Petition — Clayco Petroleum Corp. v. Occidental Petroleum Corp.

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Office -Suprems Court, US.

83-546 EE 2. bee

SEP SU 1983

ALEXATOC Ry CS TE VAGy

IN THE ae

Supreme Court of the Wnited States

October Term, 1983

> <> RS aE.

CLAYCO PETROLEUM CORPORATION

and BRUCE CLAYMAN,

Petitioners,

OCCIDENTAL PETROLEUM CORPORATION,

OCCIDENTAL OF UMM AL QAYWAYYN, INC.

and ARMAND HAMMER,

Respondents.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

WILL B. SANDLER

(Counsel of Record)

PHILIP H. KALBAN

ROSS RHODES

BOOTH, LIPTON & LIPTON

405 Park Avenue

New York, New York 10022

(212) 758-1700

Attorneys for Petitioners

Dated: September 30, 1983

Questions Presented

Le Does the act of state doctrine

automatically require dismissal of a

private antitrust action, brought solely

against American citizens for conspiracy

to restrain trade by making improper pay-

ments to the oil minister of an Arab

Sheikdom, because one element of plain-

tiff's claim involves consideration of

the motivation for, but not the validity

of, a foreign sovereign's grant of an oil

concession? (The Ninth Circuit held that

dismissal was required).

ye Does the Foreign Corrupt Prac-

tices Act of 1977, by expressing a legis-

lative judgment that United States for-

eign policy is best served by holding

American citizens accountable for corrupt

Payments to foreign officials, remove the

act of state defense in cases involving

corrupt foreign payments, to the extent

such defense rests on foreign policy con-

Siderations? (The Ninth Circuit held

that the Foreign Corrupt Practices Act

did not remove an act of state defense in

such circumstances).

Parties to the Proceeding

All parties to this proceeding appear

in the caption of the case in this Court.

iii

TABLE OF CONTENTS

Questions Presented ....

Parties to the Proceedings

Page

Table of Contents ..... iii

Table of Authorities. .... vi

Opinions Below es Sten roe

Jurisdiction a ee eae ee ee

Statutes and Regulations

Involved Te a ee eee

STATEMENT OF THE CASE .... 3

REASONS FOR GRANTING THE WRIT

Il.

THE NINTH CIRCUIT DECI-

SION THAT THE MOTIVATION

OF A FOREIGN SOVEREIGN

MAY NOT BE CONSIDERED

CONFLICTS WITH THE

HOLDING OF THE FIFTH

CiBGUae +6 ews & ove e- 3

THE NINTH CIRCUIT'S

APPLICATION OF THE ACT

OF STATE DOCTRINE IN

THE PRESENT CASE CON-

FPLICTS WITH PRIOR

DECISIONS OF THIS

COURT a ae a a oe

III.

THE NINTH CIRCUIT'S

DECISION PRESENTS IMPORTANT

QUESTIONS OF FEDERAL LAW

WHICH HAVE NOT BEEN, BUT

SHOULD BE, SETTLED BY

THIS COURT

A. Whether the Foreign Corrupt

Practices Act of 1977 Removes

the Act of State Doctrine

as a Defense in: Actions

Arising from Corrupt

Foreign Payments ....

B. Is the Grant of an Oil

Concession So Uniquely

Sovereign as to Foreclose

Analysis of the Commercial

Nature of the Act? ....

APPENDIX

Ninth Circuit Opinion,

August Ze 1983 . . . . . . . °

District Court Order

Filing and Spreading

Ninth Circuit Mandamus,

September 22, 1983 ......

District Court Opinion,

Sele why 2POe 6 8: 6 0 6 @ we

District Court Order

Dismissing Action,

SGLY 25, 2900 «© © © © © © @

Statutes Involved

The Sherman Act, 15 U.S.C.

15 G.8-Ce- §l . 7 . . . . .

- 20

-D-1l

The Clayton Act, as

amended by the Robinson-

Patman Act, 15 U.S.C.

ao UeGeC. GAS(C) « «© « « 2» « @ BZ

The Foreign Sovereign

Immunities Act, ©

28 U.S.C.§§1602,1603(d),

See etTta) = -« «-6 «6s e « « BS

The Foreign Corrupt Practices

Act of 1977,

15 U.8.C. §§78dd-1,-2,78-ff . . E-10

Table of Authorities

Cases:

Alfred Dunhill of London,

Inc. v. Republic of Cuba,

425 U.S. 682 (1976) .

Banco Nacional de Cuba v.

Sabbatino, 376 U.S. 398

Te ecg sss = 6 » «

Continental Ore Co. v. Union

Carbide & Carbon Corp.,

a7. Dawe Bee tises) « «

Dominicus Americana Bohio v.

Gulf & Western Industries,

Inc., 473 F.Supp. 680

(S.D.N.Y.) . . . . o ° . .

Habib v. Raytheon Co., 616

Foam .sau4 (D.C. Cir.

1980) . . — * o * 7. . —

Industrial Investment Devel-

opment Corp. v. Mitsui &

Co., 594 F.2d 48th (5th

Cir. 1979), certs denied,

445 U.S. 903 (1980) ...

Jiminez v. Aristegueita, 31ll

F.2d 547 (5th Cir. 1962),

cert. denied, 373 U.S.

te. . \ ) Ree

Mannington Mills, Inc. v.

Congoleum Corp. 595 F.2d

i389 (3d Cir.

1979) .. -

Page

8, 2/-33

16,

20,

17,

14, 15

24, 25

9-13

vii

Sage International, Ltd. v.

Cadillac Gage Co., 534

F.Supp. 896 (E.D. Mich.

PCS es ee) a bee eae

Sedco International, S.A. v.

Cory, 522 F.Supp 254 (S.D.

Iowa 1989) . . . . . . . . .

Securities and Exchange Com-

mission v. Occidental Petro-

leum Corp., D.D.C. No.

eee ters 6 Ge Sa eee

Underhill v. Hernandez, 168

U.S. 250 (1897) ....2-. -

Statutes:

Sherman Act:

§l, rh 0.8.C. §l . . . . . .

Clayton Act - Robinson Patman

Act:

$2(¢c), 15 U.S.C. §13(C) . « «

Foreign Corrupt Practices Act:

15 U.S.C. §§78dd-1, 78dd-2,

|: eee at en Lee ae ae ae ee ae

Foreign Sovereign Immunities

Act:

28 U.S.C. §§1602, 1603(d),

BeUetG) tals « ¢ © © 6 © @ 6:6

Page

13, 18

8, 21

29, 32

viii

Page

Cartwright Act, California

Business and Professional

Code:

Se if7ae, &708S « # ecu Siete Se

Congressional Reports:

H.R. Rep. No. 640, 95th Cong.,

lst Sess. (1977) ae ta ae a

S. Rep. No. 1031, 94th Cong.,

24 Sess. (1976) . « «ses 0 &

Articles:

Siegel, The Implication

Doctrine and the Foreign

Corrupt Practices Act,

79 Colum. L. Rev. 1085

Of >. | re esr ye cr er er

The Oakland Tribune Dec. ll,

1978, Pp. 32D oo >. . _ o oe . — 4

IN THE SUPREME COURT OF

THE UNITED STATES

October Term, 1983

CLAYCO PETROLEUM CORPORATION

and BRUCE CLAYMAN,

Petitioners,

vs.

OCCIDENTAL PETROLEUM CORPORATION,

OCCIDENTAL OF UMM AL QAYWAYN, INC.

and ARMAND HAMMER,

Respondents.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Petitioners, Clayco Petroleum

Corporation and Bruce Clayman, respect-

fully request that a writ of certiorari

issue tc review the judgment of the

United States Court of Appeals for the

Ninth Circuit, entered on August 2, 1983.

OPINIONS BELOW

The opinion of the Court of Appeals

is reported at 712 F.2d 404 and at 1983-2

Trade Cas. (CCH) 4 65,523; the opinion

appears as Appendix A.

A transcription of the unreported

Opinion of the District Court, delivered

Orally in open court on July 21, 1980,

appears as Appendix C.

JURISDICTION

The judgment of the Court of Appeals

was entered on August 2, 1983.

The jurisdiction of this court is

invoked pursuant to 28 U.S.C. § 1254(i).

STATUTES AND REGULATIONS INVOLVED

Appendix E sets forth the pertinent

text of the statutes and regulations

which this case involves. These include

Section 1 of the Sherman Act, 15 U.S.C.

