Appendix — Hunt v. Coastal States Gas Producing Co.

sof 0 KE sess Fa }

¥ Suri me vLourt VU. & . |

: F}LED t

OCT 16 1979

AK, JR. cnn |

No. Ld 9- eB 3 0 ‘mr

In The

Supreme Court of the United States

OCTOBER TERM 1979

NELSON Bunker Hunt, HerBert Hunt,

AND LAMAR HUNT,

Petitioners,

v.

CoasTaL States Gas PRODUCING

CoMPANY, AND COASTAL STATES

MaRKETING, INC.,

Respondents.

APPENDIX TO

PETITION FOR WRIT OF CERTIORARI

A. B. CoNanrt, JR.

Drew R. HeEarp

3100 First National

Bank Building

Dallas, Texas 75202

Attorneys foi Petitioners

Of Counsel:

SHANK, IRwIN, CONANT,

WILLIAMSON & GREVELLE

3100 First National

Bank Building

Dallas, Texas 75202

INDEX TO APPENDIX

Page

Appendix A

Opinion of Supreme Court of Texas in

Nelson Bunker Hunt, et al v. Coastal States

Gas Producing Company, et al .......0......ccccccccceeecee A-1

Appendix B

Dissenting Opinion of Supreme Court of Texas in

Nelson Bunker Hunt, et al v. Coastal States

Gas Producing Company, et dl ..0000.000 cece B-1

Appendix C

Opinion of Court of Civil Appeals for the

Fourteenth Supreme Judicial District in

Nelson Bunker Hunt, et al v. Coastal States

Gas Producing Company, et al oo... C1

Appendix D

Final Judgment of the 133RD Judicial District

Court for Harris County, Texas in

Nelson Bunker Hunt, et al v. Coastal States

Gas Producing Company, et al ___.__....... .....D-1

Appendix E

Pre-Trial Order, dated November 22, 1976, in

Nelson Bunker Hunt, et al v. Coastal States

Gas Producing Company, etal.............................. E-1

Appendix F

Concession No. 65, dated December 18, 1957 | F-1

Appendix G

Law No. 42 of 1973, promulgated by the

Revolutionary Command Council of the

Libyan Arab Republic | TT

INDEX TO APPENDIX

Appendix H

Transcript and translation of speech mad

June 11, 1973, by Libyan Chairmaii ntl

al-Qadhdhafi (pages T-4 to T-11 of the

Foreign Broadcast Information Service Dail

Report, a U.S. government publication) P

Appendix I

United States of America’s Note

dated July 5, 1973... ss isin = eit I-1

Appendix J

Letter of August 3, 1973, from William J. Casey

of the Department of State to G. H

Schuler, a Hunt employee a

Appendix K

Statement by the Department of State

on Policy on “Hot” Libyan Oil... K-1

Appendix L

Opinion of the District Court for the South

District of New York in Hunt v. Mobil Oil sigs

Corporation, 410 F.Supp. 10 (S.D.N.Y. | es L-1

Appendix M

Opinion of the Court of Appeals for the Sec

. o ond

Circuit in Hunt v. Mobil Oil Corporation, 550 F.2d

68 (2d Cir.), cert. denied, 434 U.S. 484 (1977)

A-l

APPENDIX A

IN THE SUPREME COURT OF TEXAS

FROM HARRIS COUNTY FOURTEENTH DISTRICT

No. B-7984

NELSON BuNKER Hunt, et al,

Petitioners,

v.

CoasTaL States Gas Propuctnc CoMPANY,

Respondent

This suit was instituted by Nelson Bunker Hunt, Herbert

Hunt and Lamar Hunt (Hunt) seeking damages against

Coastal States Gas Producing Company and Coastal States

Marketing, Inc. (Coastal States) for the alleged conversion

of oil to which Hunt was entitled by virtue of a concession

agreement with Libya. Coastal States counterclaimed for

damages for Hunt’s allegedly tortious interference with the

contract and business opportunities of Coastal States. Both

parties moved for summary judgment on the issue of liability

after extensive development of the case. The trial court

denied relief on all claims and the court of civil appeals

affirmed. 570 S.W. 2d 503. We affirm the judgment of the

court of civil appeals.

In 1957 the Government of Libya granted Hunt a conces-

sion which gave him the right, for fifty years, to explore, drill

and extract oil in an area now identified as the Sarir field.

A-2

Hunt assigned a one-half undivided interest in this con-

cession to British Petroleum Exploration Company, Ltd

(British Petroleum) in 1960. Oil was discovered ‘ns the

bares ye Backes er 74 1967, it was produced in

. In ptember 196

Mu’ammar al-Qadhafi assumed power in Libya a pam

oe the Revolutionary Command Council, and com-

esr making changes in the existing contractual relations

e various oil producers holding concession agreements

with Libya. In 1971, the Libyan Government nationalized

pee va interest of British Petroleum in the Sarir

e its rights to the Arbian i

Company (AGECO). AGECO is a ea a, 7

tire capital stock is owned by the Libyan Government.

On June 20, 1973, by Libyan Law N

eke Government nationalied all ihe pla cae ea

payer the concession agreement and assigned these rights

b CO. Although Libya agreed to pay compensation

ae ag was to be determined by a committee designated

pat *e: State. In response to this action, Hunt published

os in newspapers throughout the world claiming that

pret byan nationalization violated international law and

. ain Suit against anyone who came into possession

pee hy Fobra 1973, Coastal States entered into a con-

a CO to purchase oil from the Sarir field and it

itinu to purchase oil under this contract despite Hunt’s

claims against Libya and threatened suits. This oil was

pepe _ suc Coastal States to a refinery in Italy where

ph. p and sold to third parties. It was stipulated

a portion of the products derived from this oil was sub-

sequenly taken to the United States, although it was not

that Coastal States transported or caused any of

one gt to be brought here. Nevertheless, Coastal

is domiciled in the United States and, at least, the net

A-3

proceeds derived from the Sarir oil were brought here and

are the basis of Hunt’s suit for conversion.

British Petroleum was a party to the controversy with

Coastal States at one time, but it subsequently entered into

a full settlement with the Libyan Government after arbi-

tration of its claim and it does not now assert any claim

against Coastal States’ In May 1975 Hunt entered into a

settlement agreement with the Libyan government whereby,

for the sum of approximately $19,000,000, it released any and

all claims against the Libyan Government arising out of the

nationaliation of the Sarir field. Coastal States was not a

party to this agreement and Hunt now seeks to recover the

proceeds realized by Coastal States from oil allegedly pur-

chased from AGECO prior to the May 1975 settlement.

Both the trial court and the court of civil appeals con-

cluded that the trial court was foreclosed from inquiring

into the validity of the Libyan nationalization of Hunt’s

interest in the Sarir field by the Act of State Doctrine.

These courts further concluded that as a matter of law,

Hunt’s actions in giving notice of his claim to oil from the

Sarir field did not violate either state or federal law and

would not support Coastal States’ claim for damages for

tortious interference. Hunt and Coastal States both filed

applications for writ of error and complain of the take-noth-

ing judgment entered on the claim of each.

APPEAL BY HUNT

Hunt’s claim against Coastal States is necessarily based

upon the assertion that Libya’s expropriation was invalid

so that Coastal States acquired no title from AGECO. The

critical question involved in Hunt’s appeal is the applicability

i The arbitrator held that Hunt did not acquire title to the oil in

the strata.

A-4

: the Act of State Doctrine and more precisely, whether

unt’s suit comes within the exception to the doctrine

created by the Hickenlooper Amendment, 22 U.S.C

ey (e) (2). The lower courts have held that the doctrine

inquiry by a Texas court into th idi

. on ee e validity of acts done

The Act of State Doctrine is a judicially created doctrine

of restraint. The landmark case of Banco Nacional de Cuba

v. Sabbatino, 376 U.S. 398 (1964) reaffirmed the doctrine

as originally articulated in Underhill v. Hernandez, 168 U.S

250 (1897) in the following language: is

“Every sovereign State is bound to re i

dependence of every other sovereign hn gli the

courts of one country will not sit in judgment on the

= he the government of another, done within its own

a “gs Red ress of grievances by reason of such acts

~ tained through the means open to be availed

of by sovereign powers as between themselves.”

In Sabbatino it was stated that the doctrine “arises out of

the basic relationships between branches of government in a

pg of separation” and the courts prior recognition of

be vibe doctrine _ expresses the strong sense of the Judicial

an that its engagement in the task of passing on the

a of foreign acts of state may hinder rather than

> er this country’s pursuit of goals both for itself and for

€ community of nations as a whole in the international

sphere.”

In Hunt v. Mobil Oil Corp., 550 F. i

= denied, 434 U.S. 984, the Act pagho ptont an ai

proaithabredh soe inquiry into the validity of Libya’s na-

unt S concession. In holding that the trial

court properly dismissed Hunt’s claim against seven major

A-5

oil producers in the Persian Gulf area for damages under the

anti-trust statute, the circuit court said:

“We conclude that the political act complained of

here was clearly within the act of state doctrine and

that since the disputed pleadings inevitably call for a

judgment on the sovereign acts of Libya the claim is

non-justiciable.”

This final judgment against Hunt in that case controls his

present suit for conversion unless it comes within the ex-

ception to the Act of State Doctrine created by the Hicken-

looper Amendment. Benson v. Wanda Petroleum Company,

468 S.W. 2d 361 (Tex. 1971).

The Hickenlooper Amendment was enacted by Congress

in 1964 shortly after the Sabbatino holding and in obvious re-

action to it. It provides in part:

“[N]Jo court in the United States shall decline on the

ground of the federal act of state doctrine to make a

determination on the merits giving effect to the prin-

ciples of international law in a case in which a CLAIM

OF TITLE OR OTHER RIGHT TO PROPERTY is

asserted by any party including a foreign state...

based upon (or traced through) a confiscation or other

taking . . . by an act of that state in violation of the

principles of international law ... .” (Emphasis Added)

22 U.S.C. § 2370(e) (2). It must be recognized at the outset

that this exception which was adopted over the objections

of the Executive Department of the United States has been

narrowly construed by our courts. Occidental of Umm Al

Qay., Inc. v. Cities Serv. Oil Co., 396 F. Supp. 461, aff'd in

part, 577 F.2d 1196 (5th Cir. 1978), petition for cert. filed,

47 U.S.L.W. 3422 (U.S. Dec. 6, 1978) (No. 78-910) ; Occi-

dental Petroleum Corp. v. Buttes Gas & Oil Co., Co., 331 F.

A

ae by - les bie 1261 (9th Cir. 1972), cert. denied

; ; Unite exican States v. A

ay ages oly v. Ashley, 556 S.W. 2d

The statute enumerates three requir i

exist in order to avoid the Act of ple posete thet .

Hickenlooper Amendment. 1, Expropriated property must

a within the territorial jurisdiction of the United States.

The act of the expropriating nation must be in violation of

international law. 3. The asserted claim must be a claim of

pron or other right to property. 22 U.S.C. § 2370(e) (2). The

Pi es civil appeals concluded, without consideration of

two requirements, that the Hickenlooper Amend-

ment is not applicable to this case because Hunt acquired

only a contract right by the agreement with Libya Wea

with this conclusion and therefore limit our po as

to the third requirement stated above.

6 Libya is both the place of the contract’s execution

= performance as well as the location of the subject mat-

r, Libyan substantive law governs the interpretation and

construction of the rights conferred to Hunt by the Con-

cession Agreement. Cantu v. Bennett, 39 Tex. 304 (1873).

The Concession Agreement ex i

pressly provides that the

applicable law is the Libyan Petroleum La

and this law provides in part: sites ae

“(1) All petroleum in Libya in j

ya in its natural i

strata is the property of the Libyan State. ~~

“(2) No person shall ex

ul explore or prospect f i

or produce petroleum in any part of Sites: eal es.

thorized : Sin ok

Law.” by a permit or concession issued under this

ry Seragg intent of the Concession Agreement was to

grant Hunt the right to search for and to extract oil within

A-7

the defined area for the stated term’. It did not grant Hunt

title to the oil in the strata. Under Libyan law, title to the

oil passed at the wellhead. In 1966 Hunt and Libya volun-

tarily amended the 1957 Concession Agreement. Clause 16 of

the amended agreement states:

“(1) The Government of Libya will take all the steps

necessary to ensure that the Company enjoys all the

rights conferred by the Concession. The CONTRACT-

UAL RIGHTS expressly created by this concession

shall not be altered except by mutual consent of the

parties.

“(2) This Concession shall throughout the period of

its validity be construed in accordance with the Pe-

troleum Law and the Regulations in force on the date

of the execution of the agreement of amendment by

which this paragraph (2) was incorporated into this

concession agreement. Any amendment to or repeal of

such Regulations shall not affect the CONTRACTUAL

RIGHTS of the Company without its consent.” (Em-

phasis added)

This language is significant in that it not only refers to

Hunt’s rights as “contractual,” but it also recognizes Libya’s

ownership of the oil. We conclude that Hunt obtained only a

contractual right under the Concession Agreement.

The Hickenlooper Amendment by its express terms ap-

plies only to a claim of title or other right to property. This

construction was made abundantly clear in 1965 when Con-

gress added the words “to property” following the phrase

“claim of title or other right.” Thus this exception to the

Act of State Doctrine has no application here where only a

contractual right was expropriated from Hunt. See Occi-

dental of Umm Al Qay., Inc. v. Cities Serv. Oil Co., supra;

2The Concession Agreement provides that the designated area

may be reduced at stated intervals during the fifty year term.

A8

French v. Banco Nacional de Cuba, 242 N.E. 2d 704 (N.Y.

1968) ; Menendez v. Saks and Company, 485 F.2d 1355 (2nd

Cir. 1973), cert. denied, 425 U.S. 991 (1976); Present v.

U. S. Life Ins. Co., 282 A.2d 863, aff'd, 241 A.2d 237 (NJ.

1968). We have been cited to no case, and have discovered

no case, holding to the contrary.

The trial court and the court of civil appeals did not err

in concluding that the Act of State Doctrine bars judicial

inquiry into the validity of Libya’s actions.

APPEAL BY COASTAL STATES

We agree with the holding of the court of civil appeals

that Hunt’s motion for summary judgment was properly

granted on Coastal States’ claim of tortious interference

with business contracts and business relations. Hunt’s con-

tractual rights in the Sarir field were expropriated by Libya

and Hunt was fully justified in apprising the international

community of his intent to file suit if they dealt with oil

from this field.

The judgment of the court of civil appeals is affirmed.

Charles W. Barrow, Justice

Dissenting Opinion by Justice Steakley, joined by Chief

Justice Greenhill and Justice Spears.

Opinion Delivered: June 13, 1979

B-1

APPENDIX B

IN THE SUPREME COURT OF TEXAS

No. B-7984

NELSON BUNKER Hunt, HERBERT

Hunt AND LAMAR HUNT,

Petitioners,

v.

CoasTAL SratTes GAS PropucING COMPANY AND

CoasTAL STATES MARKETING, INC.,

Respondents.

DISSENTING OPINION

I respectfully dissent.

This is an appeal from two summary judgments. Nelson

Bunker Hunt, Hei»ert Hunt, and Lamar Hunt (hereinafter

referred to as “Hunt”) sued Coastal States Gas Producing

Company and Coastal States Marketing, Inc., (hereinafter

referred to as “Coastal States”). Hunt sought judgment

“against Coastal States awarding them possession of an

undivided one-half of all crude oil or oil products produced

from Concession 65 (the Sarir Field) and converted by

Coastal States and its assignees, or the proceeds thereof;

or, in the event that such crude oil, oil products or proceeds

have been commingled with the property of another, for an

undivided interest in such property in proportion to their

shares of commingled oil, products, or proceeds; or, alter-

natively, for the fair market value of all such crude oil or oil

products converted by Coastal States and its assignees to

B-2

date of judgment; for an accounting by Coas

the amount of crude oil produced ite cave a rt

by it or its assignees, the amount of oil products taken b

Coastal States and its assignees derived from such wb

oil, the consideration received by Coastal States or its as-

signees for such oil or oil products, and any other matters

proper to such accounting; together with exemplary dam-

be interest, costs of Court and general relief.” Coastal

; tates filed a counterclaim alleging tortious interference with

its contract and business opportunities. The trial court

granted the motion for summary judgment filed by Coastal

States against Hunt’s suit, and the motion for

judgment filed by Hunt against Coastal States’ suit. The

Court of Civil Appeals affirmed. 570 S.W. 2d 503. I would

reverse the summary judgment in Hunt’s action against

Coastal States, sever this claim and remand it for trial.

oa 1957, the Government of Libya granted Concession

a 65 to Hunt, granting him the right to explore for

and extract oil for fifty years in the area hereinafte,

referred to as the Sarir field. In 1960, Hunt assigned a one-

half undivided interest in that concession to British Pe-

troleum Exploration Company, Limited. Oil was discovered

in the Sarir field in 1961, and w:: produced in marketable

quantities by 1967. In 1971, Libya nationalized the interest of

British Petroleum in the Sarir field and transferred British

Petroleum’s interest to the Arabian Gulf Exploration Com-

pany (AGECO). Two years later, by enactment of Libyan

Law Number 42, Libya nationalized Hunt’s interest in the

concession without compensation. Hunt’s rights and assets

were then transferred to AGECO. Hunt published notices

throughout the world that the Libyan nationalization of the

Sarir field violated international law and threatened suit

against anyone who came into possession of oil from the

Sarir field. Coastal States entered into a contract with

B-3

AGECO to purchase oil from the Sarir field at approximately

the time the nationalization decree was issued, and first

received oil from the Sarir field in May, 1973. Coastal States

transported that oil to refineries in Italy and sold the pro-

cessed products to third parties. The proceeds of these sales

accrued to Coastal States, which is incorporated and head-

quartered in the United States. Coastal States also stipu-

lated that at least a portion of such products were brought

into the United States from the refineries in Italy.

