this court must refuse validity to the Persian Oil Nationalization Law in so far as it relates to nationalized property of the plaintiffs which may come within its territorial jurisdiction. I find the oil in dispute to be still the property of the plaintiffs.

The defendants urge that even if the court has come to the above general conclusion there are certain obstacles which must prevent the oil which is in the Rose Mary from being handed back to the plaintiffs. It is argued that a British court has no jurisdiction to adjudicate upon the right to ownership or possession of foreign immovables. Practical considerations would make a decree concerning them ineffective. It is said that this oil must be classed as an immovable. The Aden Transfer of Property Ordinance and the Aden Documents Registration Ordinance are cited in support of this proposition. In addition I have been referred to Morgan v. Russell & Sons,³⁴ where an agreement had been made for a licence to remove slag and cinders from certain lands. When the licence was subsequently stopped it became a question whether or not damages could be obtained on the basis that the licence was a contract for the sale of goods under the Sale of Goods Act, 1893. It was held that it was not, but was a contract to grant an interest in land. The case is not applicable here, for it concerned a right to the land itself. If the dispute had

33 (1772) 20 State Trials 1.

34 [1909] 1 K.B. 357.

related to sale of the slag after it had been taken away and put in bags there is no reason why the Sale of Goods Act should not have applied.

It is true that it can be argued that oil can be classed as an immovable. But there is nothing to show that it must necessarily be so classed. It is merely necessary or convenient to do so in certain circumstances and for certain purposes. To extend what is really only a fiction would lead to obvious absurdities. The oil in this case is clearly in the category of movables. Nor can I see that it makes any difference whether the action is in personam or in rem, though the defendants appear to attach importance to this point.

A point is taken that the amount of oil in dispute in this case is so small in relation to the total amount of oil which is known to exist in the plaintiffs' concession that this court ought not to allow itself to be used to decide what is a fictitious or at any rate no more than a test action. In Kroch v. Rossell³⁵ the Court of Appeal did indeed refuse to allow service out of the jurisdiction where it was satisfied in a libel action that the libels would have practically no circulation in England, but only on the Continent, and where the plaintiff had stated that he had no occupation, reputation or associations in England. They came to the conclusion that there was no question of substance to be decided. But here surely the true comparison to be made is not between the oil in the Rose Mary and that still under the ground in Persia: it is between the oil in the Rose Mary and any other oil from the plaintiffs' concession which has been sent out of Persia since its nationalization.

Again, I think that the defendant's argument must fail that the plaintiffs should have exhausted the resources of the courts of Persia before bringing this action in Aden. For the only action which they could have brought in Persia would have had to be quite different to that which they could bring in Aden. Nor is it possible to see how any action in Persia could have any chance of success. The Persian courts could say naught save that what had been done had been done in accordance with the Oil Nationalization Law. The defendants made no suggestion that the plaintiffs could have successfully pleaded that this law was invalid as being ultra vires or contrary to the Constitution.

This would appear to be a convenient point to refer to one of the pleaded defences of the third defendant that the cause of action in this case did not arise in Aden and this court has no jurisdiction. I do not know where else it did arise. The action is in detinue, and the action arises where the detention and refusal to hand over takes place. It is true that the nationalization took place in Persia. But the refusal to hand over the oil took place in Aden. The plea cannot succeed.

The next argument advanced by the defendants is that by

35 (1937) 1 All E.R. 725.

reason of what has been referred to in this trial as the "Middleton letter" the plaintiffs are estopped from denying the validity of the Oil Nationalization Law. The letter was written on August 3, 1951, by G. H. Middleton, H.M. ChargŽ d'Affaires at Teheran, to the Persian Minister of Foreign Affairs. It is not disputed by the plaintiffs that he had power to bind them by what he wrote. The material part of the letter is paragraph 3, which reads as follows:

"His Majesty's Government recognize on their own behalf and on that of the company, the principle of the nationalization of the oil industry in Iran."

The letter was in reply to a communication known as the "Harriman formula," and the meaning of the words "the principle of nationalization" was set out in paragraph 3 thereof which reads as follows:

"By the principle of nationalization is meant the proposal which was approved by the Special Oil Committee of the Majlis and was confirmed by the law of Esfand 29, 1329 (March 20, 1951) the text of which proposal is quoted hereunder. "In the name of the prosperity of the Iranian nation and with a view to helping secure world peace we the undersigned propose that the oil industry of Iran be declared as nationalized throughout all the regions of the country without exception, that is to say, all operations for exploration, extraction and exploitation shall be in the hands of the Government."

It seems to me that there is a complete answer to the letter. I cannot see that a recognition that the Government should in future explore, extract and exploit the oil of the country can be stretched to mean that they were willing to be expropriated without compensation. If this had been meant, different words would surely have been used. On this finding it is unnecessary to discuss whether or not the letter, if made during active but abortive negotiations to find a settlement, was written for the sole purpose of finding a settlement and would be privileged and not binding as regards any admissions if the negotiations failed.

Finally the third defendants have pleaded in paragraph 3 of their defence:

"The said cargo of oil therefore was the property of the Imperial Iranian Government and these defendants bought the same for valuable consideration in good faith through the medium of E. P. I. M. (Ente Petrolifero Italia Medoriente) and are therefore the rightful and legal owners of the cargo in question."

This defence must fail on more than one ground. Presumably the defendants wish to derive an advantage from section 23 of the Aden Sale of Goods Ordinance, cap. 121, which is a little different from the English Sale of Goods Act. The section reads as follows:

"Subject to the provisions of this Ordinance and of any other law for the time being in force, where goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the

goods is by his conduct precluded from denying the seller's authority to sell: Provided that, where a mercantile agent is, with the consent of the owner, in possession of the goods or of a document of title to the goods, any sale made by him, when acting in the ordinary course of business of a mercantile agent, shall be as valid as if he were expressly authorized by the owner of the goods to make the same; provided that the buyer acts in good faith and has not at the time of the contract of sale notice that the seller has not authority to sell."

Now, even if it is accepted that E. P. I. M. are mercantile agents within the meaning of the Ordinance, they were certainly not in possession of the goods with the consent of the owner as is required by the section. If this difficulty could be surmounted a second one arises. One Arnet, who bought the oil for the Bubenberg company, has not appeared on their behalf to say that he bought the oil innocently. In view of the evidence concerning the plaintiffs' warnings throughout the world and the existence of the interim injunction of the Court of International Justice this is not surprising, and the presumption seems the other way. It seems clear that these defendants must be defeated by the proviso of section 23

"provided that the buyer acts in good faith and has not at the time of the contract of sale noticed that the seller has not authority to sell."

I therefore find that the plaintiffs are entitled to succeed in this action, and that the cargo of oil must be returned to them. A decree will issue against all three defendants to this effect as each has or had a measure of control over the cargo.

Solicitors: Linklaters & Paines and William A. Crump & Son for the plaintiffs.

R. P. C.