§ l; Section 2(c) of the Clayton Act as

amended by the Robinson-Patman Act, 15

U.S.C. §13(c); The Foreign Sovereign

Immunities Act, 28 U.S.C. §1602 et seq;

and the Foreign Corrupt Practices Act of

STATEMENT OF THE CASE

Petitioners commenced this action

On October 4, 1979, alleging violations

of federal antitrust law, 15 U.S.C.

§§ 1 and 13(c), the California Business

and Professions Code §§ 16720 and 17045,

and the common law. Jurisdiction of the

District Court was invoked pursuant to 28

U.S.C. §§ 1331 and 1337, and principles

of pendent jurisdiction.

Essentially, the complaint alleges

that in September 1969 Umm Al Qaywayn,

which is located in the Persian Gulf,

agreed to grant petitioner Clayco Petro-

leum Corporation ("Clayco") a valuable

oil concession; that defendants Occiden-

tal Petroleum Corporation ("Occidental"),

Occidental of Umm Al Qaywayn, Inc.

("Occidental U.A.Q."), and Armand Hammer

("Hammer") (collectively, the "Occidental

Defendants") conspired to make secret

payments in England and Switzerland

totalling $417,000 to Sheikh Sultan bin

Ahmed Muallah ("Sultan"), the oil minis-

ter of Umm Al Qaywayn and the son of Umm

Al Qaywayn's ruler; and that as a resuit

of the Occidental Deferndants' unlawful

and anticompetitive conspiracy and

actions, the oil concession was awarded

on November 18, 1969 to Occidental U.A.Q.

instead of to Clayco.

Petitioners first learned why they

lost the concession in December 1978.

The December 11, 1978, edition of the

Oakland Tribune contained a story which

said that Occidental had distributed

about $30 million under "questionable

legal circumstances," and that Hammer,

Occidental's chief executive officer, had

personally disbursed $217,000 to Sultan

in a London hotel room in 1969. The

article also reported that a second pay-

ment of $200,000 was made to Sultan in

Switzerland. The article stated, "Hammer

paid the initial $217,000 as part of a

$1.7 million deal with the sheikdom...

for an oil and gas concession."

In 1977, the Securities and Exchange

Commission ("SEC") commenced an action

against Occidental alleging violations

of the Securities Exchange Act of 1934

and rules promulgated thereunder,

based on illegal or questionable pay-

ments made by Occidental. Securities

and Exchange Commission v. Occidental

Petroleum Corp., No. 77-0751, (D.D.C.,

filed May 3, 1977). Occidental consented

to the entry of a permanent injunction

and agreed to conduct an internal in-

vestigation of the alleged illegal

payments and to prepare for the SEC

and Occidental's stockholders a special

report describing such payments. Report

of the Special Committee of the Board

of Directors of Occidental Petroleum

Corporation, Investigated Payments and

Accounting Practices of Occidental Pe-

troleum Corporation (April 17, 1978)

(the Payments Report).

The Payments Report was filed and

revealed various illegal payments. a

source memorandum annexed to the Payments

Report further recites that Occidental's

$200,000 payment in Switzerland was of

"uncertain legality” and was inaccurately

described and documented on Occidental's

books.

This $417,000 in payments plus

"entertainment" expenses constituted

bribes to induce Sultan to cause the

award of the oil concession to Occidental

U.A.Q. in furtherance of the conspiracy

among Occidental, Occidental U.A.Q. and

Hammer to prevent competition and to

deprive petitioners of the concession.

After oral arguments, the District

Court granted the Occidental Defendants'

motion to dismiss, based on the act of

state doctrine. The court stated that an

exercise of sovereignty -- the award of

the offshore oil concession -- was

implicated in the case, and that adjudi-

cation would interfere with United States

foreign policy. The court noted that

plaintiffs' obligation to prove that they

were damaged by defendants' conduct would

necessitate review of the "ethical valid-

ity" of the sovereign's conduct. The

court also refused to apply a commercial

exception to the act of state doctrine.

The Ninth Circuit affirmed the Dis-

trict Court's order, holding that the

granting of an oil concession is a

sovereign decision, and that judicial

scrutiny of such a decision would embar-

rass the political branches of the United

States government in the conduct of

foreign policy, even though the dispute

is entirely among American citizens and

no official of Umm Al Qaywayn is a party

to the action.

The Ninth Circuit further held

that:

(a) The act of state doctrine

applied to preclude judicial scrutiny

even in cases where only the motivation

for, but not the validity of, foreign

sovereign acts would be subject to

examination.

(b) Granting a concession to

exploit natural resources entails an

exercise of power peculiar to a sove-

reign, and so cannot be classified as

commercial activity within the meaning of

Alfred Dunhill of London, Inc. v. Repub-

lic of Cuba, 425 U.S. 682 (1976).

Act of 1977 does not remove the act of

State defense in private suits against

American citizens based on corrupt

foreign payments.

REASONS FOR GRANTING THE WRIT

I. THE NINTH CIRCUIT DECISION THAT THE

MOTIVATION OF A FOREIGN SOVEREIGN MAY

NOT BE CONSIDERED CONFLICTS WITH THE

HOLDING OF THE FIFTH CIRCUIT

Both the District Court and the

Ninth Circuit found that in order to

prove their damages, petitioners must

show causation, i.e., that petitioners

would have received the oil concession

but for the Occidental Defendants' anti-

competitive conspiracy. Thus, although

the validity of the oil concession would

never be in issue, an element of peti-

tioners' case would involve an inquiry

into the motivation for Umm Al Qaywayn's

failure to grant the concession to

petitioners.

This precise issue was faced by the

Fifth Circuit in Industrial Investment

Development Corp. v. Mitsui & Co., 594

F.2d 48 (5th Cir. 1979), cert. denied,

445 U.S. 903 (1980). The plaintiffs

there contended, as do petitioners here,

that the defendants' anticompetitive acts

prevented them from securing a valuable

ec neession from a foreign government.

The district court's grant of sum-

Mary judgment against the plaintiff

Squarely presented the question of

whether the involvement of a foreign

government (Indonesia) or the need to

inquire into the government's motivation

in not granting a concession to plain-

tiffs were sufficient to trigger the act

of state doctrine. "The sole issue" on

appeal in Mitsui, as here, was "whether

the act of state doctrine precludes a

trial of plaintiffs' antitrust action."

Id. at 49 (footnote omitted). The Fifth

Circuit decision reversing the district

court's dismissal found that

neither the validity of those regu-

lations nor the legality of the

behavior of the Indonesian govern-

ment is in question here. The mere

fact that members of the Indonesian

government were to play a part in

the alleged scheme does not insulate

defendants' accountability for

conduct which might prove to be

prohibited by our antitrust laws.

Id. at 49. The Mitsui court made abso-

lutely clear that it "“disagree[d] that

motivation and validity are equally

protected by the act of state rubric.”

Id. at 55.

Precluding all inquiry into the

motivation behind or circumstances

Surrounding the sovereign act would

uselessly thwart legitimate American

goals where adjudication would re-

sult in no embarrassment to execu-

tive department action. Industrial

Investment must only question that

government's motivation to the

extent of measuring its damage. No

ethical standard is set by which the

propriety of its decision is tested.

Surely the limited nature and effect

of determining the proportional

cause of plaintiffs' damage alloca-

ble to defendants' conduct does not

trigger the type of special polit-

ical considerations protected by the

act of state doctrine.

Id.

Although the Ninth Circuit attempts

to distinguish Mitsui on the basis that

the motive here sought to be established

is bribery, the Fifth Circuit clearly

contemplated the possibility that judi-

cial inquiry could lead to a corrupt

motive. The express holding of the lower

court, which the Fifth Circuit reversed,

was that

‘Once it is established that the

harm complained of was ultimately

caused by a government act, the

motivation behind the act, no matter

how unscrupulous, is beyond judicial

review.'

Id. at 51 (quoting the district court;

emphasis added).

Thus the Ninth Circuit's holding

below that "judicial scrutiny of the

motivation for foreign sovereign acts

[is] precluded by the act of state

doctrine," and that petitioners herein

"Cannot argue that inquiry into motiva-

tion in this case is unprotected," is

directly in conflict with the Fifth

Circuit's holding in Mitsui.