In August, 1973, Hunt brought this suit against Coastal

States, British Petroleum, originally a co-plaintiff in the suit,

took a nonsuit after entering into a settlement with Libya

that released Libya and all third parties, thus ending all its

claims in regard to oil from the Sarir field.

In May, 1975, Hunt settled his claims against the Libyan

government for the nationalization of the Sarir field. Hunt

and Coastal States stipulated that Libya’s payment of ap-

proximately $19,000,000 for that agreement represented only

the net book value of Hunt’s physical assets located on

Concession 65 and “that no portion of such sum was for oil

previously sold by AGECO or for oil in place.” Hunt's

present suit seeks an adjudication with respect to a one-half

share of the oil purchased by Coastal States from the date of

the expropriation in May, 1973, to the date of Hunt’s settle-

ment with Libya in May, 1975.

In Hunt’s suit against Coastal States, he alleged that the

expropriation by Libya was an illegal confiscation and there-

fore did not affect his rights to recover against subsequent

converters of the oil from the Sarir field. Hunt claimed that

Coastal States acquired the oil with full knowledge of Hunt’s

contrary possessory rights, title and interest. A pre-trial

hearing was held with each party calling experts in inter-

national and foreign law who expressed their opinions re-

I. THE ACT OF STATE DOCTRINE

I would hold that the Hickenlooper Amendment,

U.S.C. § 2370(e) (2), a statutory exception to the ae

state doctrine, is applicable to Hunt's claim and directs a

judicial determination on its merits.

The act of state doctrine was articulated in U

nderhill v.

Hernandez, 168 U.S. 250, 252 (1897): “Every pest

sovereign State, and the courts of one country will not sit

in judgment on the acts of the government of another done

within its own territory.” This doctrine was reaffirmed in

the landmark case Banco Nacional de Cuba v. Sabbatino,

Sabbatino involved a dispute over the proceeds from a

shipload of sugar expropriated by Cuba. Farr, Whitlock &

subsidiary of an American owned firm, C.A.V. All

permission for the ship to sail.

Subsequently, Cuba’s agent in New York, Banco Nacional,

and C.A.V. both made demand on Farr, Whitlock & Com.

B-5

pany for payment for the sugar. Farr, Whitlock & Company

refused payment to Cuba’s agent. Instead, pursuant to court

order, it delivered the funds to Sabbatino, the Temporary

Receiver for C.A.V.’s New York assets, to await judicial

determination of ownership. Banco Nacional brought suit

against Farr, Whitlock & Company, alleging conversion of

the fund. The district court dismissed the suit. The Second

Circuit Court of Appeals affirmed, holding that the expro-

priation decree violated international law and therefore did

not transfer good title to Banco Nacional. The United States

Supreme Court reversed and remanded, holding that the act

of state doctrine precluded examination of the validity of the

Cuban expropriation. The way was thus cleared for an Amer-

ican court, by refusing to look at the validity of Cuba’s ex-

propriation, to validate that expropriation by rendering judg-

ment requiring Farr, Whitlock & Company to pay the pro-

ceeds to the last party having possession of the sugar.

The Court examined the foundations of the act of state

doctrine and concluded that the doctrine is not compelled by

the inherent nature of sovereign authority, by any principle

of international law, or by the United States’ Constitution.

376 U.S. at 421-23. Rather, the doctrine “arises out of the

basic relationships between branches of government in a

system of separation of powers. It concerns the competency

of dissimilar institutions to make and implement particular

kinds of decisions in the area of international relations.” Jd.

at 423. Finally, the Court reasoned that a judicial determina-

tion as to the validity of an expropriation by a foreign sov-

ereign within its own territory would have only an occasional

impact, would often be likely to offend the expropriating

country, and would be a potential source of embarrassment

to the Executive Branch in its conduct of possible negotia-

tions with the expropriating country. Id. at 431-33. There-

B-6

fore, as a matter of judicial restraint, the act of state doc-

trine was applied to preclude inquiry into the validity of this

expropriation.

The dissent protested the extension of the act of state

doctrine to actions of foreign sovereigns that violate interna-

tional law.’ Courts of the United States have long recognized

a duty to determine controversies on their merits, according

to the applicable law which includes international law.? Our

courts have never been required to pay unlimited deference

to foreign acts of state. The Courts of other nations do not

follow such an inflexible rule in the protection of their Exec-

utive Branch. Furthermore, the adoption of such an inflexible

1376 U.S. at 442-44, n.2, discusses earlier cases invoking

, the act

- one ts 9 nga that those cases did not involve violations

*U.S. CONSTI. art III, § 2, extends the judicial si

troversies . . . between a State iti Gniiiel & p ieent

fete Ciena a Fhe or the Citizens , and foreign

psi v. Guyot, 159 U.S. 113, 163 (1895) declared that:

nternational law, in its widest and most com i

sense — including not only questions of right Seances ham — te

governed , by what has been appropriately called the law of

nations; but also questions arising under what is usually called

private international law, or the conflict of laws, and concern-

ing the rights of persons within the territory and dominion of

>t wa ie ge send diane or or public, done within

- dominions of another na‘.on— is part of our law, and

page: ascertained and administered by the courts of justice,

often as such questions are presented in litigation between

man and man, duly submitted to their determination.

B-7

rule is likely to cause as much embarrassment to the Exec-

utive Branch as an adjudication on the merits.

The Hickenlooper Amendment was enacted before the dis-

trict court had entered judgment on remand. Subsequent to

such enactment, the district court, in Banco Nacional de

Cuba v. Farr, 243 F.Supp. 272 F.Supp. 836 (1965), held that

the amendment applied to that case; held that the expropria-

tion by the Cuban government violated international law;

and dismissed the suit. The Second Circuit Court of Appeals

affirmed, 383 F.2d 166 (1967), holding that the Hickenlooper

Amendment did apply, that the amendment was constitu-

tional, and that the Cuban expropriation violated interna-

tional law. The Court of Appeals adopted a considerable

portion of its prior determination in the case, 307 F.2d 845

(1962). The United States Supreme Court thereafter denied

petition for certiorari in the case, 390 U.S. 956 (1968).

Il. THE HICKENLOOPER AMENDMENT

In the wake of reaction against Sabbatino, Congress passed

the Hickenlooper Amendment. It became law on October 7,

1964, and was reenacted as permanent law in 1965. It reads

as follows:

Notwithstanding any other provision of law, no court

in the United States shall decline on the ground of the

federal act of state doctrine to make a determination on

the merits giving effect to the principles of international

law in a case in which a claim of title or other right to

property is asserted by any party including a foreign

state (or a party claiming through such state) based

upon (or traced through) a confiscation or other taking

after January 1, 1959, by an act of that state in viola-

tion of the principles of international law, including the

principles of compensation and the other standards set

out in this subsection: Provided, That this subpara-

B-8

graph shall not be applicable (1) in any case i j

an act of a foreign state is not contrary to een ret

law or with respect to a claim of title or other right to

property acquired pursuant to an irrevoca

credit of not more than 180 days duration “ed opel

faith prior to the time of the confiscation or other tak-

ing, or (2) in any case with respect to which the Presi-

dent determines that application of the act of state doc-

trine is required in that particular case by the foreign

policy interests of the United States and a suggestion to

this effect is filed on his behalf in that case with the

22 U.S.C. § 2370(e) (2).

The Senate Report indicates that the amendment was

meant to modify the Sabbatino decision and to achieve a

reversal of presumptions as to the embarrassment caused the

Executive Branch by judicial determinations on the merits

of controversies that involve an act of state by a foreign

sovereign.’ Under Sabbatino, courts were required to refuse

adjudication of claims that involved passing on the validity

of a foreign country’s act of state, presuming that such an

adjudication would embarrass the Executive’s conduct of

foreign policy. The Hickenlooper Amendment directs that

courts shall adjudicate such claims, presuming that such an

adjudication will not embarrass the Executive. This pre-

sumption may be rebutted if the President determines that

been

ternational law.

S. Rep. No. 1188, Part I, 88th Cong., 2d Sess. 24 (1964).

B-9

application of the act of state doctrine is required in a par-

ticular case by United States’ foreign policy interests.‘

Under the Hickenlooper Amendment, any court in the

United States must determine the merits of controversies if

(1) any party makes a claim of title or other right to prop-

erty based upon or traced through a confiscation or taking,

(2) the President has not filed with the court a suggestion

that the application of the act of state doctrine is required

by the foreign policy interests of the United States,’ and

(3) that taking was by a foreign state in violation of the

principles of international law. The amendment further

directs that the determination be made “giving effect to the

principles of international law.” Despite the majority’s as-

sertion to the contrary, the statute does not require that the

expropriated property itself be brought within the territorial

jurisdiction of the United States. The amendment does apply

Under the Sabbatino decision, the courts would presume that

any adjudication as to the lawfulness under international law of

the act of a foreign state would embarrass the conduct of foreign

policy unless the President says it would not. Under the amendment,

the Court would presume that it may proceed with an adjudication

on the merits unless the President states officially that such an

adjudication in the particular case would embarrass the conduct

of foreign policy.

Id.

This is similar to the procedure followed by the Department of

State currently regarding sovereign immunity claims. That Depart-

ment makes a determination whether foreign governments’ claims

of immunity should be granted in each case where a party seeks

to raise the immunity issue. See Sabbatino, 376 U.S. at 469; 26

DEPT. STATE BULL. 984-985 (1952), Appendix 2, Alfred Dunhill

of London, Inc. v. Cuba, 425 U.S. 682, 711-15 (1976).

5’ The Proviso clause of the amendment also exempts its applica-

tion “in any case . . . with respect to a claim of title or other right

to property acquired pursuant to an irrevocable letter of credit of

not more than 180 days duration issued in good faith prior to the

time of the confiscation or other taking.”

B-10

to the proceeds of such property.* The Hickenlooper Amend-

ment has been narrowly construed by the courts and has

been restricted to fact situations closely in point to Sabba-

tino. I would hold that the case at bar is in that class of cases

encompassed by the amendment and that our courts are

under a duty to make a determinati ti i

contention. on on the me:zits of this

A. Claim of title or other right to property.

The majority has concluded that, under Lib

does not have title to oil in strata, but only a ; ace

right to that oil, and that therefore he has no claim to prop-

erty as required by the Hickenlooper Amendment. I dis-

agree. The Hickenlooper Amendment does not require proof

* Although the amendment does not refer specifi roceeds,

> . . . call

cl at I rs iknded fo ely he orperty mont

ble. case i involved th

Pe expropriated property. The shipment of sugar steam ian Sahin

4 territorial jurisdiction of the United States.

estimony before legislative committees during consi i

the amendmen: rc t further r reflects Sie Gidiaban ‘Pacleoe tne

Henkin, 7 lumbia r Regence SS ed 3 International Law, who

testified against amendmen : “I do not think i

spply except to nemcgoaty which was itself expropriated in Bsew

| yb aggre prays W; or to that property so long as it is still identi-

oe — change its form somewhat and still identify it.”

= ign istance Act of 1965, Hearings on H.R. 7750 Before the

: in ge Committee on Foreign Affairs, 89th Cong., Ist Sess. Part VII

1 70 (1906), Professor Ceci J. Olmstead stated “This [amendment

gned after property or proceeds of i

“—— illegally taken by the foreign state.” J Por iv, tied

cases also reflect the understanding that the Hickenlooper

2d 433 (1968). See Banco Nacional de C } ]

uba v. F j

Bank of New York, 431 F.2d 394, 401-02 (2nd Cir 190) Bone

acional de Cuba v. Farr, 383 F.2d 166 (2nd Cir. 1967).

B-11

of title to property; it requires adjudication of controversies

when “a claim of title or other right to property is asserted.”

(Emphasis added). The amendment also requires that the

determination be made giving effect to the principles of in-

ternational law, not according to the law of the country that

has just accomplished the confiscation.

Significance has been attached to Congress’ addition of

the words “to property” after the phrase “a claim of title

or other right” when it reenacted the amendment and made

it permanent in 1965. A close reading of the legislative his-

tory surrounding the adoption of this amendment makes it

clear that these words were added to assure the availability

of the act of state doctrine as a defense in certain cases

where American banks, insurance companies, and other fi-

nancial institutions that have had reserves expropriated

abroad might otherwise be susceptible to multiple liability.’

7In 1964, the Hickenlooper Amendment was adopted as a tem-

porary law with the understanding that it would be further con-

sidered the following year. In 1965, after additional hearings, the

Amendment became permanent law as part of the Foreign Assist-

tance Act of 1965. Two significant changes were made. First, as

noted, it was made permanent law. Second, the words “to prop-

erty” were added as described above. The purpuse of that addition

was explained in the Senate Report:

The words “to property” have been inserted to make it

clear that the law does not prevent banks, insurance com-

panies, and other financial institutions from using the act of

state doctrine as a defense to multiple liability upon any con-

tract or deposit or insurance policy in any case where such

liability has been taken over or expropriated by a foreign

state. In such cases, it is not intended to effect any defense

previously available to such institutions. (Emphasis added).

S. Rep. No. 170 on S. 1837, 89th Cong., 1st Sess. 19 (1965).

The change was also explained during testimony before the House

by Professor Cecil J. Olmstead, Professor of International Law

at the New York University School of Law, 1965 President of

the American Branch of the International Law Association, as-

(Continued on next page)

B-12

This does not preclude the applicability of the amendment

to cases where a contract has granted a party a claim of title

or other right to certain tangible property that has been the

subject of expropriation by a foreign sovereign. Furthermore,

it has long been recognized that contract rights are a form

of property protected by the Fifth Amendment. See United

States Trust Co. v. New Jersey, 431 U.S. 1, 19, n. 16 (1977).

The legislative history indicates that the case at bar pre-

sents precisely the type of claim that was contemplated by

Congress in the passac2 of the Hickenlooper Amendment.

Professor Cecil Olmstead, one of the original authors of the

amendment, expected the amendment to apply to contract

rights when tangible property or goods claimed under a con-

tract, or proceeds thereof, came into the United States:

I would think that a contract right would [be cov-

ered] because there is a property interest in the con-

tractual right of course. We certainly intended a con-

tractual right would be covered here.

Of course, if there was a violation of a contract be-

tween a U.S. investor and a foreign state and no pro-

ceeds or goods or commodity from the enterprise came

into the United States, there would never be an op-

portunity for this amendment to work.

(Continued from preceding page)

istant to the Chairman of the Board of Texaco, Inc., and one

of the original authors of the amendment, speaking on behalf

of the Rule of Law Committee: : .

[T]he amendment has been so drafted as not to affect the

act of state doctrine defense when it is asserted by a party

which does not derive a claim of title or right through an

expropriation (e.g., U.S. bank defending a suit by depositors

in a foreign branch that was expropriated or a U.S. insurance

company defending a suit on foreign policies backed by re-

serves that were expropriated abroad).

Foreign Assistance Act of 1965: Hearings on H.R. 7750 Before the

ya on Foreign Affairs, 89th Cong., 1st Sess. Part IV,

B-13

Foreign Assistance Act of 1965, Hearings on H.R. 7750 Be-

fore the House Committee on Foreign Affairs, 89th Cong.,

1st Sess., Part IV, 608 (1965).

Congressman Adair, sponsor of the original amendment in

the House, explained its purpose in this manner:

[The amendment] insures that however the case may

arise or the act of state doctrine be invoked, a party

who had suffered an expropriation in violation [of inter-

national law] may bring suit to assert his claim to the

expropriated property if there is an attempt to market

it in the United States.

110 CONG. REC. 23680 (1964).

Even an opponent of the amendment, Professor Louis

Henkin, admitted its applicability to this type of situation.

In a letter submitted in response to a request during his tes-

timony prior to the amendment’s reenactment, Henkin

stated:

So far as the Sabbatino amendment is concerned, it

would apply also to expropriations of property owned by

nationals of third countries. The famous expropriation

by Iran of the Anglo-Iranian Oil Co. is a notable ex-

ample. Presumably, if some of that oil had come to the

United States, the British company might have traced

it here and, under the Sabbatino amendment, an Amer-

ican court would have had to decide whether the na-

_ tionalization program of the Government of Iran was

consistent with international law. (Emphasis added).

Foreign Assistance Act of 1965, Hearings on H.R. 7750 Be-

fore the House Committee on Foreign Affairs, 89th Cong.,

1st Sess., Part VII, 1076 (1965).

As recognized by the Second Circuit Court of Appeals in

Banco Nacional de Cuba v. First National City Bank of New

B-14

York, 431 F.2d 394, 402 (2d Cir. 1970), after studyi

rk, 431 | , , ying the

legislative intent behind this amendment:

If one fact is clear from the legislative history, it is

that this language [of the Hickenlooper Pew, a

was designed to be invoked by American firms in order

to afford them “a day in court” —and presumably a

monetary recovery—when some other entity at-

rer + peng the “yn perng firms’ expropriated

perty and some aspect of such an attem

action took place in this country. ica

The majority cites four cases presumably as support for

the holding that the Hickenlooper pene es is Hiaslsiio

able because Hunt only acquired a contract right in the Con-

cession Agreement. None of these cases, however, is directly

on point, nor does any preclude a holding that a claim to

property, granted by contract, is encompassed by the Hick-

enlooper Amendment. Of the four cases cited, only one ac-

tually involved a claim to tangible property that was ex-

propriated and later brought into the United States.

