Occidental of Umm Al Qaywayn, Inc. v. A Certain Cargo of Petroleum Laden Aboard Tanker Dauntless Colocotronis

• Decision Date: 09 August 1978
• Docket Number: No. 75-3088,75-3088
• Citation: 577 F.2d 1196
• Parties: OCCIDENTAL OF UMM al QAYWAYN, INC., Plaintiff-Appellant-Cross Appellee. v. A CERTAIN CARGO OF PETROLEUM LADEN ABOARD the TANKER DAUNTLESS COLOCOTRONIS, etc., et al., Defendants-Appellees-Cross Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1196

577 F.2d 1196

OCCIDENTAL OF UMM al QAYWAYN, INC., Plaintiff-Appellant-Cross Appellee. v. A CERTAIN CARGO OF PETROLEUM LADEN ABOARD the TANKER DAUNTLESS COLOCOTRONIS, etc., et al Defendants-Appellees-Cross Appellants.

No. 75-3088.

United States Court of Appeals Fifth Circuit.

Aug. 9, 1978.

Thomas M. Bergstedt, Lake Charles, La., Henry J. Read, David L. Stone, New Orleans, La., Leon Alexandroff, Louis Nizer, Gerald Meyer, Neil A. Pollio, J. Bond Smith, Jr., New York City, for plaintiff-appellant-cross appellee.

John A. Patin, Lake Charles, La., L. Linton Morgan, S. Gene Fendler, Reginald E. Cassibry, New Orleans, La., Allan B. Goldman, Los Angeles, Cal., George Miron, Washington, D. C., for defendants-appellees-cross appellants.

James W. Moorman, Asst. Atty. Gen., Land & Natural Resources Division, Bruce C. Rashkow, Chief, Marine Resources Section, U. S. Dept. of Justice, Washington, D. C., amicus curiae.

Appeals from the United States District Court for the Western District of Louisiana.

Before THORNBERRY, MORGAN and INGRAHAM, Circuit Judges.

LEWIS R. MORGAN, Circuit Judge:

In these conversion actions, consolidated on appeal, the federal court is asked for a decision we consider impossible. The immediate question is whether the district court erred in granting appellee's motion for summary judgment. The district court determined that it should refrain from deciding the issue on the merits, the rights to oil extracted from the Persian Gulf, because the decision would call into question the acts of foreign states. We dismiss on the slightly different ground that the question presented is political, being both constitutionally devolving on the executive and judicially unmanageable, and therefore, not a "case or controversy" within Article III of the Constitution. On appellee's counterclaim to enjoin appellants from further litigation in this and other federally cognized jurisdictions, we reverse the district court and grant the injunction.

A thorough factual development is a necessary prerequisite to analysis.

A. Geography.

The scene for this political drama is the exotic Persian Gulf, once noted for the Arabian nights, now famous and important as a source of oil to light those nights. On the southern "lip" of the mouth of the Gulf lie the Trucial Sheikhdoms of Umm al Qaywayn (hereafter Umm), Sharjah, and Al Ajiman. Situated near the mouth of the Gulf, about 40 miles northwest of Umm, is the tiny island of Abu Musa. The island is also approximately 50 miles due south from Iran, the country with the largest contiguous border on the Gulf.

B. History, relatively ancient.

For almost a century, Great Britain had been the "protectorate" of the Trucial Sheikhdoms, including Umm and Sharjah. Pursuant to the treaty establishing this relationship, the United Kingdom was responsible for the Sheikhdoms' international relations, defense, and internal relations among the individual states. This protectorate jurisdiction included all the territories and territorial waters of the Sheikhdoms and territorial waters. As provided by the treaty, the protectorate ended in November 30, 1971.

During the course of this protectorate, a dispute over the sovereignty of Abu Musa had existed between Great Britain as agent of Sharjah, and Iran. ¹ For example, the India Survey Map of 1897 represented the island in the colors of Persia (now Iran), as did the Viceroy's unofficial map of 1892. Later, in April of 1904, the dispute flared as the Persian government placed custom officials on the island and flew the Persian flag. This establishment of sovereignty was short-lived, however, and the evidence was quickly removed at the demand of the British government. Persia did not abandon its claim with this setback, however. In 1923, Persia reasserted its claim to Abu Musa by protesting the leasing, by Great Britain, of mineral rights to the island. In 1930, Great Britain and Persia discussed settlement of the dispute, but no accord was reached.

C. Modern History.

In the early 1960's, because of rising worldwide energy demands and the growth of offshore drilling technology, the Persian Gulf was becoming hot property. In 1964, perhaps as a response to this increased demand, Umm and Sharjah entered into an agreement, under the auspices of the British, establishing their territorial waters and continental shelf borders. This treaty not only established the territorial waters of the parties, but also established their respective continental shelf. The agreement was embodied in an admiralty map establishing the continental shelf of Umm as extending to the three-mile territorial waters of Abu Musa, recognized by the British as Sharjah's possession, giving Umm 37 miles of the intervening continental shelf.