II. THE NINTH CIRCUIT'S APPLICATION

OF THE ACT OF STATE DOCTRINE IN

THE PRESENT CASE CONFLICTS WITH

PRIOR DECISIONS OF THIS COURT

The “classic” definition of the act

of state doctrine appears in Underhill v.

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

Every sovereign state is bound

to respect the independence 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 obtained through the means

open to be availed of by sovereign

powers as between themselves.

Underhill involved an action directly

against an agent of a foreign sovereign

for refusal to grant a passport, a

"state" act within a government's police

powers.

In Continental Ore Co. yv. Union

Carbide & Carbon Corp., 370 U.S. 690

(1962), arising out of an alleged con-

Spiracy to monopolize the vanadium trade,

plaintiff claimed that it was eliminated

from the Canadian market by an agent of

the Canadian government. Id. at 702-03.

This Court refused to invoke the act of

State doctrine, holding that the defen-

dants were "not insulated by the fact

that their conspiracy involved some acts

by the agent of a foreign government.”

Id. at 706. The Court added:

Respondents say that American

Banana Co. v. United Fruit Co., 213

U.S. 347, shields them from liabil-

ity. This Court there held that an

antitrust plaintiff could not col-

lect damages from a defendant who

had allegedly influenced a foreign

government to seize plaintiff's

properties. But in the light of

later cases in this Court respon-

dents' reliance upon American Banana

is misplaced. A conspiracy to

monopolize or restrain the domestic

or foreign commerce of the United

States is not outside the reach of

the Sherman Act just because part of

the conduct complained of occurs in

foreign countries.

Id. at 704.

The Continental Ore Court found the

act of state doctrine inapplicable on

certain facts also present here:

[P])etitioners do not question the

validity of any action taken by the

Canadian Government or by its Metals

Controller. Nor is there left in

the case any question of the liabil-

ity of the Canadian Government's

agent, for Electro Met of Canada was

not served. What the petitioners

here contend is that the respondents

are liable for actions which they

themselves jointly took, as part of

their unlawful conspiracy, to in-

fluence or to direct the elimination

of Continental from the Canadian

market.

370 U.S. at 706. Plaintiffs here like-

wise do not question the validity of any

action taken by the government of Umm Al

Qaywayn, nor have they asserted any claim

against Sultan, Umm Al Qaywayn's agent in

the transaction. As contended in Conti-

nental Ore, plaintiffs contend herein

that defendants, all of whom are American

citizens, “are liable for actions which

they themselves jointly took, as part of

their unlawful conspiracy, to influence

or to direct the elimination of" Clayco

from the Umm al Qaywayn oil market.

In Banco Nacional de Cuba v. Sabba-

tino, 376 U.S. 398 (1964), this Court

rejected the notion that the act of state

doctrine "is compelled either by the

inherent nature of sovereign authority

* « e OY by some principle of interna-

tional law." Id. at 421 (citations

omitted). Instead, the Court described

the nature of the doctrine as follows:

The act of state doctrine

does... have "constitutional"

underpinnings. It arises out of the

basic relationships between branches

of government in a system of separa-

tion of powers. It concerns the

competency of dissimilar institu-

tions to make and implement particu-

lar kinds of decisions in the area

of international relations. The

doctrine as formulated in past

decisions expresses the strong sense

of the Judicial Branch that its

engagement in the task of passing on

the validity of foreign acts of

state may hinder rather than further

this country's pursuit of goals both

for itself and for the community of

nations as a whole in the interna-

tional sphere.

Id. at 423 (emphasis added).

The principles set forth in Sabba-

tino permit application of the act of

State doctrine only where the validity of

a foreign sovereign's act of state is

directly challenged and American foreign

policy would be threatened by a court's

attempt to resolve that challenge. In

the instant case, no allegations have

been made that challenge the validity or

propriety of a foreign sovereign's

actions in any manner

The Occidental Defendants made the

payments in question in 1969 to the oil

Minister of a sheikdom that no longer

exists, having since been absorbed into

the United Arab Emirates. The oil minis-

ter accepted the bribes in Switzerland

and England for his personal benefit.

This was not a “state” act within Umm Al

Qaywayn's boundaries but the private act

of an individual on foreign soil. The

act of state doctrine only applies to a

governmental act "done within its own

territory,” Underhill v. Hernandez, 168

U.S. 250, 252 (1897), and cannot apply to

bribes paid in England and Switzerland.

The only state act involved was the

actual sale of the concession, a commer-

cial act the legitimacy and validity of

which is not questioned by plaintiffs.

Nor does the present case involve a

"potential" detriment to United States

foreign policy. A branch of the United

States government has already caused to

be published details of the bribe, in-

cluding the identity of the recipient,

the oil minister of Umm Al Qaywayn. If

any damage would have been caused by such

an accusation, it would have resulted

from the government's announcement of the

improper payment and not from a private

litigant's suit against Occidental.

Proof that a governmental official,

acting personally for his own benefit and

not fer the government, accepted a bribe

cannot interfere with United States for-

eign relations, and while the acceptance

of the bribe does not speak highly of the

Umm Al Qaywayn oil minister, the neces-

sity for raising such an issue in liti-

gation before a United States court is

not a basis for invoking the act of state

doctrine.

The Ninth Circuit's holding that the

act of state doctrine precludes judicial

scrutiny of the Occidental Defendants'

anticompetitive conspiracy simply because

the goals of the conspiracy were fur-

thered by the intentional corruption of a

foreign government official plainly

conflicts with the prior decisions of

this Court defining that doctrine.

III. THE NINTH CIRCUIT'S DECISION

PRESENTS IMPORTANT QUESTIONS

OF FEDERAL LAW WHICH HAVE NOT

BEEN, BUT SHOULD BE, SETTLED

BY THIS COURT

A. Whether the Foreign Corrupt Prac-

tices Act of 1977 Removes the Act

of State Doctrine as a Defense in

Actions Arising from Corrupt For-

eign Payments

This Court established in Banco

Nacional de Cuba v. Sabbatino, 376

U.S. 398 (1964), that the theory of

the act of state doctrine is the need of

the judicial branch to abstain from

making decisions in the area of foreign

relations if such decisions would hinder

Or embarrass United States foreign

policy. The logical corollary of the

Sabbatino theory is that the doctrine

does not apply when other branches of

government have made the relevant foreign

policy decision and announced it in such

a way as to guide the courts.

Congress enacted the Foreign Corrupt

Practices Act of 1977 ("FCPA") to stem

corporate bribery of foreign governments

and government officials for the purpose

of obtaining or retaining business. See

generally Siegel, The Implication Doc-

trine and the Foreign Corrupt Practices

Act, 79 Colum. L. Rev. 1085 (1979); 15

U.S.C. § 78dd-2. See also id. §§78dd-1 &

78ff.

The legislative history of the FCPA

shows Congress' intent to prohibit and

eradicate bribery, not in spite of for-

eign policy problems, but in order to

effectuate foreign policy objectives. In

the years preceding enactment, bribery by

U.S. businesses had become rampant. The

House Committee report stated that this

practice “creates severe foreign policy

problems for the United States." H.R.

Rep. No. 640, 95th Cong., lst Sess. 5

(1977). It causes embarrassment to

friendly governments and the decline of

esteem for thé United States around the

world. Id. In the Senate report accom-

panying the FCPA's immediate predecessor

bill, the same "severe foreign policy

problems" are set forth as the basis

for the statute. S. Rep. No. 1031, 94th

Cong., 2d Sess. 3 (1976).

The Ninth Circuit below need not

have speculated that a proper hearing of

Clayco's claims would encumber foreign

policy. It is our foreign policy to

prosecute bribery, whether under the FCPA

or under the antitrust laws. The foreign

relations repercussions of bribery

actions were painstakingly considered by

all the participants in the decision-

making process that led to the FCPA;

when Congress adopted and the President

signed the toughest anti-bribery bill

that had been considered, they held such

repercussions to be no obstacle whatever.

The spirit of the Ninth Circuit's

decision is most evident in its observa-

tion, at footnote 4 of its opinion, that

"It may be that the revelation of bri-

bery, more than bribery itself, causes

these [foreign policy] problems." This

descredited apology was considered and

rejected by Congress and the President.

Underlying the FCPA is the implicit

conclusion that no government would

object to an open and vigorous inquiry’

into corrupt practices. United States

policy with respect to bribes is founded

on the understanding that all govern-

ments condemn them. Far from requiring

judicial restraint in handling bribe

cases, Congress understood that it would

be an insult to a foreign government to

Suppose that it would wish to suppress

incidents of bribery by its officials.