Although the scope of the act of state doctrine must be de-

termined under federal law, see Sabbatino, 376 U.S. at 427,

the majority has relied on two state court cases. The New

York State Court of Appeals decision, French v. Banco

Nacional de Cuba, 23 N.Y.2d 46, 242 N.E.2d 704, 295

N.Y.S.2d 433 (1968), is distinguishable from the case at

bar. Plaintiff in that case was holding certain “certificates

vf tax exemption” that the Cuban Government would no

longer redeem. These certificates purported to allow the

holder to convert pesos into United States dollars and to

take those dollars out of Cuba without paying any exporta-

tion tax. The New York Court found that French’s only loss

was occasioned by a change in Cuban currency regulations

B-15

and did not therefore constitute a taking of property.® Fur-

thermore, French involved no expropriated property, or pro-

ceeds thereof, brought into the United States. The plaintiff

was seeking monetary recovery from an account maintained

by Banco Nacional in New York City. The Hickenlooper

Amendment was not intended to provide a remedy in this

kind of situation. The Court did express, by obiter dicta, the

opinion that the Hickenlooper Amendment would not apply

to contract claims. The second state court case cited by the

majority, Present v. United States Life Ins. Co., 232 A.2d

863, aff'd, 241 A.2d 237 (N.J. 1968), did not involve a taking

of property as contemplated by the Hickenlooper Amend-

ment, nor did it involve a violation of international law.”

® A legislator who reduces rates of interest or renders agree-

ments invalid or incapable of being performed or prohibits

exports, or renders performance more expensive by the im-

position of taxes or tariffs does not take property. Nor does

he take property if he depreciates currency or prohibits pay-

ment in foreign currency or abrogates gold clauses. Expecta-

tions relating to the continuing intrinsic value of all currency

or contractual terms such as the gold clause are, like favor-

able business conditions and good will, “transient circum-

stances, subject to changes”, and suffer from “congenital in-

firmity” that they may be changed by the competent legis-

lator. They are not property, their change is not deprivation.

Mann, Money in Public International Law, 96 Recueil Des Cours

[1959] 1, 90, quoted in French v. Banco Nacional de Cuba, 242

N.E.2d at 710.

® Present involved a claim to life insurance proceeds made on

a New York insurance company based on a policy sold by that

company’s Cuban branch. That branch had been nationalized with

all assets and liabilities assumed by the Cuban government. The

plaintiffs were Cuban citizens at the time of the nationalization,

ae to the United States, and brought the claim in the United

tates.

The court accurately pointed out that these persons had no

claim to property that had been expropriated. In fact, when Cuba

took over the insurance company, it expressly assumed the liabilities

to the policy holders. The plaintiffs, however, had made no claim

on the policy when they were still in Cuba. Furthermore, there

B-16

Menendez v. Saks and Co., 485 F.2d 1355 (2d Cir. 1

cert. denied, 425 U.S. 991 (1976), followed ih United “on

Supreme Court decision in First National City Bank v.

Banco Nacional de Cuba, 406 U.S. 759 (1972), to avoid strict

application of the act of state doctrine. The Court, in follow-

ing that decision, concluded that “despite the act of state

doctrine a counterclaim limited to the amount sought by the

foreign sovereign was enforceable.” Menendez, 485 F.2d at

1373. The Court concluded that the Hickenlooper Amend-

ment did not govern the counterclaim against Banco Na-

cional and, in dicta, cited French, supra. The denial of cert-

= by sno ge States Supreme Court in no way re-

approval of the di i i

Point nga cta regarding the Hickenlooper

The only case cited that involved pro all -

propriated and later brought into the tinted tf

Occidental of Umm Al Qaywayn, Inc. v. Cities Service Oil

Co., 396 F.Supp. 461 (W.D. La. 1975), dismissed in part,

reversed in part, 577 F.2d 1196 (1978). Occidental sued

(Continued from preceding page)

was no violation of international law because the plaintiff

page Ho Cuba at the time of the expropriation, Amin “gubject

. ws enacted by Cuba — and all such laws were binding

— P—ralirag upon their property and property rights.” Id. at

applicable oad 7 ania alm phen are.

. , en i

plicability of the amendment to sane dietiea. sf seen hal

10 Menendez was a suit brought b i

, y Cuban interventors (those

Cubans Placed in control of expropriated cigar factories ns ex-

propriation by the government) for sums owed by United States

Pate Baia importers sough t an offset of moneys paid erron-

yx a for cigars received before the expropriation

occurred. cated above, the court allowed such offset, re-

fusing apply the act of state doctrine to validate the inter-

ventors repudiation of moneys owed the importers.

B-17

Cities Service for the conversion of oil in three tankers,

claiming that the oil had been produced from an area of the

Persian Gulf in which Occidental held valid concession

rights. Cities Service contended that it held the only val-

id concession rights to the area in dispute. Each com-

pany held a concession granted by one of the States bor-

dering the Persian Gulf. The area covered by each con-

cession was defined by the territorial waters of the State

granting those rights. The boundary lines were in dispute

between these governments, however, with each government

claiming the area where this oil was produced. It was never

clearly established that Occidental had valid concession

rights in the area in dispute. The boundary dispute was the

crucial factor that led the Fifth Circuit Court of Appeals to

hold that the controversy between Occidental and Cities

Service involved a political question and was therefore non-

justiciable. 577 F.2d 1196. In light of that holding on appeal,

I consider the portion of the district court’s opinion stating

that the Hickenlooper Amendment does not apply to con-

tract claims to be of no significant precedential value.

Occidental is further distinguishable from our case at bar

because of the applicability of the second proviso of the

Hickenlooper Amendment. That proviso precludes applica-

tion of the amendment when the President “determines that

application of the act of state doctrine is required in that

particular case by the foreign policy interests of the United

States and a suggesion to this effect is filed on his behalf in

that case with the court.” A letter from the State Depart-

ment was included in the Government’s amicus curiae brief

in Occidental wherein the opinion was expressed that “it

would be contrary to the foreign relations interests of the

United States if our domestic courts were to adjudicate

boundary controversies between third countries and in par-

B-18

ticular that controversy involved here.” 577 F.2d at 1204, n.

13. Conversely, Hunt has produced expressions from the

State Department supporting his pursuit of legal remedies

in regard to the oil from the Sarir field, as will be discussed

I do not find any of the cases above to be controlling in

light of the clear Congressional intent, as discussed previous-

ly, to include contractual rights to property within the ex-

ception provided by the Hickenlooper Amendment. Indeed,

I have been cited to no case, and have discovered no case,

holding squarely that a claim to property, granted by con-

tract, is not encompassed by the Hickenlooper Amendment.

Finally, the amendment’s application is not restricted to

cases where the plaintiff has asserted a claim of title or other

right to expropriated property. Rather, the amendment re-

quires a determination on the merits “in a case in which a

claim of title or other right to property is asserted by any

party .. - based upon (or traced through) a confiscation or

other taking. . . .” Therefore, by its language, the Hicken-

looper Amendment applies if either the plaintiff, or the de-

fendant, claims title or right to property based upon a taking

by a foreign country. Clearly, Coastal States, the defendant

here, is a party claiming the right to oil from the Sarir field

based entirely upon Libya’s taking of Hunt’s concession

rights. In this case, therefore, both the plaintiff, Hunt, and

the defendant, Coastal States, are asserting claims of right

to property that was expropriated by Libya.

B. Department of State’s Support of Hunt.

The second proviso of the Hickenlooper Amendment ex-

empts its application “in any case with respect to which

the President determines that application of the act of state

doctrine is required in that particular case by the foreign

B-19

policy interests of the United States and a suggestion to

this effect is filed on his behalf in that case with the court.”

This provision avoids the situation that concerned the

United States Supreme Court in Sabbatino: that judicial

determinations of parties rights might interfere with, or

embarrass, the Executive Branch of the government.”

There has been no such request filed with any court in this

case. In fact, the Department of State has indicated its

belief that the Hickenlooper Amendment was passed pre-

cisely to permit American courts to entertain suits such as

this, brought in pursuit of “hot” oil; that the nationalization

of Hunt’s interest in the Sarir field by Libya violated inter-

national law; and that wherever possible Hunt should be

11 The Department of State originally opposed the passage of

the Hickenlooper Amendment. However, after the Hickenlooper

Amendment was passed, the Department of State took the po-

sition that the amendment was valid and constitutional. Banco

Nacional de Cuba v. Farr, 383 F.2d 166, 181, n. 16 (1967).

The State Department’s acceptance of the Hickenlooper Amend-

ment post-Sabbatino is further shown in a letter from its Legal

Advisor to the Solicitor General, and appended to the majority

opinion in Alfred Dunhill of London, Inc. v. Cuba, 425 U.S. 682,

706-11 (1976):

In general this Department’s experience provides iittle sup-

port for a presumption that adjudication of acts of foreign

states in accordance with relevant principles of international

law would embarrass the conduct of foreign policy. Thus, it

is our view that if the Court should decide to overrule the

holding in Sabbatino so that acts of state would thereafter

be subject to adjudication in American courts under inter-

national law, we would not anticipate embarrassment to the

conduct of the foreign policy of the United States.

Id. at 710-11.

The letter also refers to several recent decisions where courts

of other aations have reviewed state acts under international law

and noted that “As far as can be determined, this exercise of the

judicial function in foreign jurisdictions has not caused serious

a ye consequences for the countries concerned.”

at ‘

B-20

supported in his pursuit of legal remedies."* It is apparent,

therefore, that the Department of State has determined

that adjudication of Hunt’s claim by the judicial branch

Moray ag by the Department of State on policy on “hot”

Question has been raised in testimony before the Subcom-

tee on Foreign Relations about the policy of partmen

of State in respect of “hot” tdpens ah Wha stones hat

B-21

of our government will cause no serious harm or embarrass-

ment to the conduct of foreign policy by the Executive

Branch of our government.

C. Violation of International Law

The amendment also requires that the taking by the for-

eign state be “in violation of the principles of international

law, including the principles of compensation and the other

(Continued from preceding page)

find it appropriate to request courts in the United States to

refrain from passing upon acts of the Libyan Government on

grounds of “act of State.” (Emphasis added).

UNITED STATES OF AMERICA’S NOTE VERBALE NO.

59, Presented to Ministry of Foreign Affairs of the Libyan Arab

Republic dated July 5, 1973:

. . . It is clear from those pronouncements [the speech by

Chairman Qadhafi, see p. 24 infra, and the official com-

mentary actompanying the law expropriating Hunt’s interest]

that the reasons for the action of the Libyan Arab Republic

Government against the rights and property of the Nelson

Bunker Hunt Oil Company were political reprisal against the

United States Government and coercion against the economic

interests of certain other U.S. Nationals in Libya. Under

established principles of international law, measures taken

against the rights and property of foreign nationals which are

arbitrary, discriminatory, or based on considerations of po-

litical reprisal and economic coercion are invalid and not

entitled to recognition by other states.

LETTER, From William J. Casey, Under Secretary of State to

G. Henry M. Schuler of Nelson Bunker Hunt, dated August 3, 1973:

I am writing in response: to your letter of August 2, 1973 re-

garding the nationalization on June 11, 1973 of Nelson Bunker

Hunt’s rights and property in Libya. In your letter, you re-

quested me to approve the release of the text of a diplomatic

note transmitted by the U.S. Government to the Government

of the Libyan Arab Republic on July 8, 1973, which contained

our position with respect to the June 11 nationalization. . . .

. .. I am enclosing the text of the substance of the note and

will provide you with certified copies . . . as soon as they

are available. We have no objection to your using this note

in connection with any pending or proposed litigation or in

any other way appropriate to the assertion of your legal rights

to the nationalized property... .

B-22

standards set out in this subsection.” The majority does

not reach this question since it found the Hickenlooper

Amendment inapplicable to the instant case on other

grounds.

Hunt contends that Libya’s expropriation violated inter-

national law because it did not provide for prompt, ade-

quate compensation and because it arbitrarily discriminated

against him for a political purpose unrelated to any legiti-

mate public interest. In my view, the Hickenlooper Amend-

ment itself requires speedy compensation, equivalent to the

full value of the expropriated prope:ty.

The amendment refers to the “principles of compensation

and the other standards set out in this subsection” as

guidelines for the determination of the adequacy of com-

“pensation. That subsection, 22 U.S.C. 2370(e) (1), requires

the President to suspend assistance to any country expro-

priating property owned more than 50% by the United

States’ citizens if that government does not, within a rea-

sonable time after the expropriation, take steps to discharge

its obligations toward those citizens, “including speedy

compensation for such property in convertible foreign ex-

change, equivalent to the full value thereof, as required by

international law. . . .” The statute, therefore, anticipates

that United States’ citizens will receive the full value of

their expropriated property and that such compensation

will be forthcoming shortly after the expropriation takes

place. Other authority indicates further that the United

States expects compensation to its citizens for expropriated

property to be reasonably prompt and to be for the full

market value."

18 $188. Adequacy of Compensation

(1) Compensation, to be adequate in amount within the mean-

ing of $187, must be in an amount that is reasonable under

B-23

It is uncontested that Hunt received no compensation

from Libya until approximately two years after the expro-

priation and that the compensation received at that time

was limited to the net book value of the physical assets on

the concession at the time of the nationalization. The na-

tionalization decree purported to provide some measure of

compensation to Hunt. However, ‘he amount of compensa-

tion was to be determined by a committee appointed by

Libya’s oil minister, with no provision for Hunt to produce

evidence as to the value of his interest in the Sarir field.

Further, the decree explicitly precluded any appeal from

the committee’s decision. The Restatement of the Law

(Second), Foreign Relations Law of the United States, § 185

(Continued from preceding page) ,

the circumstances . . . Under ordinary conditions, . . . the

amount must be equivalent to the full value of the property

—— together with interest to the date of payment. (Emphasis

).

Restatement of the Law (Second), Foreign Relations Law of the

United States, § 188 (1965).

The President of the United States, in January 1972, drew

attention to the importance which the United States attaches

to respect for the property rights of its nationals. He stated

that the policy of the United States concerning expropriatory

acts includes the position that: “Under international law, the

United States has a right to expect:

— That any taking of American private property will

be nondiscriminatory;

— That it will be for a public purpose; and

— That its citizens will receive prompt, adequate, and

effective compensation from the expropriating country.”

With regard to current or future expropriations of property

or contractual interests of U.S. nationals, or arrangements for

“participation” in those interests by foreign governments, the

Department of State wishes to place on record its view that

foreign investors are entitled to the fair market value of their

interests.

DEPARTMENT OF STATE PRESS RELEASE NO. 630, De-

cember 30, 1975.

B-24

(1965) states that the taking of property by a state is

wrongful under international law if, among other things,

“there is not reasonable provision for the determination and

payment of just compensation.” Comment (e) elaborates

on this requirement and explicitly refers to two elements

of fairness which were denied Hunt: that an impartial tri-

bunal or administrative authority determine his rights, and

that he have a reasonable opportunity to obtain and pre-

sent witnesses and evidence in his own behalf. I conclude

that the compensation provisions of the nationalization de-

cree were illusory and did not meet the requirements for

adequate compensation.

Coastal States points out that several countries notably

Latin American and Communist countries, do not acknowl-

edge any duty to provide compensation to aliens for ex-

propriated property. There is also disagreement among in-

ternational law experts as to whether something less than

full market value may constitute adequate compensation.

However, in the case at bar, we have the additional consid-

eration that the property was seized as a means of politi-

cal and economic retaliation against the United States.

The retaliatory nature of Libya’s expropriation of Hunt’s

interest in the Sarir field is clearly shown in the text of a

speech given by Libyan Chairman Mu’ammar al-Qadhafi

at a celebration marking the third anniversary of the closing

of the United States Air Force Base at Wheelus:

The United States, which has suffered defeats every-

where, has not yet been taught the final lesson, espe-

cially when we see it being quarrelsome ia the Arab

world and completely siding with Israel . . . we say with

a loud voice that this United States needs to be given

a big hard blow on its cold insolent face in the Arab

area.

B-25

U.S. policy, brothers, is going to lead to a catastrophe

for U.S. interests in the Arab area in particular.

The time has come for the Arab peoples to confront the

United States. The time has come for the U.S. interests

to be threatened earnestly and seriously in the Arab

area, regardless the cost . .. The United States is still

scorning the Arab nation and its rights. It is continu-

ously giving Israel the most modern arms to enable it

to humiliate the Arab nation or to conquer at its will

or to remain unjustly in the occupied territory. Also,

U.S. (arrogance) is now manifested in the attitude of

the oil companies . . . However, the time may come, if it

has not already come, for the serious and dangerous

confrontation to take place —a confrontation the cost

of which we must bear — with the oil companies and

with the entire U.S. imperialism.

On this occasion, the RCC of the Libyan Arab Repub-

lic has decided to nationalize the American oil company

Bunker Hunt. (Emphasis added).