On November 18, 1969, appellant and the Ruler of Umm contracted that appellant would have the exclusive right to explore for and extract oil within Umm, its continental shelf, and its territorial waters for forty years. The boundaries to this concession conformed to those established for Umm by the treaty with Sharjah of 1964. The British Foreign Office ratified the concession agreement, as a condition precedent required under the protectorate. A month later, Sharjah granted Buttes Oil Company, appellees' predecessor, a similar concession to extract oil from its territories. The boundaries of the Buttes concession also conformed to the 1964 treaty and the agreement was subsequently ratified by the British Foreign Office.

No conflict existed between the parties until March 25, 1970, when Buttes Oil and Gas Company notified the British representative to the Sheikhdoms that Buttes intended to drill for oil within the Occidental concession area, approximately 31 miles from Umm, 9 miles east of Abu Musa. Indeed, the drilling location coincided with that suggested by Occidental's exploratory testing. Also at that time, the British agent was made aware of a Sharjah decree purporting to extend its territorial waters from three to twelve miles, including those of Abu Musa. Of course, this unilateral decree did substantial violence to the 1964 treaty, and the British Foreign Office rejected the subsequent amendment of Buttes' concession agreement with Sharjah to reflect the extension. Additionally, the Buttes' request to drill was also denied by the British Government. Although the Foreign Office considered the unilateral action in violation of international law, it strove to bring about an amicable solution. Although Umm and Sharjah were persuaded by the United Kingdom to mediate their claims, mediation failed when Umm refused to abide by the mediator's decision.

Meanwhile, to further muddy the political waters, in a letter dated May 28, 1970, appellant was informed by the National Iranian Oil Company that it should desist all drilling operations in its concession area. The stated basis for this demand was that because Abu Musa was an Iranian possession, and because Iran recognizes twelve mile territorial limits, Occidental concession was within Iran's territories. Faced with the probability of intervention by Iran, the British Government maintained the suspension of all drilling in the disputed area.

On November 26, 1971, the dispute between Iran and Sharjah over Abu Musa was settled, at least practically and prospectively. ² This agreement between Iran and Sharjah occurred only four days prior to the expiration of the British protectorate over the Trucial Sheikhdoms. Pursuant to this agreement, the island was essentially divided, and Sharjah's concession with Buttes was ratified and the future royalties were split between the sovereigns. On November 30, 1971, Iranian troops landed on Abu Musa, and the Iranian navy began patrolling the waters of the island. Shorn of the protection of the British Government, Umm had no means to protect its territories as defined under the 1964 agreement, and Occidental was without protection as well. Buttes began drilling immediately with salutory results. Buttes later sold interests in the oil to appellees, Ashland Oil Inc., Kerr McGee Corp., Skelly Oil Company, and Cities Service Company. Each was put on notice of Occidental's claim. In 1974, appellants began extracting oil from the disputed concession area, and among the shipments of this oil to the United States were those aboard the "Dauntless Colocotronis," "Lykavitos," and the "Anglo-Maersk," which were seized in proceedings. ³

At least among the sovereigns, the rights to the royalties from the area were definitely settled. Some time after the Iranian occupation of Abu Musa, the Rulers of Umm and Sharjah agreed to divide royalties payable to Sharjah with Umm receiving thirty percent. Appellant suffered its final political reverse when in June of 1973, the Ruler of Umm terminated Occidental's concession for failure to pay rentals due under the contract.

D. History of the Case.

Prior to analysis of the case, a brief legal history of the dispute is helpful. The appellants and appellees' predecessors have once before litigated the underlying basis of their dispute. In Occidental Petroleum Corporation v. Buttes Gas and Oil Co., 331 F.Supp. 92 (C.D.Cal. 1971), aff'd, 461 F.2d 1261 (9th Cir. 1972), cert. denied, 409 U.S. 950, 93 S.Ct. 272, 34 L.Ed.2d 221, appellants brought an antitrust action against Buttes, and Clayco Petroleum Company and certain officers of the corporations alleging a conspiracy among the defendants to oust appellant from its concession. This action was filed more than eight months prior to the Iranian occupation of Abu Musa, and years prior to the exportation of oil. The district court held, and the court of appeals affirmed, that the court was precluded from piercing the veil of sovereign action by the "act of state" doctrine ⁴ and granted summary judgment. Although appellee contends that the Ninth Circuit case is res judicata for the case sub judice, we need not decide the question because we hold that we lack...