Responding to concerns that the =FCPA

would be seen as an interference in

foreign relations, Representative Stephen

Solarz responded as follows:

What I am talking about is legisla-

tion which would make American

citizens live up to statutes of the

United States. For example, would

Our government in any way resent it

if a foreign government passed

legislation in its own country

prohibiting their nationals from

bribing American officials?

Multinationals Abroad Hearings, Supra, at

27.

The inapplicability of the act of

state doctrine where corruption is in-

volved received judicial endorseent in

Dominicus Americana Bohio v. Gulf &

Western Industries, Inc., 473 F. Supp.

680, 690 (S.D.N.Y. 1979), wherein the

court stated that an "act of state may be

scrutinized by the courts if it resulted

from the corruption of governmental offi-

cials." As in the instant case, the cor-

ruption exception arose in Dominicus on a

motion to dismiss. The Dominicus court,

however, refused to dismiss the action at

such an early stage in the proceedings:

The allegations here that government

actions were procured through fraud

and coercion . . . suffice to pre-

clude application of the act of

state doctrine even to the expropri-

ation issue at this stage of the

litigation.

Id. (footnote omitted, emphasis added);

cf. Jimenez v. Aristeguieta, 3ll F.2d

547, 558 (Sth Cir. 1962), cert. denied,

373 U.S. 914 (1963) (act of state doc-

trine does not protect "common crimes

committed by the Chief of State done

in violation of his position and not in

pursuance of it"); Sage International,

Ltd. v. Cadillac Gage Co., 534 F.Supp.

896, 910 n. 26 (E.D. Mich. 1981) ("in

Spirit and in practice, the [Foreign

Corrupt Practices] Act supports the

notion that act of state concerns are

subjugated to interests in stemming

foreign corrupt practices").

In private civil cases, courts have

heard a variety of claims involving

foreign bribery. See, e.g., Habib v.

Raytheon Co., 615 F.2d. 1204, 1206, 1211

(D.C. Cir. 1980) (appeals court sugges-

tion that, on remand, trial court could

find contract unenforceable if question-

able payments to Prince Abdallah of Saudi

royal family were illegal); Sedco Inter-

national, S.A. v. Cory, 522 F.Supp. 254,

286-89 (S.D. Iowa 1980) (detailed examina-

tion of bribe to Qatar oil minister).

Because the activities contempla-

ted by the FCPA necessarily involve the

conduct of a foreign sovereign, applica-

tion of the judicially created act of

State doctrine to cases involving such

corrupt payments has the effect of insul-

ating the malfeasors from liability for

the very conduct Congress has condemned.

Such a result does not further United

States foreign policy, but perversely

frustrates it.

The lower courts' assumption that

they must avoid considering the grant of

an oil concession because of the possibi-

lity that a government oil minister would

be shown to have taken a bribe is en-

tirely misplaced. Our government has

Stated its belief that respect for other

nations compels us to deal firmly with

bribery in our courts. Accordingly, the

courts must presume that Umm Al Qaywayn

abhors bribery and approves of the

efforts of the United States to prevent

it, and would only support efforts that

would, as a side benefit, serve to pro-

tect its »%fficials from bribes by foreign

companies. The courts below plainly

erred in assuming to the contrary.

B. Is the Grant of an Oil Concession So

Uniquely Sovereign as to Foreclose

Analysis of the Commercial Nature of

the Act?

In Alfred Dunhill of London, Inc. v.

Republic of Cuba, 425 U.S. 682 (1976)

four justices of this Court enunciated

a rationale for removing commercial acti-

vity from the act of state doctrine. Ob-

serving that prior cases had established

that a court should decline to adjudicate

a case only where necessary to prevent

embarrassment to the executive branch

of the United States Government in its

administration of foreign policy, id.

at 697 (citing Banco Nacional de Cuba

v. Sabbatino, supra, 376 U.S. at 427-

28), the plurality noted that the Court

had not granted sovereign immunity to

foreign governments in suits arising out

of their commercial dealings since the

United States Department of State for-

mally adopted that position. Id. at 702-

03; see Letter from Jack B. Tate, Acting

Legal Adviser, United States Department

of State, to the United States Attorney

General (May 19, 1952) (the "Tate let-

ter"), reprinted in Alfred Dunhill of

London, Inc. v. Republic of Cuba, 425

U.S. 682, 711 app. 2 (1976).

The commercial exception to the

sovereign immunity doctrine was codified

when Congress enacted it as part of the

Foreign Sovereign Immunity Act of 1976

("FSIA") 28 U.S.C. §1605(a)(2); see also

id. §1602. In determining whether a

"commercial activity" has taken place

for FSIA purposes, courts are directed

to make "reference to the nature of the

course of conduct or particular trans-

action or act, rather than... to its

purpose.” Id. §1603(d).

In Dunhill, the court extended this

reasoning to the act of state doctrine,

stating:

For all the reasons which led the

Executive Branch to adopt the res-

trictive theory of sovereign immu-

nity, we hold that the mere asser-

tion of sovereignty as a defense to

a claim arising out of purely com-

mercial acts by a foreign sovereign

is no more effective if given the

label "Act of State" than if it is

given the label "sovereign immun-

ity."

Id. at 705.

The Ninth Circuit relied on certain

expository language in Dunhill effec-

tively to foreclose any reasoned analysis

of the purposes of the act of state doc-

trine in a commercial context. Thus, the

Dunhill plurality observed that

In their commercial capacities, for-

eign governments do not exercise

powers peculiar to sovereigns. In-

stead, they exercise only those

powers that can also be exercised

by private citizens.

Id. at 704.

The Ninth Circuit, therefore, found

that a private citizen could not grant a

concession to exploit natural resources,*

and so held that no further inquiry was

* Although the Ninth Circuit's sweep is

too broad, in that private property

owners are entirely capable of granting

Mineral licenses, we may assume for

present purposes that only ay sovereign

May grant an offshore oil concession.

necessary or permissible.

: The plain thrust of the Dunhill

opinion is that the act of state doctrine

arises only in "exercises of governmental

powers, including military powers and

expropriations..." (id. at 404; emphasis

in original); and that the "restrictive

approach to sovereign immunity” (id.)

should translate into a correspondingly

expansive willingness to examine foreign

acts of state which arise in a commercial

context.

In this case, petitioners have not

made any claim that Umm Al Qaywayn

nationalized any assets or that it

took any other governmental action that

would justify automatic application of

the act of state doctrine. Umm Al

Qaywayn simply acted to exploit its

property's commercial potential by

granting Occidental U.A.Q. a right to

explore for, extract and sell oil that

otherwise would have been granted to

petitioners. If respondents resold their

drilling concession, such sale would not

constitute a governmental act. Similar-

ly, if Umm Al Qaywayn had simply produced

and sold its own oil on the market, its

actions would be subject to a commercial,

not a sovereign, standard. FSIA §1605(a)

(2). There is no indication in this case

that the Sheikdom of Umm Al Qaywayn

granted the oil concession to Occidental

rather than Clayco as "a considered

policy decision by a government to give

effect to its political and public

interests...." See Mannington Mills,

Inc. v. Congoleum Corp., 595 F.2d 1287,

1294 (3d Cir. 1979).

Petitioners here do not allece that

defendants secured the exercise of any

public, governmental power. By finding

that the presence of any uniquely sover-

eign component in a non-public commercial

activity of a sovereign renders the act

of state defense absolute, the Ninth

Circuit has turned the Dunhill decision

on its head. Plainly, there is a need

for this court to provide further guid-

ance in the area of sovereign immunity,

act of state, and developments in this

area of international law since Dunhill.

Dated: September 30, 1983

Respectfully submitted,

WILL B. SANDLER

(Counsel of Record)

PHILIP H. KALBAN

ROSS RHODES

BOOTH, LIPTON & LIPTON

405 Park Avenue

New York, New York 10022

(212) 758-1700

Attorneys for petitioners

APPENDIX

APPENDIX A

IN THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

CLAYCO PETROLEUM CORPORATION

and BRUCE CLAYMAN,

Plaintiffs-Appellants,

Vv.

OCCIDENTAL PETROLEUM CORPORATION,

OCCIDENTAL OF UMM AL QAYWAYN, INC., and

ARMAND HAMMER.

Defendants-Appellees.