There is generally a consensus among authorities that

an uncompensated expropriation, wher: done as an act of re-

taliation, is contrary to international law. The Second Circuit

Court of Appeals reviewed such authorities and concluded:

Unlike the situation presented by a failure to pay ade-

quate compensation for expropriated property when

the expropriation is part of a scheme of general social

improvement, confiscation without compensation when

the expropriation is an act of reprisal does not have

significant support among disinterested international

commentators from any country. And despite our best

efforts to deal fairly with political and social doctrines

vastly different from our own, we also cannot find any

reasonable justification for such procedure. Peacetime

seizure of the property of nationals of a particular coun-

try, as an act of reprisal against that country, appears

to this court to be contrary to generally accepted prin-

ciples of morality throughout the world.

B-26

Banco Nacional de Cuba v. Sabbatino, 307 F.2d 845, 866

(1962), reaffirmed in Banco Nacional de Cuba v. Farr, 383

F.2d 166, 183, cert. denied, 390 U.S. 956 (1968). I agree with

the reasoning of the Second Circuit Court of Appeals and

would hold that the expropriation of Hunt’s interest in the

Sarir field by Libya was without prompt, adequate compen-

sation; that the expropriation was in retaliation against the

United States; and that for these reasons the expropriation

violated international law.

I would reverse the summary judgment against Hunt and

remand his suit against Coastal States for a determination

on the merits.

Chief Justice Greenhill and Justice Franklin Spears join.

OPINION DELIVERED: June 13, 1979

C-1

APPENDIX C

Affirmed, and Opinion filed August 23, 1978.

No. 1809

NELSON BUNKER HUNT, ET AL,

Appellants-A ppellees

vs.

COASTAL STATES GAS PRODUCING COMPANY,

ET AL, Appellees-Appellants

Appeal from 133rd District Court

of Harris County

Nelson Bunker Hunt, Herbert Hunt and Lamar Hunt

(collectively referred to as “Hunt’”) originally instituted a

suit for conversion against Coastal States Gas Producing

Company and Coastal States Marketing, Inc. (collectively

referred to as “Coastal States”) claiming that Coastal States

had converted oil to which Hunt was entitled by virtue of

a concession agreement with Libya. Coastal States answered

and filed a counterclaim for tortious interference with its

contract and business opportunities. Coastal States moved

for summary judgment on Hunt’s claim. Hunt moved for

summary judgment only on the issue of liability in the origi-

nal suit and for a general summary judgment against Coastal

States on Coastal States’ counterclaim. The trial court

granted Coastal States’ motion for summary judgment in

C-2

the original suit and Hunt’s motion for summary judgment

on the counterclaim. Both sides appeal.

In 1957 Libya granted a concession (Concession Number

65) to Nelson Bunker Hunt. The concession gave Hunt the

right, for fifty years, to explore, drill and extract oil. Subse-

quently, Herbert Hunt and Lamar Hunt acquired an interest

in the concession pursuant to an agreement with Nelson

Bunker Hunt. In 1960, with the approval of the Libyan gov-

ernment, the Hunts assigned a one-half undivided interest

in the concession to British Petroleum Exploration Com-

pany, Limited.

In 1961 oil was discovered in the concession (hereinafter

called the Sarir field). Oil was produced in marketable quan-

tities by 1967. In 1971, the Libyan government nationalized

the operations and interest of British Petroleum in the Sarir

field and transferred its rights to the Arabian Gulf —

tion Company (AGECO).

In 1973, the Libyan government, by the enactment of

Libyan Law Number 42, nationalized Hunt’s interest in the

Sarir field. Article 1 of Libyan Law Number 42 provides:

The rights of Nelson Bunker Hunt in Oil Concession

Agreement No. 65 shall be nationalized, and ownership

of all the funds, rights, assets and shares of Nelson Bun-

ker Hunt in the said concession shall revert to the State,

including specifically all the rights relating to the instal-

lations and facilities for prospecting, exploration and

drilling for, and production of, crude oil and natural gas,

as well as for transportation, processing, storage and

export, and other assets and rights relating to the said

concession.

Hunt’s rights and assets were then transferred and assigned

to AGECO. Hunt subsequently published notices in news-

papers throughout the world claiming that the Libyan na-

C-3

tionalization of the Sarir field violated international law and

was of no effect, and additionally threatened suit against

anyone who came into possession of Sarir oil. In May 1973,

approximately the time the nationalization decree was issued,

Coastal States entered into a contract with AGECO to pur-

chase oil from the Sarir field. The oil was then transported

to a refinery in Italy. This contract was consummated and

performed despite Hunt’s claims against Libya. Hunt ulti-

mately settled his claims against Libya in May 1975. In that

agreement, Hunt released any and all claims against the Li-

byan government which arose out of the nationalization of

the Sarir field. Hunt was paid approximately $19,000,000.00

as consideration.

In August, 1973 Hunt instituted this suit against Coastal

States for conversion of the Sarir field oil. Hunt claimed that

the Libyan government confiscated his property in violation

of: (1) the concession agreement between the parties; (2)

international law; and (3) the public policy of the United

States and that such an illegal confiscation could not and

did not affect Hunt’s rights to recover against subsequent

converters of oil from the Sarir field. Hunt claimed that

Coastal States acquired the petroleum from the Sarir field

and exercised dominion and control over such oil with full

knowledge of and inconsistent with Hunt’s possessory rights,

title and interest. Coastal States counterclaimed against

Hunt for tortious interference with Coastal States’ contrac-

tual relations and business opportunities.

At a pre-trial hearing both Hunt and Coastal States called

experts in international] and foreign law who expressed their

opinions regarding the application of Libyan and interna-

tional law to the facts presented in this case. Following the

hearing, the parties submitted motions for summary judg-

ment.

C-4

In October 1977 the trial court entered its final judgment,

granting Coastal States’ motion for summary judgment on

Hunt’s conversion claim, denying Hunt’s motion for sum-

mary judgment on the issue of liability and granting Hunt’s

motion for summary judgment on Coastal States’ claim for

tortious interference with Coastal States’ contracts and busi-

ness opportunities. The trial court additionally filed conclu-

sions of law stating that Libyan law determined the interest

acquired by Hunt in the Sarir field, and, under Libyan law,

Hunt did not acquire title to the oil, but merely a contract

right to extract the oil. The trial court also found that the

Act of State Doctrine applied to this case and foreclosed the

trial court from inquiring into the validity of the Libyan na-

tionalization of Hunt’s interest in the Sarir field, and, no ex-

ception to this doctrine was applicable. Regarding Coastal

States counterclaim for tortious interference, the court held

that, as a matter of law, Hunt’s actions in giving notice of

his claim to oil from the Sarir field did not violate either

state or federal law, and his actions in giving such notice

were neither malicious or capricious.

Both parties appeal from the judgment rendered by the

trial court.

APPEAL BY HUNT

Hunt asserts seven points of error attacking the trial

court’s findings as to the applicability of the Act of State

Doctrine, the applicability of Libyan law rather than interna-

tional law, and its findings that Hunt had only a contractual

right to extract the oil.

Since Coastal States’ possession of the oil is clearly right-

ful, and does not constitute a conversion, if its transferor’s

title was good, the critical issue in the resolution of Hunt’s

whole suit is whether Libya’s expropriation was valid. This,

C-5

in turn, presents the question of whether a Texas court may

inquire into the acts done by a foreign sovereign. Such in-

quiry is generally barred by the Act of State Doctrine. In

his first two points Hunt asserts four reasons why the Act

of State Doctrine, which bars inquiry into the validity of

the actions of an expropriating nation, should not apply to

the Libyan nationalization in this case: (1) the State De-

partment has expressed its views that the Libyan national-

ization was violative of international law and it would be

unlikely that the executive branch would request American

courts to refrain from considering the validity of the acts of

Libya on the grounds of the Act of State Doctrine (the

Bernstein exception); (2) Libya, by nationalizing the oil

field and marketing the petroleum in international commerce

did not act officially as a sovereign (the commercial act ex-

ception) ; (3) the Hickenlooper amendment, designed to un-

dercut the Act of State Doctrine is applicable; and (4) Li-

bya and Hunt, parties to the concession agreement, included

an “applicable law” clause in the concession agreement which

is unambiguous and these terms should be given effect re-

gardless of the Act of State Doctrine.

For reasons discussed herein, we affirm the summary judg-

ment against Hunt.

THE ACT OF STATE DOCTRINE

The Act of State Doctrine is a judicially created doctrine

of restraint. The classic formulation of that doctrine was

restated in Banco Nacional de Cuba v. Sabbatino:

Every sovereign state is bound to respect the indepen-

dence of every other sovereign state, and the courts of

one country will not sit in judgment on the acts of the

government of another, done within its own territory.

Redress of grievances by reason of such acts must be

C4

obtained through the means open to be availed of by

sovereign powers as between themselves.

376 U.S. 398, 416; 84 S. Ct. 923, 934 (1964) quoting Underhill

v. Hernandez, 168 U.S. 250, 252, 18 S. Ct. 83, 84 (1897).

Hant claims under his second point that the Bernstein ex-

ception to this doctrine applies ‘and permits judicial inquiry

into the validity of the Libyan nationalization. See Bernstein

v. N. V. Nederlandsche-Amerikaansche Etc., 210 F.2d 375

(2d Cir. 1954). We disagree.

It is highly questionable whether there is such an excep-

tion. In First National City Bank v. Banco Nacional de Cuba,

Justice Rehnquist defined and analyzed the Bernstein excep-

tion and concluded:

[That where the Executive Branch, charged as it is

with primary responsibility for the conduct of foreign

affairs, expressly represents to the Court that applica-

tion of the act of state doctrine would not advance the

interests of American foreign policy, that doctrine

should not be applied by the courts. In so doing, we of

course adopt and approve the so-called Bernstein excep-

tion to the act of state doctrine.

406 U.S. 759, 768, 92 S. Ct. 1808, 1813 (1972). However, the

dissent, comprised of four justices, pointed out that only

Chief Justice Berger and Justice White concurred with Jus-

tice Rehnquist. Tyo additional justices concurred with Jus-

tice Rehnquist only in result. The dissent explicitly rejected

the Bernstein exception and reasoned that the validity of a

foreign act of state is a “political question not cognizable in

our courts.” 406 U.S. at 787-88, 92 S. Ct. at 1823. Addition-

ally, Justice Powell, in his concurring opinion disapproved

of the Bernstein exception.

I would be uncomfortable with a doctrine which would

require the judiciary to receive the Executive’s permis-

C-7

sion before invoking its jurisdiction. Such a notion, in

the name of the doctrine of separation of powers, seems

to me to conflict with that very doctrine.

406 U.S. at 773, 92 S. Ct. at 1816. Therefore, we conclude

that the Bernstein exception is no longer viable, and we do

not consider whether the expressions of the State Depart-

ment regarding the Libyan nationalization were sufficient

expressions to the court. See Alfred Dunhill of London uv.

Republic of Cuba, 425 U.S. 682, 725, 96 S. Ct. 1854, 1875-76

(1976) (dissenting opinion); Menendez v. Saks and Com-

pany, 485 F.2d 1355, 1373 (2d Cir. 1973) rev’d on other

grounds sub nom., Alfred Dunhill of London v. Republic of

Cuba, 425 U.S. 682, 96 S. Ct. 1854 (1976). See also Hunt v.

Mobil Oil Corp. 550 F.2d 68, 77-79 (2d Cir. 1977). Further-

more, we decline to give credence to the exception due to

the separation of powers rationale enunciated in Justice

Harlan’s opinion in Banco Nacional de Cuba v. Sabbatino,

376 U.S. 398, 84 S. Ct. 923 (1964) and in Justice Powell’s

concurring opinion in First National City Bank v. Banco

Nacional de Cuba, 406 U.S. 759, 773-76, 92 S. Ct. 1808,

1816-17 (1972).

Hunt’s second contention in his first point of error is that

when a foreign government engages in a “commercial” ac-

tivity, such as Libya’s conduct with regard to the Sarir

field, the Act of State Doctrine does not apply and a court

can inquire into the validity of the nationalization decree.

In Hunt’s brief, he directs this court to consider language

from Alfred Dunhill of London v. Republic of Cuba:

[W]e are nevertheless persuaded by the arguments of

petitioner and by those of the United States that the

concept of an act of state should not be extended to

include the repudiation of a purely commercial obliga-

tion owed by a foreign sovereign or by one of its com-

cercial instrumentalities. Our cases have not yet gone

so far, and we decline to expand their reach. ...

C-8

425 U.S. 682, 695, 96 S. Ct. 1854, 1861 (1976). The afore-

mentioned language is authorized by Mr. Justice White.

However, upon examination of Dunhill, we conclude that

this language is not the language of a majority of the Su-

preme Court and the validity or existence of this exception

is likewise doubtful. But, in any event, when a foreign state

has exercised a sovereign power, as Libya did here, it is a

governmental, and not a commercial, act. Alfred Dunhill of

London v. Republic of Cuba, 425 U.S. 682, 720, 96 S. Ct.

1854, 1873 (1976) (dissenting opinion). See Banco Nacional

de Cuba v. Sabbatino, 376 U.S. 398, 84 S. Ct. 923 (1964) ;

Hunt v. Mobil Oil Corp., 550 F.2d 68 (2d Cir. 1977). :

In Hunt’s second point, he claims that the trial court com-

mitted error when it refused to apply the Hickenlooper

amendment to obviate and avoid the Act of State Doctrine.

The Hickenlooper amendment (sometimes referred to as the

Sabbatino amendment) was enacted by Congress in reaction

to the Sabbatino holding. The pertinen: portions state that:

[N]o court in the United States shall decline

ground of the federal Act of State Doctrine to bag

determination on the merits giving effect to the prin-

ciples of international law in a case in which a claim

of title or other right to property is asserted by any

party including a foreign state . . . based upon (or)

traced through) a confiscation or other taking... . by

an act of that state in violati inci

7 Ss cl on of the principles of

22 U.S.C. § 2370 (e) (2). We recognize at the outset that this

exception is extremely narrow. Occidental of Umm Al Qay,

Inc. v. Cities Serv. Oil Co., 396 F. Supp. 461, 471 (W.D. La.

1975) ; Occidental Petroleum Corp. v. Buttes Gas & Oil Co.

331 F. Supp. 92, 112 (C.D. Cal. 1971), aff'd, 461 F.2d 1261

(9th Cir. 1972), cert. denied, 409 U.S. 950, 93 S. Ct. 272;

C-9

United Mexican States v. Ashley, 556 S.W.2d 784, 786 (Tex.

Sup. 1977).

Three elements must exist in order to avoid the Act of

State Doctrine under the Hickenlooper amendment. First,

expropriated property must come within the territorial

jurisdiction of the United States. Second, the act of the

expropriating nation must be in violation of international

law. Third, the asserted claim must be a claim of title or

other right to property.

Without considering the merits of the first two require-

ments we conclude that the Hickenlooper amendment is

inapplicable to this case because Hunt acquired only a con-

tract right in the concession agreement. See Occidental of

Umm Al Qay., Inc. v. Cities Serv. Oil Co., 396 F.Supp.

461, 472 (W.D. La. 1975); French v. Banco Nacional de

Cuba, 295 N.Y.S.2d 433, 448 (N.Y. Ct. App. 1968).

There was some disagreement among the testifying ex-

perts as to whether, in construing the contract, international

law or Libyan law applied. But international law does not

govern the nature of the rights conferred by the contract.

Under well established Texas conflict of laws rules, Libya

substantive law governs the interpretation and construction

of the concession agreement. This is true whether the oil is

characterized as personalty or realty since Libya is both

the place of the contract’s execution and performance and

the location of its subject matter. Cantu v. Bennett, 39

Tex. 304 (1873); see Austin Building Co. v. National Union

Fire Ins. Co., 432 S.W.2d 697 (Tex.Sup. 1968) (personalty) ;

Colden v. Alexander, 171 S.W.2d 328 (Tex.Sup. 1943) (real-

ty). Although expert witnesses called by the parties also dif-

fered on the meaning and effect of the applicable law, the

law is explicitly stated and clear. Libyan Petroleum Law

Number 25 of 1955 provides:

C-10

(1) All persons in Libya in its natural state in strata

is the property of the Libyan State.

(2) No person shall explore or prospect for, mine or

produce petroleum in any part of Libya, unless au-

herp by a permit or concession issued under this

Ww.

The original agreement executed in 1957 provided, in

clause 1, that:

vee the Commission hereby grants to the Company,

subject to the conditions hereof and the provisions of

the Law, the exclusive right for a period of . . . fifty

- ++ years to carry out geological investigations, in-

cluding aerial surveys, and to search for by any other

means, bore for, and extract petroleum within and over

the area outlined in red on the map annexed hereto

of approximately . . . 32944 ooo. square kilo-

metres situated in the ................. OR AE Pa? Zone

bounded and defined... .

The Company shall also have the right to take away

such petroleum whether by pipeline or otherwise from

the concession area and to use, process, store, export

and dispose of the same.

Clause 29 of that agreement, titled “Interpretation,” states

that the “Law” means the Petroleum Law of 1955.

Further, the amended agreement voluntarily entered into

by Hunt and Libya in January 1966, approximately five

years before Libya’s gradual nationalization of the Sarir

field, and after oil had been discovered, again specifically

refers to and is governed by Petroleum Law Number 25 of

1955. Clause 16 of that agreement states:

(1) The ae oanageay pag Aen take all the steps

necessary to ensure that pany enjoys all the

rights conferred by the Concession. The contractual

rights expressly created by this concession shall not be

altered except by mutual consent of the parties.