<~—~-—oee waren warer wr wTrer ware ee ~

No. 80-5657

D.C. #CV 79-3845-RMT

Appeal from the United States District

Court for the Central District

of California

Robert M. Takasugi, District Judge,

Presiding

Argued December 8, 1981

Submitted March 23, 1982

Filed August 2, 1983

Before: KENNEDY* and SCHROEDER, Circuit

Judges, and THOMPSON,**

District Judge.

OPINION

PER CURIAM.

This appeal arises from an anti-

trust suit filed by Clayco Petroleum

Corporation and Bruce Clayman, the

founder and principal shareholder of

Clayco against Occidental Petroleum

Corporation, Occidental of Umm Al Qay-

wayn, Inc. and Armand Hammer (Occidental)

charging Occidental with making secret

payments to an official of Umm Al Qaywayn

in order to obtain unlawfully an off-

shore oil concession. The district court

* Judge Kennedy was substituted to re-

place Judge Reinhardt on this panel

as of January 17, 1983.

** Honorable Bruce R. Thompson, Senior

United States District Judge for the

District of Nevada, sitting by desig-

nation.

dismissed the action on the basis of the

act of state doctrine. We affirm.

I. FACTS AND PROCEDURAL CONTEXT

Plaintiffs commenced this action

alleging violations of section 1 of

the Sherman Act, 15 U.S.C. §1, section

2(c) of the Robinson-Patman Act, 15

U.S.C. §13(c), sections 16720 and 17045

of the California Business and Profess-

ions Code, and the common law. The

crux of the complaint is that Occidental

conspired to make and made secret pay-

ments in England and Switzerland total-

ling $417,000 to Sheikh Sultan bin Ahmed

Muallah (Sultan), Umm Al Qaywayn's

Petroleum Minister and son of its ruler,

Sheikh Ahmed al Mualla (Ahmed). The

complaint further alleges that only

through these unlawful and anti-competi-

tive actions did defendants secure the

2 This court has held that the govern-

ment of Umm Al Qaywayn is a foreign

valuable off-shore oil concession. More

specifically, plaintiffs allege that in

September 1969, Ahmed agreed that Clayco

would receive the concession, but in-

Stead, on November 18, 1969, he awarded

the concession to defendant Occidental of

Umm Al Qaywayn, Inc., Occidental Petro-

leum's subsidiary.

Plaintiffs allege that the first

information they obtained regarding why

they lost the concession became available

in December 1978. The December ll, 1978,

edition of the Oakland Tribune con=-

tained a story which said that Occidental

had distributed about $30 million under

"questionable legal circumstances," and

(footnote continued)

sovereign for purposes of the act of

State doctrine. Occidental v. Buttes,

331 F. Supp. at 113. This determination

was made when that nation was one of the

Trucial States; the skeikdom is now part

of the United Arab Emirates. This change

does not warrant a redetermination of

the sheikdom's status.

that Dr. Armand Hammer, Occidental's

chief executive officer, had personally

disbursed $217,000 to Sultan in a London

hotel room in 1969. The article also

reported that a second payment of

$200,000 was made to Sultan in Switzer-

land. The article stated, "Hammer paid

the initial $217,000 as part of a $1.7

million deal with the sheikdom .. . for

an oil and gas concession."

In 1977, the Securities and Ex-

change Commission (SEC) commenced an ac-

tion against Occidental alleging viola-

tions of the Securities Exchange Act of

1934 and rules promulgated thereunder,

based on illegal or questionable payments

made by Occidental. Securities and

Exchange Commission v. Occidental Pet-

roleum Corp., No. 77-0751, (D.D.C.

filed May 3, 1977). Occidental consented

to the entry of a permanent injunction

and agreed to conduct an internal inves-

tigation of the alleged illegal payments

and to prepare for the SEC and Occiden-

tal's stockholders a special report des-

cribing such payments. Report of the

Special Committee of the Board of Direc-

tors of Occidental Petroleum Corporation,

Investigated Payments and Accounting

Practices of Occidental Petroleum Cor-

poration (April 17, 1978) (the Payments

Report).

The Payments Report was filed and

revealed various illegal payments. A

Source Memorandum annexed to the Payments

Report further recites that Occidental's

$200,000 payment in Switzerland was of

"uncertain legality" and was inaccura-

tely described and documented on Occiden-

tal's books.

Plaintiffs allege that these $417,

000 in payments plus "entertainment"

expenses constituted bribes to induce

Sultan and his father to award the

concession to Occidental. Plaintiffs

contend that Occidental, its subsidiary,

and Dr. Hammer conspired to prevent

competition and to deprive plaintiffs

of the concession.

For the purpose of reviewing the

district court's dismissal for failure

to state a claim, we must assume that

the facts alleged in the complaint are

true. Benson v. Arizona State Board

of Dental Examiners, 673 F.2d 272,

275 n.7 (9th Cir. 1982); Austad v.

United States, 386 F.2d 147, 149 (9th

Cir. 1967). We recognize that dismissals

for failure to state a claim are dis-

favored in antitrust actions. Hospital

Building Co. v. Trustees of Rex Hospi-

tal, 425 U.S. 738, 746, 96 S. Ct. 1848,

1853 (1976). We assume, without decid-

ing, that plaintiffs' allegations amount

to antitrust violations. We must deter-

mine whether dismissal is nevertheless

required because the act of state doc-

trine bars this action. See Timberlane

Lumber Co. v. Bank of America, N.T. &

S.A. 549 F.2d 597, 608 (9th Cir. 1976).

The district court granted defend-

ants' motion to dismiss, based on the act

of state doctrine. The court stated

that an exercise of sovereignty -- the

award of the offshore oil concession

-- was implicated in the case, and that

adjudication would interfere with United

States foreign policy. The court noted

that plaintiffs' obligation to prove

that they were damaged by defendants'

conduct would necessitate review of

the ethical validity of the sovereign's

conduct. The court also refused to

apply a commercial exception to the

act of state doctrine.

II. ISSUES

The appellants raise numerous chal-

lenges to the district court's appli-

cation of the act of state doctrine.

In essence, appellants argue first that

this case is outside the purview of

the act of state doctrine; and second,

that the foreign sovereign action invol-

ved fits within "corruption" or "commer-

cial" exceptions to the doctrine.

III. DISCUSSION

The act of state doctrine was

first enunciated in Underhill v. Her-

nandez, 168 U.S. 250, 252, 18 S. Ct.

83, 84 (1897): "Every sovereign state

is bound to respect the independence

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 terri-

tory." The doctrine is a function of

A-10

Our system of separation of powers and

as such has "'constitutional' underpinn-

ings." Banco Nacional de Cuba v. Sabba-

tino, 376 U.S. 398, 423, 84 S. Ct. 923,

938 (1964). It recognizes that judicial

examination of the acts of foreign

governments may hinder the executive

and legislative branches' conduct of

foreign policy. Id.; Timberlane, 549

F. 2d at 605-06. Sabbatino prescribed a

flexible approach to the doctrine; the

critical element is the potential for

interference with our foreign relations.

"(T]he less important the implications of

an issue are for our foreign relations,

the weaker the justification for exclusi-

vity in the political branches." 376

U.S. at 428, 84 S. Ct. at 940.

With this in mind, we address

appellants' claim that the complained

of actions in this case do not include

a sovereign policy decision. We cannot

A-11l

agree. We acknowledge that without

sovereign activity effectuating "public"

rather than private interests, the act

of state doctrine does not apply. Inter-

national Association of Machinists and

Aerospace Workers (IAM) v. OPEC, 649 F.2d

1354, 1360 (9th Cir. 1981), cert. denied,

454 U.S. 1163 (1982); Timberlane, 549

F.2d at 607-08. That test is met here.

This case differs from those relied upon

by appellants, in which sovereign activi-

ty merely formed the background to the

dispute or in which the only governmental

actions were the neutral application

of the laws.

For example, in Mannington Mills,

Inc. v. Congoleum Corp., 595 F.2d 1287

(3d Cir. 1979), the court held that the

granting of patents by a foreign sover-

eign did not constitute "a considered

policy decision by a government to give

effect to its political and public

A-12

interests ...,” 595 F.2d at 1294,

and so was "not the type of sovereign

activity that would be of substantial

concern to the executive branch in its

conduct of international affairs." Id.

Similarly, in Timberlane, the only action

by the Honduran government was to enforce

existing laws in a private lawsuit,

reflecting no sovereign decision to

disfavor the losing party. Thus the

defendants, whose alleged conspiracy

encompassed initiating judicial action,

could not raise an act of state defense.