C-11

(2) This Concession shall throughout the period of

its validity be construed in accordance with the Petro-

leum Law and the Regulations in force on the date of

the execution of the agreement of amendment by

which this paragraph 2 was incorporated into this

concession agreement. Any amendment to or repeal of

such Regulations shall not affect the contractual rights

of the Company without its consent.

This language is significant in that it not only refers to

Hunt’s rights as “contractual” but also recognizes Libya’s

ownership of the oil. As this court has recently had occasion

to point out, phrases in important, multimillion dollar con-

tracts are not inserted loosely, and it is presumed that the

parties to such an agreement were aware of the significance

and effect of each word agreed upon. See City of Houston v.

R. F. Ball Construction Company, Inc., Docket No. 1750

(Tex.Civ.App. — Houston [14th Dist.] July 12, 1978).

Hunt argues that it is clause 28(7) of the concession

agreement, not clause 29 or clause 16, that governs the rights

of the parties, and, under that clause international law

applies. Clause 28(7) reads:

This Concession shall be governed by and interpreted

in accordance with the principles of law of Libya com-

mon to the principles of International Law and in the

absence of such common principles, then by and :n ac-

cordance with the general principles of law, including

such of those principles as may have been applied by

international tribunals.

This clause, however, deals solely with arbitration. It

speaks not to the nature of the rights granted and acquired

under the concession agreement, but merely to the enforce-

ment of those rights following a breach of the agreement;

it deals with remedies, not substantative rights. In this

C-12

regard we agree with the analysis offered by K. Lipstein in

29 Transactions of the Grotius Society, Conflict of Laws

Before International Tribunals (II), 55-56 (1943):

First, the tribunal must decide whether a private party

interest exists in the light of domestic law and in

whom such interest is vested.

Secondly; once the preliminary investigation has estab-

lished the existence of a private law right, the tribunal

must determine whether the violation of the right

acquired under municipal law constitutes an illegal act

under international law.

Libyan Law Number 42 did expropriate the physical

assets of Hunt but Libya never relinquished its ownership

of the oil, and consequently cannot have expropriated it from

Hunt. While Libya’s actions presumably constituted a

breach of the concession agreement with Hunt, they do

not amount to a confiscation of the oil since Hunt never

acquired a valid claim of title or other right in the un-

severed oil but only a right to the oil whic Hunt extracted.

Therefore, the Hickenlooper amendment does not apply

and the Act of State Doctrine precludes judicial inquiry into

Libya’s actions. See Occidental of Umm Al Qay., v. Cities

Serv. Oil Co., 396 F. Supp. 461, 472 (W.D. La. 1975);

French v. Banco Nacional de Cuba, 295 N.Y.S.2d 433, 448-49

(N.Y. Ct. App. 1968).

The fourth exception which Hunt asserts in an attempt

to avoid the application of the Act of State Doctrine is that

it simply does not apply when the private enterprise and

expropriating country have jointly executed an unambiguous

agreement which enunciates controlling legal principles.

Hunt points to the “applicable law” clause (clause 28 (7) )

in the 1957 concession agreement, and then directs this

C-13

court to language in Banco Nacional de Cuba v. Sabbatino,

in which Hunt claims that the Act of State Doctrine does

not apply:

[T]he Judicial Branch will not examine the validity

of a taking of property within its own territory by a

foreign sovereign government, extant and recognized

by this country at the time of suit, in the absence of

a treaty or other unambiguous agreement regarding

controlling legal principles, even if the complaint al-

— that the taking violates customary international

w.

876 U.S. 398, 428, 84 S. Ct. 923, 940 (1964). We have ex-

amined subsequent cases which cite the aforementioned

language and conclude it is unclear what type of “unam-

biguous agreement” the opinion refers to. However, we

conclude that this language is inapplicable to this case

since, as we have held, Libya did not expropriate property

(the oil) from Hunt.

We have examined all of Hunt’s points of error and, hav-

ing concluded that the Act of State Doctrine bars judicial

inquiry into the validity of Libya’s actions, the trial court’s

grant of summary judgment against Hunt on his claim for

conversion is hereby affirmed.

APPEAL BY COASTAL STATES

Coastal States, in its nine points of error, claims that

the trial court erred when it granted Hunt’s motion for

summary judgment on Coastal State’s claims of tortious

interference with its contract and business opportunities.

We have considered these points and they are hereby

overruled.

An essential element to the claims for tortious interference

with contractual relations and business relations is that the

C-14

defendant’s acts must have no legal justification. We have

examined the record and conclude that as a matter of law

Hunt’s actions were legally justified and there is no genuine

issue of fact on this essential element. See Gibbs v. General

Motors Corporation, 450 S.W.2d 827 (Tex.Sup. 1970).

The trial court concluded that Hunt had a contractual

interest in the Sarir field at the time of nationalization.

This interest was repudiated by Libya and the record clearly

shows that Hunt instituted litigation against various corpo-

rations in the international community due to their dealings

in Sarir oil and additionally apprised corporations of his

intent to file suit if indeed they dealt with such oil. How-

ever, these actions were legally justified due to the repudia-

tion of the concession agreement. See Terry v. Zachry, 272

S.W.2d 157 (Tex.Civ.App.—San Antonio 1954, writ ref’d

n.r.e.). See also St. Joseph Pro Bldg. Corp. v. American

Nat. Ins. Co., 511 S.W.2d 578 (Tex.Civ.App. — Houston

[14th Dist.] 1974, writ ref’d. n.r.e.).

The court properly granted Hunt’s motion for summary

judgment on Coastal States’ claims of tortious interference

with business contracts and business relations; there is no

genuine issue of fact regarding the essential element of no

legal justification.

The trial court’s judgment is affirmed.

Judgment rendered, and Opinion filed August 23, 1978.

C-15

JUDGMENT

NELSON BUNKER Hunt, Et AL

vs. No. 1809

CoastaL States Gas Propucinc ComMpaNy, Er AL

“This cause, being an appeal from the judgment rendered

and entered by the court below on October 24, 1977, came

on to be heard on the transcript of the record, and the same

being inspected, because it is the opinion of this Court that

there is no error in the judgment, it is therefore considered,

adjudged and ordered that the judgment of the court below

be affirmed in all things. It is further ordered that the ap-

pellants, Nelson Bunker Hunt, Herbert Hunt and Lamar

Hunt, and their surety, Lawyers Surety Corporation, pay

all costs incurred by them by reason of this appeal. It is

further ordered that appellants, Coastal States Gas Pro-

ducing Company and Coastal States Marketing, Inc., and

their surety, Highlands Insurance Company, pay all costs

incurred by them by reason of this appeal. It is further

ordered that this decision be certified below for observance.”

D-1

APPENDIX D

IN THE DISTRICT COURT OF

HARRIS COUNTY, TEXAS

133RD JUDICIAL DISTRICT

No. 952,564

NELSON BuNKER Hunt, HErBertT HUNT

AND LAMAR HuNT

Us.

CoasTaL States GAS PRODUCING

ComPANY, et al

FINAL JUDGMENT

CaME ON the above entitled and numbered cause wherein

Nelson Bunker Hunt, Herbert Hunt and Lamar Hunt (here-

inafter collectively called “Hunt”) are plaintiffs and counter-

defendants and Coastal States Gas Producing Company and

Coastal States Marketing, Inc. (hereinafter collectively

called “Coastal States”), are defendants and counter-

claimants, for hearing on the motions of both plaintiffs and

defendants for summary judgment, and came all parties

by and through their counsel of record and announced to

the Court that each waived any and all time requirements

regarding the filing and service of motions for summary

judgment and that they were ready to proceed with hearing

on such motions. The Court, having considered the motion,

the summary judgment record, the arguments, briefs and

D-2

evidentiary presentations of law by the parti i

ry pr parties, and being

fully advised in the premises does make and enter the fol-

lowing conclusions of law: :

i.

Libyan law determines the interest acquired by Hunt i

Concession No. 65. is ences

2.

Under Libyan law, Hunt did not acquire title to petro-

leum in strata underlying the area of Concession No. 65 by

said Concession Agreement, but only a contractual right

to extract such petroleum.

3.

The Libyan Nationalization Decree (Law No. 42 of 1973)

did not take from Hunt any interest in or title to crude oil

that Coastal States purchased from Libya pursuant to the

re (“AGECO”) dated May 2, 1973 and the contract

een Ashland Oil Company of California and AGECO

dated April 11, 1973.

4,

Nothing taken from Hunt by the said Nationalization

Decree was purchased by Coastal States from Libya pur-

suant to said contracts.

5.

The Act of State Doctrine applies to foreclose the Court

from inquiring into the validity of said Libyan Nationaliza-

tion Decree.

6.

No exception to the Act of State Doctrine applies in this

case,

D-3

7.

Plaintiffs are not entitled to recover against Coastal

States.

8.

Hunt’s actions in giving notice of his claim to oil produced

from Concession No. 65 (the Sarir Field) following the

Libyan confiscation, by newspaper and otherwise, was not

in violation of the law and public policy of the State of

Texas and of the United States of America.

9.

Hunt’s actions in giving such notice were not malicious

or capricious.

It is noted by the Court that there is a suit between

the parties pending in the United States District Court for

the Southern District of Texas, Houston Division under

Cause No. 74-H-1422. It has been represented to the Court

that such action is based upon the United States Antitrust

Laws, and in making and entering the above and foregoing

conclusions of law, this Court has not considered and does

not purport to pass upon the legality of any action of the

parties, or any of them under or in light of the United

States Antitrust Laws. Accordingly, it is

OrperED, ADJUDGED AND DecreeEpD that the motion for sum-

mary judgment of Hunt that Coastal States take nothing

against Hunt by reason of Coastal States’ counterclaim is

granted, and judgment is hereby rendered that Coastal

States take nothing of and against Hunt by reason of its

counterclaim. It is further

OrperepD, ADJUDGED AND Decreep that Coastal States’

motion for summary judgment that Hunt take nothing

D-4

against Coastal States by reason of Hunt’s action is

granted, and judgment is hereby rendered that Hunt take

nothing of and against Coastal States. It is further

Orperep, ADJUDGED AND Decreep that Hunts’ motion for

summary judgment that it be granted judgment against

Coastal States for its damages or in the alternative partial

summary judgment establishing the liability of Coastal

States to Hunt be and hereby is denied.

Dong and ENrerep this 24th day of October, 1977.

PPS SEH EEE ESSERE SESESEESESESESEESESOSESESE

E-1

APPENDIX E

IN THE DISTRICT COURT OF

HARRIS COUNTY, TEXAS

133RD JUDICIAL DISTRICT

NELSON BUNKER HUuNT, et al

vs.

CoasTAL STATES GaAs

PRODUCING COMPANY

ORDER

On November 15, 1976, the above styled and numbered

cause was called for trial and each of the parties hereto

having announced ready, such cause was and has been

convened.

It appearing, however, that certain additional hearings,

determinations, and discovery should be completed prior to

jury selection herein and in the interest of the orderly

administration of this case, the Court, with the concurrence

of counsel for all parties, does hereby make the following

order:

I, SETTING OF PRELIMINARY HEARING

1. The Court hereby sets for hearing beginning Decem-

ber 6, 1976 and continuing from day to day thereafter until

completed, without the intervention of a jury, the deter-

mination of all questions of international, foreign or domes-

tic law presented by this litigation.

E-2

2. At such hearing, each of the parties shall be entitled

to tender for examination, cross-examination, and examina-

tion by the Court, such experts on questions of international

or foreign law as they may desire and may submit to the

Court such written briefs or memoranda of law as they may

believe to be helpful to the Court in determination of the

questions therein presented.

3. At such hearing, expert witnesses shall be presented,

first, by Hunt, et al., and second by Coastal States Gas

Producing Company, with each party thereafter to present

such rebuttal testimony as they desire in the same order.

Il. LEGAL ISSUES TO BE DETERMINED

The following are the legal issues to be determined at the

hearing set in Section I, above, as delineated by each party

hereto, together with such subsidiary issues as may seem

reasonable or proper to the determination of such issues:

(1) The issues as tendered by Hunt are:

(a) Whether under pertinent choice-of-law and other

rules of Texas and the United States international law

governs the construction and application of Concession

65 and the rights of Hunt and the Government of Libya

thereunder.

(b) Whether international law is a part of the law of

the United States and of the State of Texas.

(c) What the sources are to which courts in the United

States must refer to determine the principles of inter-

national law to be applied by them.

(d) Whether international law determines the validity

or legality of the Libyan expropriation of the interest

ef Hunt in Concession 65.

(e) Whether, under international law or U.S. Federal

law, the expropriation of the interest of Hunt in Con-

E-3

cession 65 was an arbitrary and wrongful breach of

contract which did not affect the property rights pre-

viously granted by it to Hunt.

(f) Whether, under international law, the expropria-

tion of Hunt’s interest in Concession 65 was wrongful if

it was done to effect a political reprisal rather than to

effect a legitimate public purpose related to the internal

needs of Libya.

(g) Whether, under international law, the expropria-

tion of Hunt’s interest in Concession 65 was an act of

political reprisal.

(h) Whether, under international law, the Libyan ex-

propriation of Hunt’s interest in Concession 65 was

wrongful if it was discriminatory rather than general

in application.

(i) Whether, under international law, the expropria-

tion of Hunt’s interest in Concession 65 was discrimina-

tory.

(j) Whether, under international law, the expropriation

of Hunt’s interest in Concession 65 was illegal if it

failed to provide for prompt, adequate and effective

compensation.

(k) Whether, under international law, the expropria-

tion of Hunt’s interest in Concession 65 did fail to pro-

vide for prompt, adequate and effective compensation.

(1) Whether, under established U. S. public policy,

when a foreign petroleum concession is expropriated in

violation of international law as applied by the United

States, the United States favors and supports actions

taken by the victim to protect its rights by notifying

prospective purchasers of its claim to continued owner-

ship of petroleum taken from the expropriated conces-

sion and to initiate legal action in the United States

against a purchaser of the petroleum or its products to

recover the goods or their proceeds?

E-4

(m) Whether the courts of the State of Texas follow

the public policy of the United States in matters per-

taining to foreign expropriations.

(n) Whether under international law, if the expropria-

tion were invalid for any of the foregoing reasons,

Hunt’s rights to the property in question, i.e., Sarir oil,

its products and proceeds, are superior to the rights,

if any, acquired by Coastal as a result of its purchases

of oil from the Government company of the Libyan

Arab Republic following such expropriation.

(0) Whether, under international law, an appropriate

remedy for the protection of Hunt’s rights under Con-

cession 65 was a Texas action for conversion.

(p) Whether the Act of State Doctrine applies to a

government taking in contravention of a concession

agreement and, more particularly, the taking of Hunt’s

rights under Concession 65.

(q) Whether, if the Act of State Doctrine would other-

wise apply, the Hickenlooper Amendment nevertheless

requires the Court to pass upon the validity of the ex-

propriation of Hunt’s interest in Concession 65.

(r) Whether, under international law, the payment

made pursuant to the Agreement of May 19, 1975 con-

stituted prompt, adequate, and effective compensation

for oil theretofore wrongfully taken and sold by the

Libyan Government to Coastal.

(s) Whether, under applicable law, Coastal was re-

leased by Hunt by such Agreement.

(2) The issues as tendered by Coastal are:

(a) Whether Libyan law determines what rights were

acquired under the Concession Agreement.

(b) Whether, under Libyan law, Hunt (and his as-

signee BP) never obtained title or property right in

and to the Sarir crude extracted by Arabian Gulf Ex-

ploration Company.

—- ae —_S musi

E-5

(c) Whether, if Hunt never acquired title or property

right to the Sarir crude extracted by Arabian Gulf Ex-

ploration Company, rules of international law relating

to the conditions under which title or property rights

may be taken from aliens are irrelevant.

(d) Whether, under the applicable law, Hunt relin-

quished any rights he may have had against Libya and

Coastal States by his Settlement Agreement with the

Government of Libya.

(e) Whether the acts of the Libyan Government of

December 7, 1971, and June 11, 1973 were acts taken

by the Government within its own territory and the

Act of State Doctrine precludes this Court from exam-

ining the validity and effectiveness of such acts.

(f) Whether, if the title of Coastal States and Market-

ing is not based upon or traced through a confiscation

or other taking of crude oil, the Hickenlooper Amend-

ment does not apply to allow this Court to examine the

validity and effectiveness of the measures taken by the

Libyan Government within its own territory even if

those measures would be in conflict with the principles

of international law.

Il. STIPULATIONS OF DOCUMENTARY EVIDENCE

The parties have stipulated as to the relevance, admissi-

bility, and authenticity of the following documents, for the

purposes of the hearing referred to in Section I, above:

(a) Concession No. 65, dated December 18, 1957;

(b) Assignment by Hunt to BP dated November 10,

1960;

(c) Hunt’s Agreement for Amendment of Petroleum

Concession No. 2 plus one-half interest in Concession

No. 65 dated January 20, 1966;

(d) BP’s Agreement for Amendment for Petroleum

Concession No. 34, 36, 37, 63, 64, 80, 81 and 65 dated

January 20, 1966;

E-6

(e) Libyan Petroleum Law No. 25 of 1955, as amended;

(f) Law No. 7 of 1971, promulgated by Revolutionary

Command Council of the Libyan Arab Republic;

(g) Law No. 42 of 1973, promulgated by Revolutionary

Command Council of the Libyan Arab Republic;

(h) Agreement between Coastal and Arabian Gulf Ex-

ploration Company (“AGECO”) dated May 2, 1973;

(i) Agreement between Ashland Oil Company of Cali-

fornia and Arabian Gulf Exploration Company, dated

April 11, 1973;

(j) Assignment of Ashland-AGECO Contract to

Coastal;

(k) Processing Agreement between Coastal and Mon-

tedison dated June 10, 1963;

(1) Agreement between BP and Libyan Government

dated November 20, 1974; and

(m) Agreement between Hunt and Libyan Government

dated May 19, 1975.

The foregoing listing of documents is not intended to ex-

clude by omission any documents constituting precedent or

authority on any international law questions which may

properly be adduced, including diplomatic notes, judicial

precedent, writings and the like or documents relevant to

the qualification of witnesses.

IV. OTHER DOCUMENTARY EVIDENCE

The parties have not stipulated to but the Court finds

the following documents to be relevant, admissible and au-

thentic for purposes of the December 6, 1976, hearing and

sc to its ultimate determination of the legal issues

above.

(a) Letter of August 3, 1973, from William J. Casey to

G. Henry H. Schuler of Nelson Bunker Hunt;

E-7

(b) Excerpt of the Foreign Broadcast Information

Service Daily Report (a U.S. Government publication)

dated June 12, 1973, containing a transcription and

translation of Libyan Law No. 42 issued on June 11,

1973;

(c) U. S. Department of State Press Release No. 630

of December 30, 1975;

(a) Excerpt of the Foreign Broadcast Information

Service Daily Report (a U. S. Government publication)

dated June 12, 1973, pgs. T-4 to T-11, containing a

transcription and translation of a speech made on

— 11, 1973, by Libyan Chairman Mu’ammar al-Qad-

(e) Statement by the Department of State on Policy on

“Hot” Libyan Oil; and

(f) United States of America’s Note Verbale No. 59

dated July 5, 1973 and the attached certification by

W. H. Holm.

V. STIPULATED FACTS

The following facts have been stipulated by the parties for

purposes of the hearing referred to in Section I, above:

(a) Hunt and BP discovered oil on Concession 65 in

1961.

(b) Hunt and BP subsequently developed an oil field

on Concession 65, known as the “Sarir Field”, con-

structed physical facilities thereon and a pipeline from

such Field to Marsa-al-Hariga /Tobruk, Libya.

(c) Hunt and BP produced, sold, and exported oil pur-

suant to Concession 65 from the Sarir Field from Jan-

uary 12, 1967, to December 7, 1971, when the interest

of BP was expropriated.

(d) Hunt produced, exported, and sold his share of the

oil produced from the Sarir Field from December 7,

1971, to May 24, 1973, when his interest in Concession

65 was expropriated by the Libyan Government.

E-8

(e) On December 7, 1971, there were oil companies

other than BP, holding concessions other than No. 65,

which were not expropriated, in whole or in part, and

no other such company was expropriated on that date.

(f) On May 24, 1973, and on June 11, 1973, there were

oil companies other than Hunt, holding concessions

other than No. 65, which were not expropriated, in

whole or in part, and no other such company was ex-

propriated on that date.

(g) Arabian Gulf Exploration Company is the Govern-

ment company to which the Libyan Government pur-

ported to transfer the interests in Concession 65 expro-

priated from BP and Hunt.

(h) Pursuant to its contract with Arabian Gulf Explor-

ation Company and the assignment to it of the contract

between Ashland and the Arabian Gulf Exploration

Company, Coastal took possession of Sarir crude oil.

(i) Coastal first took possession of oil produced from

the Sarir Field on May 29, 1973.

(j) Coastal transported all crude oil from the Sarir

Field of which it took possession to the Montedison

Refinery in Italy pursuant to the Processing Agreement

referred to in Paragraph (k) above.

(k) Products derived or processed under the Processing

Agreement accumulated to Coastal States’ account at

the Montedison Refinery and were sold by Coastal

States to third parties pursuant to contracts between

Coastal States and such third parties.

(1) At least a portion of such products were taken from

the Montedison Refinery in Italy to points in the

United States of America; provided, however, that it is

not stipulated that Coastal States transported or caused

to be transported any of the products derived from the

Montedison Refinery under the Processing Agreement

to the United States.

FOLATE PL AE EILEEN OIE NTE LORD IIT RT ERLI EAB AT

E-9

(m) Nelson Bunker Hunt, Herbert Hunt, and Lamar

Hunt are citizens of the United States of America.

(n) Coastal is a company incorporated and headquar-

tered in the United States of America.

(o) All subsidiaries of Coastal are companies incorpo-

rated and headquartered in the United States of

America.

(p) Coastal consolidates its financial information for

reporting and income tax purposes with its wholly

owned subsidiaries.

(q) Among its wholly owned subsidiaries is Coastal

States Marketing, Inc.

(r) Coastal derived proceeds from sales, exchanges, or

other dispositions of products refined or derived under

the Processing Agreement.

(s) The basis for calculation of the sum paid to Hunt

by the Government of the Libyan Arab Republic pur-

suant to the Agreement between such parties of May

19, 1975, was the net book value of Hunt’s physical

assets located on Concession 65, i.e., such calculation

and sum did not include oil previously sold by AGECO

or for oil in place.

VI. THE SETTING OF FINAL PRELIMINARY

HEARING AND DISCOVERY CUTOFF

1. At 1:00 P.M. on January 4, 1977, a preliminary hear-

ing shall be held for the resolution of any matters required

prior to jury selection in this cause.

2. Effective at the convening of such final preliminary

hearing, there shall be no further discovery of any kind or

character instituted except upon express consent of all par-

ties affected.

E-10

Vil. SETTING OF JURY SELECTION

Jury selection shall begin in this cause at 9:00 A.M.,

January 17, 1977, and jury trial shall thereafter follow from

day to day until completion.

OrpereED this 22nd day of November, 1976.

Paul Pressler,

Judge Presiding

APPROVED

SHANK, Irwin, CONANT, WILLIAMSON

& GREVELLE

BY

Attorneys for Hunt, et al

FULBRIGHT & JAWORSKI

Dan Matthews

Attorneys for Coastal States

Gas Producing Company

F-1

APPENDIX F

Second Schedule

THE CONCESSION

Tuis DEED OF CONCESSION is concluded on the eighteenth

day of December, 1957, under the Petroleum Law of 1955:

Between

The Petroleum Commission (hereinafter called the Com-

mission) in the name of the Province of Cyreniaca and with

the approval of the Minister

and

NELSON BUNKER HUNT (hereinafter called the Com-

pany) having its registered office at 700 Mercantile Bank

Building, Dallas, Texas, U.S.A., represented by Phillips L.

Hynes who is legally authorized to act on behalf of the

Company by virtue of a Power of Attorney dated May 4,

1956 which has been produced by him.

Clause

F-2

THE CONCESSION

. Working Obligations 0200000. ooocoooccececeee.

. Company to Follow Good Oil

BPM UII ooo cn bocscscscssccesceccssesosscsscsssscocsones,

De ID DOO oincdoccccccccccccsccccsntecescosesecsseseeee.ccce,

cmcuen

8

. Method of Making Payments <i Bison

9

10. Exemption from Certain Import

and Export Duties 20000.

11. Exchange Control 000000000 oooooccocecce cece.

13. Transport Rights 0.000000 ocococcececcecesceceee.

14. Right to Occupy Land 20.0

15. Company’s Labour |...

16. Company’s Rights Ensured ......................

17. Savings for Rights of Government

RATA

18. Employment and Training of Libyans ........

19. Water Disposal and Plugging.

of Boreholes ................ oe AA iielasenmicasc Cais

BE, FOCUS annonce cece scscccessesesceces cece einer

23. Address of Local Manager ..............................

24. Force Majeure 200... ooo cccccccece ce cecesceseeeenn.

25. Asmigmment ooo ccc ccccccsccccsssscsccosceceseces

A a rr

I

30. Fee \ ah een tet see aC se ss

a AIELLO A LL ILENE NI +

Se ee ee es ee mx ~/

Oke Pass se"

F-3

*Starting at the intersection of 21° longitude and 28° lati-

tude thence east till 23° longitude thence south till 27° lati-

tude thence west till 22° 30’ longitude then south till 26°

latitude thence west till 21° 30’ longitude thence north till

27° latitude thence west till 21° longitude thence north till

point of origin.

Seal of Petroleum Commission

CLAUSE l.

Grant of Concession

In consideration of the undertaking by the Company to

make the annual payments and pay the fees, rents and roy-

alties hereinafter prescribed and to perform and observe the

terms and conditions of this Concession, the Commission

hereby grants to the Company, subject to the conditions

hereof and the provisions of the Law, the exclusive right for

a period of fifty years to carry out geological investigations,

including aerial surveys, and to search for by any other

means, bore for, and extract petroleum within and over the

area Outlined in red on the map annexed hereto of approxi-

mately 32944 square kilometres, situated in the 3 Zone

bounded and defined as follows:

The Company shall also have the right to take away such

petroleum whether by pipeline or otherwise from the con-

cession area and to use, process, store, export and dispose of

the same,

| CLAUSE 2.

Surrender of Concession Area

In accordance with Article 10 of the Law the Company

shall progressively reduce the area of the Concession and

shall have the right at any time to surrender the whole or

F-4

any part of the Concession area. On the period coming

through Appendix A to this contract and which is part of

it, the surrender must be done according to what is said

in the mentioned Appendix.

CLAUSE 3.

Renewal of Concession

The Concession may be extended for any period such

that the total duration shall not exceed 60 years.

If the Company requires a renewal it shall submit to the

Commission an application in writing for such renewal

not more than five years and not less than three years be-

fore the end of the term of this concession.

The Commission shall advise the Company of its decision

within one year of the receipt of the application.

CLAUSE 4.

Working Obligations

1. The Company shall, within eight months from the

date of the grant of this concession, commence opera-

tions to explore for petroleum within the concession area

according to the work program, fixed in Appendix A to this

contract which if part of it, and shall diligently prosecute

all its operations under the concession in a workmanlike

manner and by appropriate scientific methods. In further-

ance thereof the Company shall spend in Libya or else-

where on, or in connection with, the said operations includ-

ing general organization, overhead and administrative ex-

penses connected therewith such sums as may be required

in order to comply with the provisions of Article 11 of

the Law.

2. Any sum spent during any of the working periods

specified in Article 11 of the Law in excess of the minimum

SATEEN IORI) LON BEN

F-5

sum prescribed for that period shall be carried forward as

a credit to the Company against the expenditure require-

ments for the following period or periods.

CLAUSE 5.

Company to follow Good Oil Field Practices

The Company shall carry on all its operations under this

Concession in accordance with good oil field practices and

so that when petroleum is found it shall be produced in

reasonably substantial quantities having regard to the world

demand for petroleum and economic exploitation of the

petroleum resources of the concession.

CLAUSE 6.

Surface Rents

The Company shall in accordance with Article 13 of the

Law and Clause 9 (2) of this Concession pay the following

surface rents for each 100 square kilometers held:

Five pounds for each of the first 8 years

Ten pounds for each of the next 7 years

or until petroleum is found in commercial quantities which-

ever is the earlier and £L2,500 for each year thereafter.

CLAUSE 7.

Royalty

(1) The Company shall pay a royalty of twelve and

one-half per centum of the value on the field of production

of all petroleum (excluding natural gas) won and saved

into field storage, freed of water and foreign substances, and

of all natural gasoline recovered by the Company from

the concession area, after deduction of the quantities of

such petroleum, petroleum products and natural gasoline

used by the Company in the course of its operations here-

under.

F-6

(2) The value of crude oil under this clause shall be:

(a) The average free competitive market price during

the previous quarter f.o.b. Libyan seaboard terminal

of crude oil of the same or nearest comparable type

with such adjustments for quality and gravity as norm-

ally prevail in the oil industry minus handling charges

and costs of transportation from field storage;

(b) In the absence of a price f.o.b. Libyan seaboard

terminal under sub-paragraph (a) hereof, the average

free competitive market price during the previous quar-

ter f.o.b. at the nearest seaboard terminal outside Libya

for which such a price is published for petroleum of

reasonably similar quality and gravity with such ad-

justments for quality gravity and location as normally

prevail in the oil industry to arrive at a fair competitive

market price f.o.b. Libyan seaboard and minus handling

charges and the costs of transportation from field stor-

age to Libyan seaboard terminal.

(3) The value of natural gasoline and petroleum other

than crude oil and natural gas shall be calculated in a

manner to be agreed upon from time to time between the

Director and the Company. From such value shall be de-

ducted the cost of its extraction and processing.

(4) The Company shall also pay a royalty of twelve and

one-half per centum on the sale price less the cost of trans-

port from the wellhead to the place of sale realized in

respect of all natural gas derived from the concession

area and sold by the Company in Libya. The royalty on

natural gas exported shall be based on the sale price at

the point of sale after deducting handling charges, duties

and impests and costs of transportation from the wellhead.

TOTAL SE LOPE TREN S| ETL 5S INCRE OLE RS NIG TLS D LEGS A PAS I RELEASE BOY ERE HE TTS AIM,

FERGIE, LRG LIN Ta

sui dati Ce

F-7

CLAUSE 8.

Taxation and Division of Profits

(1) The Company Shall pay such income tax and other

taxes and imposts as are payable under the Law of Libya

but shall not be subject to any form of taxation or other

exaction of such a nature as to render it liable to taxation

or other dues not payable by companies in general operating

in Libya other than fees, royalties and surface rents made

payable under this Concession and the Law:

Provided however that —

(a) if in respect of any complete year after the ef-

fective date as hereinafter defined the total amount

of the fees, rents, royalties, income taxes and other

taxes and imposts for which the Company is liable in

respect of operations and income therefrom under all

the petroleum concessions held by the Company in

Libya falls short of 50% of the Company’s profits as

hereinafter defined during that year, the Company

shall pay to the Government such sum by way of sur-

tax as will make the total of the Company’s payments

equal to 50% of such profits;

(b) if in respect of any complete year after the

effective date the total amount of the fees, rents, roy-

alties, income taxes and other taxes and imposts for

which the Company is liable as aforesaid exceeds 50%

of the said profits of the Company during that year,

the Company shall be entitled to deduct from the

total payments to be made to the Commission a sum

equal to such excess. If the sum which the Company is

entitled to deduct exceeds the Company’s unpaid lia-

bility in any year the excess shall be considered as

F-8

an advance payment of any sums payable to the Com-

mission in the following year or years.

(2) In this Clause —

“effective date” means the date on which the Company

first reaches a level of regular exports of petroleum averaging

15,000 barrels a day measured over a period of 30 con-

secutive days under all its concessions in Libya or the

expiry of 4 years from the date when petroleum is first

exported regularly by the Company, whichever is the earlier;

“profits” for the purposes of paragraph (1) (a) and (b)

mean in respect of any year the increase of the Company

obtained from all its petroleum exploration, development,

prospecting and producing activities in Libya in that year

after deducting:

(a) all expenses and losses, except fees, rents, royal-

ties, income taxes and other taxes and imposts payable,

incurred by the Company in carrying out such activities

ne ae thereto irrespective of where

ration and prospecting expenses, in-

tangible drilling costs as defined in the Regulations,

to the extent such expenses and costs are not incidental

to the procurement or installation of physical assets,

the cost of drilling wells not productive of petroleum

in commercial quantities and expenses of organizing

and initiating petroleum operations in Libya, may be

deducted in the year in which they are incurred or they

may be capitalized and amortised as provided below.

The election to deduct or to capitalize as aforesaid may

be made annually by the Company. The unamortised

balance of the cost of physical assets abandoned dur-

eee ae ee

F-9

(b) an amount in respect of amortisation during that

year of capital expenditures on physical assets used

in connection with such operations, and of expenses

incidental to their procurement and installation, com-

puted in the case of all such expenditures incurred

before the effective date, irrespective of the date in-

curred, at a rate, not exceeding 20% per annum, to

be elected annually by the Company, until all such

expenditures are fully amortised; and in the case of

all such expenditures incurred on or after the effective

date, at a rate not exceeding 10% per annum, to be

elected annually by the Company, until all such ex-

penditures are fully amortised;

(c) each year for depletion allowance irrespective of

the amounts so deducted in any previous years, an

amount equal to 25% of the gross income of the year,

as hereafter defined, but limited to 50% of the profits

of the year computed after deduction of the amounts

specified in su-paragraphs (a) and (b) above but

before deducting the amounts specified in this sub-

paragraph. Gross income for the year for the purposes

of calculating this depletion allowance shall consist of

income derived from the disposal of petroleum produced

by the Company in Libya, less the cost of handing and

transporting it to the place of such disposal. In lieu

of the aforesaid deduction the Company may in any

year deduct an amount for amortisation of all capital

expenditures made in connection with such operations

other than those made on physical assets, incurred be-

fore the effective date, irrespective of the date incurred,

at the rate of 20% per annum, and in the case of such

capital expenditures incurred on or after the effective

date at the rate of 5% per annum until such expendi-

F-10

tures have been fully amortised by virtue of all de-

ductions made under this sub-paragraph (c).

(3) Where in respect of any year the total of the de-

ductions taken under paragraph (2) of this Clause ex-

ceeds the gross income in respect of that year before tak-

ing the said deductions, the excess shall be carried for-

ward and, as far as may be, deducted from the profits of

subsequent years up to a maximum of 10 years.