549 F.2d at 608. See also Industrial

Investment Development Corp. v. Mitsui &

Co., 549 F.2d 48 (5th Cir. 1979), cert.

denied, 445 U.S. 903 (1980) (background

of Indonesian law requiring local part-

ners for foreign lumber business does not

entitle private party who allegedly

frustrated joint venture to raise act of

state defense).

A-13

In contrast, the act of state

docrine was held to bar antitrust claims

in Occidental Petroleum Corp. v. Buttes

Gas & Oil Co., 331 F. Supp. 92 (C.D.

Cal. 1971), aff'd, 461 F.2d 1261 (9th

Cir.), cert. denied, 409 U.S. 950

(1972).4 Plaintiffs there alleged that

the sovereign issued a fraudulent terri-

torial decree to enable defendants, in

the place of plaintiffs, to exploit oil

and gas in the area covered by the

decree. 331 F. Supp. at 101. Although

Buttes involved a territorial decree,

2 In Buttes, Occidental was the plain-

tiff and Clayco was a defendant. The

case against Clayco was dismissed on

jurisdictional grounds. Defendants in

that case were alleged to have induced

the Ruler of Sharjah, a shiekdom adjacent

to Umm Al Qaywayn, to assert fraudu-

lently a territorial claim over off-

shore waters which included the very

concession at issue here and so to

deprive Occidental of its concession from

Umm Al Qaywayn.

A-14

which is not present here, the underlying

dispute in both cases concerns a sover-

eign decision authorizing exploitation of

important national resources. Buttes is

sufficiently analogous to call for act

of state preclusion. Further, it is

clear that judicial scrutiny of sovereign

decisions allocating the benefits of oil

development would embarrass the political

branches of our government in the conduct

of foreign policy. IAM v. OPEC, 649 F.2d

at 1360-61; Hunt v. Mobil Oil Corp., 550

F.2d 68, 78 (2d Cir. 1977), cert. denied

434 U.S. 984 (1978). This conclusion is

unaffected by the fact that the ruler was

not named as a party. Buttes, 331 F.

Supp. at 110-11.

Appellants also argue that the

examination of foreign governmental

action which this case requires is not

intrusive enough to warrant an act of

State defense because the concern here

A-15

is the motivation behind the sovereign's

act, rather than its legal validity.

Appellants rely principally on the Fifth

Circuit's statement that motivation

and validity are not "equally protected

by the act of state doctrine.” Indus-

trial Investment Development Corp. v.

Mitsui, 594 F.2d at 55. That opinion

does not foreclose application of the act

of state doctrine to cases where motiva-

tion but not validity must be scruti-

nized. Rather, Mitsui holds that where

the motivation for the sovereign act

would be subject to a limited examination

in order to measure the plaintiff's

damages, and the adjudication “would

result in no embarrassment to executive

department action," inquiry is not

foreclosed by the act of state doctrine.

Id; cited with approval in Northrup Corp.

v. McDonnell Douglas Corp., 705 F.2d

1030, 1048 (9th Cir. 1983). In this

A-16

case, however, the very existence of

plaintiffs' claim depends upon establish-

ing that the motivation for the sovereign

act was bribery, thus embarrassment would

result from adjudication.

This circuit's decisions have

Similarly limited inquiry which would

"impugn or question the nobility of a

foreign nation's motivation." Timber-

lane, 549 F.2d at 607. In Buttes, the

trial court, in an opinion adopted by

this court, held judicial scrutiny of the

motivation for foreign sovereign acts to

be precluded by the act of state doc-

trine, noting that it has traditionally

barred antitrust claims based on the

defendant's alleged inducement of foreign

sovereign action. 333 F. Supp. at 110

(citing American Banana Co. v. United

Fruit, 213 U.S. 347 (1909)). We recently

reaffirmed our unwillingness to "resolve

issues requiring ‘inquiries . . . into

A-17

the authenticity and motivation of the

acts of foreign sovereigns.'" Northrup,

705 F.2d at 1047 (quoting Buttes at i10).

Appellants thus cannot argue that inquiry

into motivation in this case is unpro-

tected.

We turn now to appellants' efforts

to invoke exceptions to the act of state

doctrine. Appellants first contend that

an exception for purely commercial acts

should apply in this case. A plurality

of the Supreme Court recognized an

exception for purely commercial activity

in Alfred Dunhill of London, Inc. v.

Republic of Cuba, 425 U.S. 682, 96 S. Ct.

1854 (1976), but only four Justices

concurred in that section of the opinion.

The Dunhill plurality emphasized that a

commercial exception is appropriate

in situations where governments are

not exercising powers peculiar to sove-

reigns. 425 U.S. at 704, 96 S. Ct. at

A-18

1866. Unlike the context Dunhill envi-

sioned, the governmental action here

could not have been taken by private

citizen. Granting a concession to

exploit natural resources entails an

exercise of powers peculiar to a so-

vereign. See United States v. Cali-

fornia, 332 U.S. 19, 29, 67 S. Ct. 1658,

1664 (1947); see generally IAM v. OPEC,

477 F. Supp. 553, $67, (C.D. Cal.

1979) (international law shows control

Over natural resources is exercise of

sovereignty).

The Ninth Circuit has not defini-

tively ruled on the commercial exception.

Compare Northrup, 705 F.2d 1048 n.25

(alluding to existence of commercial

exception), with IAM v. OPEC, 649 F.2d at

1360 (holding that presence of a "commer-

cial component” does not create an excep-

tion). Because the rule espoused by the

Dunhill plurality would not apply in any

A-19

event, we need not reach the question

whether to adopt an exception to the act

of state doctrine for purely commercial

activity.

Appellants also contend that the

passage of the Foreign Corrupt Practices

Act of 1977 (FCPA), 15 U.S.C. §§ 78dd-1l

et seq. (Supp. V 1981), created an

exception to the act of state doctrine

which should apply in this case.>

3 Neither the Supreme Court nor a

court of appeals has spoken on this

issue. The district court in Dominicus

Americana Bohio v. Gulf & Western, 473

F. Supp. 680, 690 (S.D. N.Y. 1978),

held, at least in the alternative, that

there is a “corruption exception” to the

act of state doctrine. No truly suppor-

tive authority, however, is cited by the

court for that proposition. The district

court in Sage International, Ltd. v. Cad-

illac Gage Co., 534 F. Supp. 894 F.

Supp. 896 (E.D. Mich. 1981), said in dic-

tum that "there is a likelihood that the

doctrine could be avoided were the alle-

gations such as to call for review of

foreign sovereign corruption charges."

Id. at 910. The court also said in dic-

tum that "in spirit and practice, the

Act [FCPA] supports the notion that act

of state concerns are subjugated to in-

A-20

The FCPA prohibits bribery of a

foreign official for the purpose of

obtaining or retaining business. 15

U.S.C. §§ 78dd-l, dd-2. The Act provides

for severe criminal penalties including

fines and imprisonment. 15 U.S.C. §§

78dd-2(b), 78£ff. In addition, the

Attorney General may bring a civil action

to enjoin impending violations. 15

U.S.C. § 78dd-2(c).

The FCPA was intended to stop

bribery of foreign officials and politi-

cal parties by domestic corporations.

Bribery abroad was considered a "severe"

United States foreign policy problem;

it embarrasses friendly governments,

causes a decline of foreign esteem for

the United States and casts suspicion

(footnote continued)

terests in stemming foreign corrupt prac-

tices.” Id. n 26.

A-21

on the activities of our enterprises,

giving credence to our foreign opponents.

H.R. Rep. No. 640, 95th Cong., lst

Session. 5 (1977).+ The FCPA thus

represents a legislative judgment that

our foreign relations will be bettered by

a strict anti-bribery statute. There is

also no question, however, that any

prosecution under the Act entails risks

to our relations with the foreign govern-

ments involved. Note, Sherman Act Juris-

diction and the Acts of Foreign Sover-

eigns, 77 Colum. L. Rev. 1247, 1261

(1977); Department of State Responses to

October 5, 1981 Inquiry by Congressman

Timothy E. Wirth, Chairman U.S. House of

Representatives Subcommittee on Telecom-

Munications, Consumer Protection, and

4 It may be that the revelation of

bribery, more than bribery itself,

causes these problems. H.R. Rep. No.