(4) If the Company shall participate in joint operations,

it may, in respect of such operations, report its rateable

proportion of income therefrom and expenses therein and

make all permitted elections independently of other com-

panies participating in the joint operations, provided that

one or more of the companies in the joint operations is

carrying out other independent operations in Libya under

the Law. Income and expenses so reported may be consoli-

dated with those in respect of other operations being car-

ried out by the Company in Libya under the Law.

(5) In computing profits as herein defined sound account-

ing practices usual in the petroleum industry shall be em-

ployed.

CLAUSE 9.

Method of Making Payments

(1) The fees, surface rents, royalties and surtaxes pay-

able hereunder and income taxes shall be paid by the Com-

pany to the Commission. The collection of such sums shall

be subject to the procedure provided by the Financial Laws

and Regulations of Libya.

(2) The Company shall pay the surface rents specified in

Clause 6 hereof annually in advance until such time as

caisaaiaal pleeiaicaa ieee Ea -

F-11

royalty becomes payable by the Company under Clause 7

hereof. Thereafter surface rents and royalties shall be cal-

culated in respect of each quarter and shall be paid by the

Company to the Commission within 60 days after the last

day of the quarter. Sums payable by way of surface rents

under Clause 6 hereof in respect of any quarter shall be

reduced by the amount of any royalty payable hereunder

in respect of the same quarter.

CLAUSE 10.

Exemption from certain import and export duties

(1) The Company or any contractor employed by the

Company may import free of duty, plant, machinery, tools,

equipment and materials together with such other goods

as may be specified from time to time in Regulations issued

under the Customs Law intended to be used in Libya for

petroleum exploration, prospecting, mining, transporting,

processing operations and activities connected therewith.

Provided, however, that such exemption shall not apply to

any goods included in this paragraph which are available

in Libya of suitable type and reasonably comparable quality,

and at no higher price, provided that in comparing prices

to the price of the imported goods shall be added Customs

duties and other expenses incurred up to the time the im-

ported goods reach Libya.

(2) Other goods which are dutiable under the Customs

Law shall be subject to the payment of the appropriate duty.

(3) If the Company or any contractor, as the case may

be, intends to sell or transfer any goods which have been

imported free of duty under paragraph (1) hereof, a de-

claration shall be made to the Department of Customs be-

fore such sale or transfer is effected and, unless such goods

F-12

are sold or transferred to another company or contractor

entitled to the same exemptions, such import duty shall

be paid as may be assessed by the Director General of

Customs in accordance with the Customs Law;

(4) Petroleum or any of its derivatives, produced in

Libya, and any goods imported free of duty under para-

graph (1) hereof may be exported free of Customs duty

and without an export license subject to the policy of the

Government regarding exports in general and to such re-

strictions as the State may impose by Law on production

and exports during a state of war or emergency.

CLAUSE 11.

Exchange Control

The Company shall be subject to the normal exchange

control applicable in Libya provided however that:

(a) the Company shall be entitled to retain abroad

all funds acquired by it abroad including the proceeds

of sales insofar as such funds may exceed the Com-

pany’s requirements for the purposes of its operations

in Libya, but statements of foreign exchange holdings

or proceeds of sales of Libyan petroleum shall be ren-

dered to the Libyan National Bank in such form and

at such periods as it may require;

(b) the Company shall be entitled to remit any funds

held by it in Libya in excess of its requirements in

Libya on the primary currency in which the Company’s

investment in operations under this concession was

made, to the country from which the primary cur-

rency originated;

ba EIN LATE

F-13

(c) the Company shall be entitled to buy and sell

solely for the purposes of its own operations in Libya

and remittances under paragraph (b) above any cur-

rency whether Libyan or otherwise at the most favor-

able rate of exchange available through authorized bank-

ing channels to any other buyer or seller in Libya of

such currency;

(d) no restriction shall be placed on the importa-

tion of funds by the Company for the purpose of carry-

ing out its operations under this concession.

CLAUSE 12.

Ancillary Rights

For the purpose of its operations under this concession

the Company shall have the following rights in the conces-

sion area:

(a) with the approval of the Director, to drill for

water and impound surface waters and to establish

systems for the supply of water for its operations and

for consumption by its employees;

(b) with the approval of the Director to carry away

and use in Libya materials such as gravel, sand, lime,

gypsum, stone and clay which shall be free of charge

in the case of such materials taken from lands other

than private lands;

(c) to erect, set up, maintain and operate houses,

fences, engines, machinery, furnaces, buildings, pipe-

lines, storage tanks, compressor stations, pumping sta-

tions, processing plants, field roads and all other con-

structions, installations and works required in further-

F-14

ance of its activities. The Company may likewise for

such purposes, erect, set up, maintain and operate all

other communication and transportation systems and

facilities but shall not do so, other than for temporary

purposes, unless drawings of and locations for their

sites have been submitted to and approved by the

Director.

CLAUSE 13.

Transport Rights

The Company shall have the right for the purposes of

its operations to erect and operate a harbour and terminal

facilities together with the necessary means of communica-

tion and transport between such facilities and any part

of the concession area, provided that the consent of the

appropriate authorities to the location of such works shall

be obtained. Such consent shall not be unreasonably with-

held or delayed. The Company shall likewise have the right

under similar conditions to build and maintain pipelines

elsewhere outside the concession area for the transport of

petroleum produced under this concession. In exercising

such right the Company may occupy land in accordance

with the provisions of Clause 11 hereof and erect and main-

tain thereon any communication and transportation sys-

tems and facilities and other fixtures which it requires for

the installation, servicing, maintenance and operation of

such pipelines. |

CLAUSE 14.

Right to occupy land

(1) The Company shall have the right to enter and oc-

cupy free of charge for the purposes of its operations under

LOGIE SOLEIL err cal

Ot eT ee ae ee

PE PLEA GASSER EMER TY MT

F-15

this concession any land within the concession area other

than private land, provided it is not then in the lawful

occupation of some person.

(2) If the Company fails to agree with a private land-

owner or lawful occupier of other than private land as to

the terms on which it may enter and occupy the land in

question the Company shall immediately notify the Di-

rector. If the occupation is to be of a temporary nature,

not exceeding one year, the Director shall authorize such

temporary occupation upon deposit by the Company with

the Commission of a sum by way of reasonable compen-

sation to such landowner and/or lawful occupier for loss

of use of and damage to the interest in the land as the

Director shall determine. If the occupation is to be for a

longer period than one year the Commission shall authorize

occupation by the Company of the land in question upon

deposit by the Company with the Commission of such sum

by way of reasonable compensation as the Commission shall

determine and the Commission shall direct appropriate pro-

ceedings to be taken to put the Company into possession

of the land under the law from time to time in force, as

if the Company’s operations were in all respects a work

of public utility. In the event of any dispute as to the na-

ture and extent of the interests of claimants to the land

or the amount of compensation payable by the Company,

the Commission shall refer the dispute for determination

by an appropriate court of Law and the Commission shall

pay to the respective claimants such sum by way of com-

pensation as may have been determined by the Court. The

Commission shall pay to or obtain from the Company (as

the case may be) the amount by which the sum deposited

by the Company exceeds or falls short of the total com-

pensation payable to the claimants.

F-16

(3) This concession shall not confer upon the Company

the right to do any work within the precincts of cemeteries,

places used for religious worship and places of antiquity as

defined in the Antiquity Laws from time to time in force.

Any works of art or antiquity discovered by the Company

shall be subject to the law from time to time in force.

(4) No drilling or any dangerous operations shall be

conducted within 50 metres of any public works or perma-

nent buildings without the previous consent of the Director,

and subject to such conditions as he may impose.

CLAUSE 15.

Company’s Labour

Subject to the provision of any Immigration Laws in

force at the time, the Company is hereby allowed to bring

into the country such employees as may be necessary for

its operations and the competent authorities shall facilitate

the entry into exit from and movement within Libya of

such employees and their dependents while such employees

are engaged on the Company’s operations, hereunder. The

Company shall have the right so to arrange its labour shifts

that all operations may proceed by day and by night and

during public holidays.

CLAUSE 16.

Company’s Rights Ensured

The Government of Libya, the Commission and the ap-

propriate provincial authorities will take all steps necessary

to ensure that the Company enjoys all the rights conferred

by this Concession.

The contractual rights expressly created by this con-

cession shall not be altered except by mutual consent of

the parties.

-

F-17

CLAUSE 17.

Saving for Rights of Government and Others

Nothing in this concession shall be deemed to limit the

right to grant concessions in respect of minerals other than

petroleum in the concession area, or generally to limit the

rights of the Government or any authority or person in the

concession area, save as expressly provided herein; pro-

vided always that the Company’s operations hereunder are

not thereby endangered or interfered with nor its rights

hereunder prejudiced. The Company shall not obstruct the

exercise of any such right, but shall afford the holder thereof

and of any concession holder as aforesaid, every reasonable

facility for the exercise of their rights.

CLAUSE 18.

Employment and Training of Libyan Subjects

(1) Provided that the requisite number having adequate

skill and ability is available, the minimum number of Libyan

subjects employed by the Company in Libya after 10 years

from the date of commencement of operations shall have

reached at least 75% of the total number of persons em-

ployed by the Company in Libya.

(2) The Company shal! as from the date of commence-

ment of regular exports from Libya of petroleum in com-

mercial quantities produced in the concession area make

an annual payment to the Libyan Government of not less

than £L2,500 and not more than £L5,000, which payment

shall be applied towards giving Libyan subjects such tech-

nical training as may be agreed upon by the Director and

the Company, in order to fit thern for employment in the

petroleum industry or in related undertakings, provided

however that the Company may each year reduce such pay-

F-18

ments by the amount which during that year it expended

for the training and education of Libyan subjects for such

purposes in Libya or abroad.

CLAUSE 19.

Water Disposal

Plugging of Boreholes and Weils

The Company shall, in accordance with good oil field

practices, provide an adequate system for the disposal of

its water and waste oil, and shall securely plug all bore-

holes and wells made by before they are abandoned.

CLAUSE 20.

Reports to be furnished

(1) The Company shall at its own expense furnish to

the Director during the first quarter of each year a report

of the progress of its operations in the concession area dur-

ing the preceeding year. This report shall contain:

(a) a statement of the number of bore-holes and

wells drilled, including bore-holes and wells drilled in

search of water, and of the depth of each, with a plan

showing their location if the Director so requires;

(b) a statement of any petroleum, water or valuable

minerals encountered during the course of the Com-

pany’s operations;

(c) a statement of all petroleum, produced, of gas

sold, and of natural gasoline recovered;

(d) a statement of the amount of water produced

with the oil and natural gas;

F-19

(e) the nature and extent of geological and geo-

physical surveys carried out;

(f) a general survey of the operations; and

(g) a statment showing the number of Libyan sub-

jects and nationals of other countries employed by the

Company in Libya.

(2) The Company shall furnish to the Director not less

than 30 days before the end of each year a statement of

the general programme it intends to carry out during the

following year.

(3) The Company shall keep accurate financial records

of its operations under this concession which records shall

be open to inspection by the appropriate authorities.

‘4) The Company shall furnish such further information

relating to its operations in the concession area as the Di-

rector shall reasonably require.

(5) The Company shall keep accurate geological and

geophysical plans, maps and records relating to the lands

within the concession area.

(6) On the discovery of oil or gas, the Director shall

immediately be informed of such discovery.

(7) All information furnished by the Company under

this clause shall (except with the consent in writing of the

Company) be treated as confidential.

CLAUSE 21.

Inspection

The Chairman and other members of the Commission,

the Director and other competent officials shall have the

F-20

right to enter the premises of the Company and inspect its

work, books, registers and papers to ensure the proper im-

plementation by the Company of the provisions of the

Law, the Regulations and decisions made hereunder and

the provisions of this Concession.

CLAUSE 22.

Measurement of Petroleum

The Company shall measure and record by methods cus-

tomary in good oil field practice all petroleum and natural

gasoline produced and saved by the Company within the

concession area as if freed of water and other foreign sub-

stances. The Director or any official designated by him shall

be entitled to attend such measuring and to examine and

test the accuracy of the appliances employed therein and

to examine the records thereof. The Company shall assist

such official in the performance of his duties under this

Clause. If any such measuring appliance shall at any time

be discovered to be inaccurate, the same shall, if the Di-

rector so decides, be deemed to have existed in the con-

dition for a period of 90 days prior to the discovery of such

inaccuracy, or for the period elapsed since the last occasion

upon which the same was examined or tested, whichever

shall be the less, and the Company’s records shall be ad-

justed accordingly.

CLAUSE 23.

Address of Local Manager

The Company shall before commencing operations furnish

to the Director the name and address of the Manager of the

Company’s operations under this concession. Any notice

required to be served on the Company shall be sufficiently

QAR aCe - -

oe ere eg et BED

F-21

served if delivered at, or sent by registered post to, the

Manager at such address.

CLAUSE 24.

Force Majeure

Failure by the Company to carry out any of the provisions

of this Concession shall not give rise to any claim or be

deemed to be a breach of this Concession, if it be shown

that the failure has arisen from force majeure, namely Act

of God, insurrection, riots, war, strikes of workmen, or any

other unforeseen circumstances beyond the control of the

Company. If by reason of force majeure the fulfilment by

the Company of any of the terms, and conditions of this

Concession or the enjoyment of its rights under the Con-

cession is delayed the period of such delay shall be added

to the period fixed herein for such fulfilment or enjoyment.

CLAUSE 25.

Assignment.

(1) The Company may assign this Concession in whole

or in part to one or more companies if the assignee:

(a) controls the assignor, or

(b) is controlled by the assignor, or

(c) is controlled by one or more companies who them-

selves control the assignor provided that in the aforesaid

cases the control may be direct or indirect, and provided

that the assignee satisfies the conditions laid down in Article

5 of the Law.

(2) In other cases assignment may not be made except

with the consent of the Commission, and subject to such

conditions as it may deem appropriate.

F-22

CLAUSE 26.

Right to remove property

On the surrender of any area and on the expiration or

earlier determination of this concession, the Company shall,

except as hereafter in this clause provided, be entitled to

remove all its property of whatever nature situated within

the surrendered area or the concession area as the case may

be. Well casings and well heads may not however be re-

moved unless adequate protective measures are taken to the

satisfaction of the Director. Fixtures necessary to control

the flow of gas or liquid from the well head may not be

removed without the approval of the Director. No taxes,

duties or charges whatsoever other than any specifically

made payable hereunder, shall be imposed in connection

with such removal. The Director, may, however, within a

period of 30 days following any surrender or expiration or

earlier determination, elect to purchase any property which

theretofore was used by the Company solely and exclusively

in connection with its operations within the surrendered

area or the concession area. Such purchases will be made

at a fair price to be determined by agreement between the

Director and the Company. Failing such agreement the

matter shall be referred to an independent expert or panel

of experts as may be agreed between the Director and the

Company. Such panel shall consist of one member to be

appointed by the Director, another member to be appointed

by the Company and a third member to be chosen by the

two members appointed. The expert or panel, as the case

may be, shall determine what, in the circumstances, is a

fair price for the property. The wells and any well cas-

ings, well heads and fixtures not removed as aforesaid shall

be handed over to the Director free of charge within 30

days following the surrender or expiration or earlier de-

F-23

termination. The Director may require the Company to

restore the surface of the land to a reasonable condition in

accordance with good oil field practice, taking into account

normal wear and tear caused by the Company’s operations

thereon.

CLAUSE 27.

Revocation

(1) The Commission may, by notice in writing to the

Company, revoke this Concession in the following circum-

stances but not otherwise:

(a) the Company fails to commence operations with-

in 8 months as required by Clause 4 or fails to meet

its expenditure obligations within each of two consecu-

tive periods specified in Article 11(1)(a) and (b) of

the Law, or

(b) any surface rents or royalties payable under this

Concession are in arrears for six months after the date

on which they ought to have been paid in accordance

with Clause 6 and Clause 7; or

(c) the Company goes into liquidation except volun-

tarily for the purpose of reconstruction or amalgama-

tion, or a receiver is appointed; or

(d) the Company fails to perform its obligations

under Clause 2 or Clause 25; or

(e) any sum awarded against the Company in arbi-

tration proceedings under the following clause has not

been paid within 90 days of the date stipulated in the

award;

Provided that the Commission shall give to the Company

previous notice in writing of the breach and require the

F-24

Company to remedy the breach and pay compensation

where appropriate within the period fixed by the Commis-

sion which shall not be less than 90 days; notice of revoca-

tion shall only be given if the Company has failed within

the specified period to remedy the breach and pay compensa-

tion where appropriate.

(2) Whenever the Company disputes the grounds upon

which revocation may be based and requests arbitration

under Clause 28 hereof, the revocation shall only become

effective subject to and in accordance with the result of the

arbitration.

(3) Revocation shall be without prejudice to any liability

incurred by the Company before revocation.

CLAUSE 28.

Arbitration

(1) Any dispute between the parties arising out of or in

connection with this Concession, unless otherwise resolved,

shall be settled by arbitration proceedings between the Com-

mission as one party and the Company as the other party

and such proceedings shall determine the measures to be

taken by the parties including, if appropriate, payment of

compensation, to put an end to or remedy the damage

caused by any breach of this Concession.

(2) The institution of proceedings shall take place upon

the receipt by one party from the other of a written request

for arbitration. Each party shall within thirty days of the

instituton of proceedings appoint an arbitrator. If the ar-

bitrators fail to settle the dispute they shall appoint an

umpire within sixty days of the institution of proceedings.

If they do not do so either party may request the Presi-

eee

EERE en TnI

F-25

dent, or, if the President is a national of Libya or of the

country in which the Company was originally registered, the

Vice-President of the International Court of Justice, to

make the appointment.

(3) If either of the parties within sixty days of the in-

stitution of proceedings either fail to appoint its arbitrator

or does not advise the other party of the appointment made

by it, the other party may request the President or, if the

President is a national of Libya or of the country in which

the Company was originally registered, the Vice-President

of the International Court of Justice to appoint a sole

arbitrator who shall hear and settle the dispute alone.

(4) The umpire, however appointed, or the sole arbitrator

shall not be either a national of Libya or of the country in

which the Company was originally registered; nor shall he

be or have been in the employ of any party to the Concession

or of the Government of the aforesaid country.

(5) Should the International Court of Justice be replaced

by or its functions be substantially transferred to any new

international tribunal, the functions of the President or

Vice-President (as the ease may be) of the International

Court of Justice exercisable under this Concession shall be

exercisable by the President or Vice-President (as the case

may be) of the new international tribunal without further

agreement between the parties hereto.

(6) The procedure of arbitration shall be determined by

the umpire or the sole arbitrator who shall be guided gen-

erally by the relevant rules of procedure established by

Articles 32-69 inclusive of the rules of the International

Court of Justice of 6th May, 1916. The umpire or sole ar-

bitrator shall likewise fix the place and time of the

arbitration.

F-26

(7) This Concession shall be governed by and interpreted

in accordance with the Laws of Libya and such principles

and rules of international law as may be relevant, and the

umpire or sole arbitrator shall base his award upon those

laws, principles and rules.

(8) There shall be no appeal against the award and the

parties to this Concession shall faithfully abide thereby.

(9) The expenses of the arbitration shall be borne by

the parties in such proportion and manner as may be pro-

vided in the award.

CLAUSE 29.

Interpretation

(1) Words defined in the text of the Petroleum Law 1955

shall have the same meaning in this Concession.

(2) In this Concession:

“the Law” means the Petroleum Law of 1955;

“the Director” means the Director of Petroleum Affairs;

“land” means territory under the control and jurisdic-

tion of the United Kingdom of Libya and includes

marshes, ground underlying lakes or rivers and the sea-

bed and subsoil beneath territorial waters and the high

seas continuous thereto;

“concession area” means the area over which for the

time being the Company enjoys the rights conferred

upon it hereunder;

“crude oil” means any unrefined oil consisting primarily

of hydrocarbons;

“natural gasoline” means any liquid hydrocarbon ob-

tained from natural gas by any chemical or physical

process;

F-27

“natural gas” means any subsoil gas consisting primar-

ily of hydrocarbons;

“quarter” means a three month period of a year be-

ginning on Ist January, Ist April, Ist July or 1st Oc-

tober as the case may be.

CLAUSE 30.

Fees

This Concession is granted on payment of a fee of £L500.

(Signed) Anis Qasem

For the Commission

(Signed) Mohammed Bu Dajaja

Se ee

The Minister

(Signed) Phillip L. Hynes

For the Company

Company’s Seal

Date 18. 12. 1957

Corresponding to 0.0...

F-28

APPENDIX A

The Company undertake to start drilling for oil during

three years from the date of the grant of the Concession

or it will surrender the Concession area completely.

The Petroleum Commission Seal

The signature of Mr. Hynes

F-29

ROYAL DECREE

AMENDING THE PETROLEUM LAW OF 1955.

Having seen Article 64 of the Constitution,

Article 25 of the Petroleum Law 1955, and

Acting on what has been submitted to us by the Minister

of National Economy and with the approval of the Council

of Ministers,

WE, IDRIS THE FIRST, King of the United Kingdom

of Libya,

Decree as follows:

ARTICLE 1.

The first paragraph of Article 25 of the Petroleum Law of

1955 is hereby amended to read as follows:

“(1) This Law may be cited as the Petroleum Law of

1955 and shall come into force thirty days after publi-

cation in the Official Gazette with the exception of

articles 2 and 24 which shall come into force on

publication.”

ARTICLE 2.

The Minister of National Economy shall carry out this

Decree which shall take effect on publication.

IDRIS

Given at Dar-As-alaam Palace on 29th Ramadan 1374 h.

Corresponding to 1st May 1955, g.

By Order of the King

ABDUL Mauip Ku’BAR

For the Prime Minister

SALEM AL-QanpI

Minister of National Economy

F-30

ROYAL DECREE

FORMING THE PETROLEUM COMMISSION

Having seen Article 2 of the Petroleum Law of 1955,

The Royal Decree given on 29th Ramadan 1374 amending

the aforesaid Law, and

Acting on what has been submitted to us by the Prime

Minister on concurrence with the competent authorities of

the Provinces, and with the approval of the Council of

Ministers,

WE, IDRIS THE FIRST, King of the United Kingdom

of Libya,

Decree as follows:

ARTICLE 1.

The following are hereby appointed as members of the

Petroleum Commission:

Assayyed Anis Al-Qasim

Assayyed Abu Bakr Ahmad

Assayyed Muhammed Assifat

Assayyed At-Taher Al-Bishti

ARTICLE 2.

The Commission hereinbefore mentioned shall elect its

own chairman.

ARTICLE 3.

The Prime Minister shall carry out this Decree which

shall come into force on publication.

IDRIS

Given at Dar-A-alaam Palace on 29th Ramadan 1374 h.

Corresponding to 21st May 1955, g.

By Order of the King

ABDUL Mausip Ku’BAR

For the Prime Minister

ee

G-1

APPENDIX G

TEXT OF LIBYAN LAW NO. 42 OF 1973

NATIONALIZING NELSON BUNKER HUNT’S

INTERESTS IN CONCESSION 65

(The following is a MEES translation of the official Arabic

text of Libyan Law No. 42 of 1973 nationalizing the half-

share interest of US indpendent Nelson Bunker Hunt in

Concession 65 in Libya, which was promulgated by Libya’s

Revolutionary Command Council on 11 June 1973 (MEES,

15 June). The other half-share, originally owned by BP,

was nationalized by Libya in December 1971.)

In the name of the people,

The Revolutionary Command Council,

After review of the Constitutional Proclamation No. 1 of 2

Shawwal 1389, corresponding to 11 December 1969; and

Petroleum Law No. 25 of 1955 and the laws amending it;

and Law No. 24 of 1970 relating to the National Oil Corpora-

tion and the laws amending it; and Law No. 115 of 1971

nationalizing the British Petroleum Company known as

BP Exploration (Libya) Limited and establishing a national

company known as the Arabian Gulf Exploration Company;

and the Council of Ministers’ decision of 5 Rabi’ I 1392,

corresponding to 19 April 1972, setting forth the articles of

association of the Arabian Gulf Exploration Company; and

Oil Concession Agreement No. 65 and the agreements re-

lating to it; and in accordance with the proposal of the

President of the Council of Ministers and the approval of

the said Council, has issued the following Law:

ARTICLE 1

The rights of Nelson Bunker Hunt in Oil Concession

Agreement No. 65 shall be nationalized, and ownership of all

G-2

the funds, rights, assets and shares of Nelson Bunker Hunt

in the said concession shall revert to the State, including

specifically all the rights relating to the installations and

facilities for prospecting, exploration and drilling for, and

production of, crude oil and natural gas, as well as for trans-

portation, processing, storage and export, and other assets

and rights relating to the said concession.

ARTICLE 2

All the funds, rights and assets of Nelson Bunker Hunt

reverting to the State in accordance with the provisions of

the preceding Article shall be assigned to the Arabian Gulf

Exploration Company, established by Law No. 115 of 1971

referred to above.

The Arabian Gulf Exploration Company shall replace

Nelson Bunk Hunt in so far as his rights and obligations

in Oil Concession Agreement No. 65 are concerned, but shall

not be responsible for previous obligations except within

the limits of the funds, rights and assets reverting to the

State as of the effective date of this Law.

ARTICLE 3

The Arabian Gulf Exploration Company shall have the

right to implement existing crude oil sales contracts relating

to the rights of the party concerned referred to in Article 1

above, or to annul them, as it deems appropriate in the

public interest.

ARTICLE 4

The Arabian Gulf Exploration Company shall pay to the

State Treasury through the Ministry of Petroleum all fees,

rents, royalties and additional taxes imposed on Nelson

Bunker Hunt, which fall due as of the effective date of this

OE A ie Te a me pe

G-3

Law in accordance with the provisions of the Petroleum

Law and the concession agreement referred to above and the

agreements amending it.

ARTICLE 5

The State shall pay compensation to the party concerned

for the funds, rights and assets reverting to it by virtue

of Article 1. The determination of the amount of the said

compensation shall be undertaken by a committee to be

formed by a decision of the Minister of Petroleum in the

following manner:

(a) One judge of the Courts of Appeal as President, to

be nominated by the Minister of Justice.

(b) One representative of the National Oil Corporation

as a member, to be nominated by the Minister of

Petroleum.

(c) One representative of the Ministry of the Treasury

as a member, to be nominated by the Minister of

the Treasury.

The committee may seek the help of any employees or

other parties whose assistance it deems necessary in the

performance of its task.

ARTICLE 6

The necessary sums for settlement of outstanding taxes,

fees and any other payments due to the State Treasury

and any debts connected with the nationalized rights shall

be deducted from the amount of compensation due to the

party concerned in accordance with the provisions of the

preceding Article, within the limits of the amount of

compensation.

G-4

Creditors of debts referred to in the preceding paragraph

must submit a statement of the sums due to them, sup-

ported by documentary proof, to the committee provided

for in Article 5 within a period not exceeding 30 days from

the date of issue of the decision establishing it.

ARTICLE 7

The committee provided for in Article 5 must issue a

decision estimating the compensation and determining the

debts to be deducted from it, within a period not exceeding

three months from the date of issue of the decision estab-

lishing it.

The decision of the committee shall be documented and

final and shall admit of no appeal by any means, and it

shall be communicated to the Minister of Petroleum who

shall notify the party concerned within 30 days of the date of

its issue.

ARTICLE 8

Employees and workers of Libyan nationality who are in

the employ of Nelson Bunker Hunt shall be attached to the

Arabian Gulf Exploration Company, and may not leave, or

stay away from, their work unless they are relieved of it

by a decision of the company’s board of directors. Foreign

employees and workers may choose between remaining in

their work or leaving it. Libyan ernployees and workers, and

foreigners who choose to remain in their work, shall retain

their present salaries and wages.

ARTICLE 9

A committee shall be appointed by a decision of the board

of directors of the Arabian Gulf Exploration Company to be

G-5

responsible for taking receipt of the funds, assets and rights

of the party concerned, referred to in Article 1.

ARTICLE 10

Any contract, act or measure carried out contrary to the

provisions of this Law shall be considered utterly null and

void. Banks, organizations or individuals are prohibited from

disbursing any sums or settling any claims or sums due from

the party concerned, referred to in this Law, except with the

approval of the board of directors of the aforementioned

company.

ARTICLE 11

Any violation of any provision of this Law shall be punish-

able by imprisonment for a term not exceeding two years

and a fine not exceeding LD 500, or by either of these two

penalties. Moreover, any person violating the provisions of

the preceding Article shall be sentenced to pay three times

the sum forfeited by the State as a result of the violation.

ARTICLE 12

The Minster of Petroleum shall implement this Law,

which shall be effective as of the date of its issue, and it

shall be published in the Official Gazette.

Issued on 10 Jamada I 1393,

corresponding to 11 June 1973

The Revolutionary Command

Council

Colonel Mu’ammar al-Qadhafi

Prime Minister

Major ’Abd al-Salam Jallud

Minister of Petroleum

’Izz al-Din al-Mabruk

H-1

APPENDIX H

UNITED STATES OF AMERICA

DEPARTMENT OF STATE

To all to whom these presents shall come, Greeting:

I Certify That Gerald A. Rosen, whose name is subscribed

to the document hereunto annexed, was at the time of sub-

scribing the same Acting Assistant Legal Adviser for Eco-

nomic and Business Affairs, Department of State, United

States of America, and that full faith and credit are due to

his acts as such.

In testimony whereof, I, Henry A. Kissinger, Secretary

of State, have hereunto caused the seal of the Department

of State to be affixed and my name subscribed by the Acting

Authentication Officer of the said Department, at the city

of Washington, in the District of Columbia, this nineteenth

day of October, 1976.

Henry A. KISSINGER

ek. | || 0) serena ttennapnerenenneneionrarsesuseenes

Department Secretary of State.

of State

“ada By HuaS.O’Conneu _

Acting Authenticating Officer,

Department of State.

This certificate is not valid if it is removed

or altered in any way whatsoever

H-2

DEPARTMENT OF STATE

Washington, D.C. 20520

October 18, 1976

To Whom It May Concern:

I, Gerald A. Rosen, Acting Assistant Legal Adviser for

Economic and Business Affairs of the Department of State

of the United States of America, do hereby certify that

the annexed copy of the excerpt of the Foreign Broadcast

Information Service Daily Report (a U.S. Government pub-

lication) dated June 12, 1973, pgs. T-4 to T-11, containing

a transcription and translation of a speech made on June 11,

1973, by Libyan Chairman Mu’ammar al-Qadhadhafi, is a

true and faithful copy of the original document held in files

under my custody at the Department of State, the same

having been examined by me and compared with the said

originals and found to agree therewith word for word and

figure for figure.

Gerald A. Rosen

Acting Assistant Legal Adviser

for Economic and Business

Affairs

Department of State

United States of America

H-3

The meeting, held at the headquarters of the Libyan RCC,

was attended by Libyan RCC members Maj. Abu Bakr

Yunis, Maj. ’Abd as-Salam Jallud, Maj. ’Abd al-Mun’im

al-Huni and Capt. "Umar al-Muhayshi. It was also attended

by President Anwar as-Sadat’s secretary for information

[words indistinct] Al-Qadhdhafi for information and the sec-

retary of the Unified Political Command.

MENA has learned that the talks between the two sides

will be resumed at 1000 tomorrow, Monday, at the People’s

Palace in Tripoli.

Ugandan President Amin Arrives

Tripoli Domestic Service in Arabic 1230 GMT 11 Jun 73 M

[Excerpt] Ugandan President Maj. Gen. Idi Amin arrived

at Tripoli International Airport at 1330 today to participate

in the third anniversary celebrations of the evacuation of the

last U.S. soldier from the soil of the sacred homeland. The

brother colonel [Mu’ammar al-Qadhdhafi] led those who

received Amin at the airport.

As-Sadat, Al-Qadhdhafi Meetings Continue

Cairo MENA in Arabic 1000 GMT 11 Jun 73 M—FOR

OFFICIAL USE ONLY

[Text] Tripoli—The meetings of the Unified Political Com-

mand between the Arab Republic of Egypt and the Libyan

Arab Republic resumed today at the Guest Palace in Tripoli

under Presidents Anwar as-Sadat and Mu’ammar al-Qadh-

dhafi. The meeting was attended on the Egyptian side by

Ashraf Marwan, presidential secretary for information and

secretary of the Unified Political Command; and on the

Libyan side by RCC members Lt. Col. Abu Bakr Yunis,

H-4

Maj ’Abd as-Salam Jallud, Maj ’Abd al-Mun’im al-Huni,

Maj Mustafa al-Kharrubi and Capt Umar al-Muhayshi and

Capt Ahmad al-Magsabi, Libyan presidential secretary for

information and secretary of the Unified Political Command.

As-Sadat, Amin, Al-Qadhdhafi Meet

Tripoli Domestic Service in Arabic 2100 GMT 11 Jun 73 M

[Text] President Muhammad Anwar as-Sadat, Col Mu’am-

mar al-Qadhdhafi and Maj Gen Idi Amin held a meeting at

the People’s Palace in Tripoli at 2200 today. The meeting

was attended by members of the RCC and Prime Minister

Maj ’Abd as-Salam Ahmad Jallud, and secretaries of the

Unified Political Command Brothers Col. Ahmad al-Bakri

and Ashraf Marwan.

Al-Qadhdhafi Speaks at Celebrations

Tripoli Domestic Service in Arabic 1654 GMT 11 Jun 73 M

[Speech by Libyan Chairman Mu’ammar al-Qadhdhafi at

the Martyrs Square in Tripoli on the anniversary of the

evacuation of the U.S. troops from Wheelus Base — live and

relayed simultaneously by Cairo Domestic Service and Cairo

Voice of the Arabs]

[Text] In the name of God, the merciful and compassionate.

Brothers, while we celebrate Evacuation Day, one of the

achievements of the 1 September revolution, we miss on this

day the presence of one of the soldiers of the 1 September

revolution. On this day we miss one of the soldiers of the

1 September [revolution] — we miss Capt Muhammad al-

Mugaryif. Since his death has been God’s decree, we today

cannot but exercise patience and read the first Sura for the

repose of his soul.

H-5

Brothers, our celebration today marks the anniversary of the

expulsion of the U.S. imperialist forces from our free land.

[applause] This day comes as the gigantic 1 September revo-

lution is entering a new stage of series revolutionary evolu-

tion — the stage of genuine popular revolution. This an-

niversary comes today while the Libyan people are march-

ing to seize authority

This text is long and has been trimmed here. Open the source document for the complete record.