640, 95th Cong. lst Sess. 5 (1977).

A-22

Finance of the Committee on Energy and

Commerce at 10-ll, 13, 18, 20.

The Justice Department and the

SEC share enforcement responsibilities

under the PCPA.2 They coordinate

enforcement of the Act with the State

Department, recognizing the potential

foreign policy problems of these act-

ions. See Testimony of Ernest B. Johns-

ton, Jr., Department of State Before the

Subcommittee on Telecommunications, Con-

Sumer Protection and Finance, House

Committee on Energy and Commerce, Decem-

ber 16, 1981 at 11; Department of State

Responses to October 5, 1981 Inquiry,

3 For example, in United States v

Carver, No. 79-1768 (S.D. Fla., filed

May 1, 1979), the Justice Department took

action against a bribe in circumstances

similar to the ones alleged here involv-

ing the Emirate of Qatar. An example of

SEC enforcement is SEC v_ Page Airways,

Inc., No. 78-0656 (D.D.C. filed April 12,

1978), reprinted in Fed. Sec. L. Rep.

(CCH)Y 96, 393 (1978).

A-23

Supra, at 12, 13. Executive bodies have

discretion in bringing any action. E.g.

United States v. Cox, 342 F.2d 167,

193 (5th Cir.)(Wisdom, J., concurring),

cert. denied, 381 U.S. 935 (1965).

Therefore, any governmental enforcement

represents a judgment on the wisdom

of bringing a proceeding, in light of

the exigencies of foreign affairs. Act

of state concerns are thus inapplicable

Since the purpose of the doctrine is

to prevent the judiciary from interfering

with the political branch's conduct

bd Appellants argue that the matter of

prosecutorial discretion is academic in

this case, because the SEC action and

resulting Payments Report and Source

Memorandum have already publicized the

events at issue here. However, the

Payments Report and Source Memorandum

disclose only some of the underlying

facts and only raise a question as to the

legality of some of the payments under

Umm Al Qaywayn law. There was no inquiry

into the reasons for the granting of the

concession.

A-24

of foreign policy. Sabbatino, 476

U.S. at 423, Timberlane, 549 F.2d

at 605.

Here, however, we are faced with

a private lawsuit, rather than a public

enforcement action. It is the screen-

ing of governmental proceedings, with

State Department consultation, which

distinguishes FCPA enforcement from

private suits. See Timberlane, 549 F.2d

at 613. Hence, in private suits, the act

of state doctrine remains necessary to

protect the proper conduct of national

foreign policy. We therefore reject

appellants' contention, which is not

Supported by the legislative history,

that in enacting the FCPA, Congress

intended to abrogate the act of state

doctrine in private suits based on

foreign payments.

For the reasons above, we hold

that the act of state doctrine applies,

A-25

and that appellants do not come within

any exception to the doctrine. The

decision of the trial court dismissing

the action is therefore AFFIRMED.

APPENDIX B

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES - GENERAL

Case No. CV-79-3845 -RMT

Date: September 19, 1983

Title: Clayco Petro. Corp et al -v-

Occidental Petro Corp et al

DOCKET ENTRY

ENTERED

Sept 22, 1983

CLERK U.S. DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

PRESENT:

HON. ROBERT M. TAKASUGI, JUDGE

Tamara Saunders

Deputy Clerk

Court Reporter

ATTORNEYS PRESENT FOR PLAINTIFFS:

none

ATTORNEYS PRESENT FOR DEFENDANTS:

none

PROCEEDINGS:

IT IS ORDERED that the mandate from

the USCCA, 9th Circ., affirming this

District Court (Appl §80-5657), is hereby

filed and spread. The Notice setting

hearing on filing and spreading for

10/3/83 is vacated. IT IS FURTHER

ORDERED that the order awarding costs to

appellee in amount of $5,104.00 is also

filed & spread.

Initials of Deputy Clerk

APPENDIX C

IN THE UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

HONORABLE ROBERT M. TAKASUGI,JUDGE

PRESIDING

CLAYCO PETROLEUM CORPORATION

and BRUCE CLAYMAN,

Plaintiffs,

vS.

OCCIDENTAL PETROLEUM CORPORATION

OCCIDENTAL OF UMM AT QUWAIN, INC.,

and ARMAND HAMMER,

Defendants.

*~—~ ew ee we we ~ CK

REPORTER'S TRANSCRIPT OF PROCEEDINGS

PLACE: Los Angeles, California

DATE: Monday, July 21, 1980

DONNA FITZSIMONS, CSR §2387

Official Reporter

430 United States Courthouse

312 North Spring Street

Los Anglges, California 90012

(213) 622-5391

THE COURT: Thank you very much.

As far as the facts of this parti-

cular case are concerned, it does impli-

cate the sheikdom in a bribery scandal,

which naturally colors the exercise of

their sovereignty in awarding oil conces-

sions and it does interfere with U.S.

foreign policy.

With respect to the commercial ex-

ception, it certainly is not adopted by

the Ninth Circuit. And even if it were,

it would not be applicable here.

I think the need to prove the but-

for causation would lead the Court to

pass on the ethical validity of the

sovereign's act, which obviously is pre-

cluded by the Act of State doctrine. On

that basis, the motion to dismiss is

granted.

On the American Lighting Speciali-

ties, Inc., matter, apparently Counsel

was --

C-3

MR. WESTBROOK: Does your Honor

wish a formal order?

THE COURT: Please.

(Proceedings concluded.)

APPENDIX D

UNITED STATES DISTRICT COURT

FOR THE CENTRAL DISTRICT OF CALIFORNIA

CLAYCO PETROLEUM CORPORATION

and BRUCE CLAYMAN,

Plaintiffs,

vs.

OCCIDENTAL PETROLEUM CORPORATION

OCCIDENTAL OF UMM al QUWAIN, INC.

and ARMAND HAMMER,

Defendants.

NO. 79 03845 RMT (Kx)

ORDER DISMISSING ACTION

WHEREAS, defendants have made a

motion to dismiss this action upon the

ground, inter alia, of the act of state

doctrine, and

WHEREAS, defendants and plaintiffs

have filed extensive memoranda in support

of and in opposition to said motion and

the open court on July 21, 1980, and

WHEREAS, the Court has decided that

the act of state doctrine precludes

adjudication of the claims set forth in

the complaint and, therefore, it is

unnecessary to decide the other grounds

advanced in support of the motion,

NOW, THEREFORE, IT IS ORDERED that

this action be and it hereby is dismissed

for failure to state a claim upon which

relief can be granted.

DATED: July 25, 1980

U.S. District Judge

APPENDIX E

Statutes Involved

The Sherman Act

Trusts, etc., 15 U.S.C. §1 in restraint

of trade illegal; penalty

Every contract, combination in the

form of trust or otherwise, or conspir-

acy, in restraint of trade or commerce

among the several States, or with foreign

nations, is declared to be illegal.

Every person who shall make any contract

Or engage in any combination or conspir-

acy hereby declared to be illegal shall

be deemed guilty of a felony, and, on

conviction thereof, shall be punished by

fine not exceeding one million dollars if

a corporation, or, if any other person,

one hundred thousand dollars or by

imprisonment not exceeding three years,

or by both said punishments, in the

discretion of the court.

The Clayton Act

as amended by the

Robinson-Patman Act

15 U.S.C. §13(c)

Discrimination in price, services, or

facilities--Price; selection of customers

Payment or Acceptance of Commission,

Brokerage or other compensation

engaged in commerce, in the course of

such commerce, to pay or grant, or to

receive or accept, anything of value as

a commission, brokerage, or other compen-

Sation, or ary allowance or discount in

lieu thereof, except for services ren-

dered in connection with the sale or

purchase of goods, wares, or merchandise,

either to the other party to such trans-

action or to an agent, representative, or

other intermediary therein where such

intermediary is acting in fact for or in

behalf, or is subject to the direct or

indirect control, of any party to such

transaction other than the person by

whom such compensation is so granted or

paid.

The Foreign Sovereign Immunities Act

28 GsBeGa

Judiciary -- Procedure

§1602 Findings and declaration of purpose

The Congress finds that the determi-

nation by United States courts of the

Claims of foreign states to immunity from

the jurisdiction of such courts would

serve the interests of justice and would

protect the rights of both foreign states

and litigants in United States courts.

Under international law, states are not

immune from the jurisdiction of foreign

courts insofar as their commercial acti-

vities are concerned, and their fommer-

cial property may be levied upon for the

Satisfaction of judgments rendered

against them in connection with their

commercial activities. Claims of foreign

states to immunity should henceforth be

decided by courts of the United States

and of the States in conformity with the

principles set forth in this chapter.

§1603 Definitions

For purposes of this chapter-

(a) A “foreign state", except as used

in section 1608 of this title, includes

a political subdivision of a foreign

state or an agency or instrumentality

of a foreign state as defined in subsec-

tion (b).

(b) An “agency or instrumentality of a

foreign state" means any entity--

(1) which is a separate legal person,

corporate or otherwise, and

(2) which is an organ of a foreign

state or political subdivision there-

of, or a majority of whose shares

or other ownership interest is owned

by a foreign state or political sub-

division thereof, and

(3) which is neither a citizen of a

State of the United States as

defined in section 1332(c) and (d)

of this title, nor created under the

laws of any third country.

territory and waters, continental or

insular, subject to the jurisdiction of

the United States.

(d) A “commercial activity" means either

a regular course of commercial conduct

or a particular commercial transaction

or act. The commercial character of an

activity shall be determined by refer-

ence to the nature of the course of con-

duct or particular transaction or act,

rather than by reference to its purpose.

(e) A “commercial activity carried on

in the United States by a foreign state"

means commercial activity carried on by

such state and having substantial contact

with the United States.

§ 1605. General exceptions to the juris-

dictional immunity of a foreign state

(a) A foreign state shall not be immune

from the jurisdiction of courts of the

United States or of the States in any

case-

(1) in which the foreign state has

waived its immunity either expli-

citly or by implication, notwith-

standing any withdrawal of the

waiver which the foreign state may

purport to effect except in accor-

dance with the terms of the waiver;

(2) in which the action is based

upon a commercial activity carried

on in the United States by the

foreign state; or upon an act per-

formed in the United States in

connection with a commercial activity

of the foreign state elsewhere; or

upon an act outside the territory of

the United States in connection with

a commercial activity of the foreign

State elsewhere and that act causes a

direct effect in the United States;

(3) in which rights in property taxes

in violation of international law

are in issue and that property or

any property exchanged for such

property is present in the United

States in connection with a commer-

cial activity carried on in the

United States by the foreign state;

Or that property or any property

exchanged for such property is owned

Or operated by an agency or instru-

mentality of the foreign state and

that agency or instrumentality is

engaged in a commercial activity

in the United States;

(4) in which rights in property in

the United States acquired by suc-

cession or gift or rights in immovable

E-8

property situated in the United States

are in issue; or

(5) not otherwise encompassed in para-

graph (2) above, in which money dam-

ages are sought against a foreign

State for personal injury or death,

Or damage to or loss of property,

occurring in the United States and

caused by the tortious act or omis-

sion of that foreign state or of any

official or employee of that foreign

State while acting within the scope

of his office or employment; except

this paragraph shall not apply to-

(A) any claim based upon the exer-

cise or performance or the failure

to exercise or perform a discre-

tionary function regardless of

whether the discretion be abused,

(B) any claim arising out of mali-

cious prosecution, abuse of pro-

2 =z

cess, libel, slander, misrepre-

sentation, deceit, or interference

with contract rights.

(b) A foreign state shall not be immune

from the jurisdiction of the courts of

the United States in any case in which

a suit in admiralty is brought to enforce

a maritime lien against a vessel or cargo

of the foreign state, which maritime lien

is based upon a commercial activity of

the foreign state: Provided, That-

(1) notice of the suit is given by

delivery of a copy of the summons

and of the complaint to the person,

or his agent, having possession of

the vessel or cargo against which

the maritime lien is asserted; but

such notice shall not be deemed to

have been delivered, nor may it

thereafter be delivered, if the

vessel or cargo is arrested pursuant

to process obtained on behalf of the

E-10

Party bringing the suit-unless the

Party was unaware that the vessel

Or cargo of a foreign state was

involved, in which event the service

of process of arrest shall be deemed

to constitute valid delivery of such

notice; and

(2) notice to the foreign state of

the commencement of suit as provided

in section 1608 of this title is

initiated within ten days either of

the delivery of notice as provded in

subsection (b) (1) of this section

or, in the case of a party who was

unaware that the vessel or cargo of

a foreign state was involved, of the

date such party determined the

existence of the foreign state's

interest.

Whenever notice is delivered under sub-

section (b)(1) of this section, the mari-

time lien shall thereafter be deemed to

E-11l

be an in personam claim against the for-

eign state which at that time owns the

vessel or cargo involved: Provided, That

a court may not award judgment against

the foreign state in an amount greater

than the value of the vessel or cargo

upon which the maritime lien arose, such

value to be determined as of the time

notice is served under subsection (b)(1l)

of this section.

The Foreign Corrupt Practices Act

of 1977

15 S.. Bate

Commerce and Trade

§78dd-1. Foreign corrupt practices by

issuers--Prohibited practices

(a) It shall be unlawful for any issuer

which has a class of securities regis-

tered pursuant to section 781 of this

title or which is required to file re-

ports under section 780(d) of this title,

or for any officer, director, employee,

E-12

Or agent of such issuer or any stockhol-

der thereof acting on behalf of such

issuer, to make use of the mails or any

means or instrumentality of interstate

commerce corruptly in furtherance of an

offer, payment, promise to pay, or

authorization of the giving of anything

of value to-

(1) any foreign official for purposes

of -

(A) influencing any act or decision

of such foreign official in his

official capacity, including a

decision to fail to perform his

official functions; or

(B) inducing such foreign official

to use his influence with a foreign

government or instrumentality

thereof to affect or influence

any act or decision of such

government or instrumentality.

in order to assist such issuer in

E-13

obtaining or retaining business for

Or with, or directing business to,

any person;

(2) any foreign political party or

official thereof or any candidate

for foreign political office for

purposes of-

(A) influencing any act or decision

of such party, official, or candid-

ate in its or his official capa-

city, including a decision fail to

perform its or his official func-

tions; or

(B) inducing such party, official,

or candidate to use is or his in-

fluence with a foreign government

or instrumentality thereof to af-

fect or influence any act or deci-

sion of such government or instru-

mentality,

in order to assist such domestic concern

in obtaining or retaining business for or

E-14

with, or directing business to, any per-

son;

(3) any person, while knowing or

having reason to know that all or

a portion of such money or thing of

value will be offered, given, or

promised, directly or indirectly,

to any foreign official, to any

foreign political party or official

thereof, or to any candidate for

foreign political office, for purpo-

ses of-

(A) influencing any act or decision

of such foreign official, political

party, party official, or candidate

in his or its official capacity,

including a decision to fail to

perform his or its official func-

tions; or

(B) inducing such foreign official,

political party, party official,

or candidate to use his or its

E-15

influence with a foreign govern-

ment or instrumentality thereof

to affect or influence any act

or decision of such government

Or instrumentality,

in order to assist such domestic concern

in obtaining or retaining business for or

with, or directing business to, any per-

son.

Penalties

(b)(1)(A) Except as provided in subpara-

graph (B), any domestic concern which

violates subsection (a) of this section

shall, upon coviction, be fined not more

than $1,000,000.

(B) Any individual who is a domes-

tic concern and who willfully violates

subsection (a) of this section shall,

upon conviction, be fined not more

than $10,000. or imprisoned not more

than five years, or both.

E-16

(2) Any officer or director of a domestic

concern, who willfully violates subsec-

tion (a) of this section shall, upon

conviction, be fined not more than

$10,000 or imprisoned not more than five

years, or both.

(3) Whenever a domestic concern is found

to have violated subsection (a) of this

section, any employee or agent of such

domestic concern who is a United States

citizen, national, or resident or is

otherwise subject to the jurisdiction of

the United States (other than an officer,

director, or stockholder acting on behalf

of such domestic concern), and who

willfully carried out the act or practice

constituting such violation shall, upon

conviction, be fined not more than

$10,000, or imprisoned not more than

five years, or both.

(4) Whenever a fine is imposed under

paragraph (2) or (3) of this subsection

E-17

upon any officer, director, stockholder,

employee, or agent of a domestic concern,

such fine shall not be paid, directly or

indirectly, by such domestic concern.

Civil Action by Attorney General to

Prevent Violations

General that any domestic concern, or

officer, director, employee, agent, or

stockholder thereof, is engaged, or is

about to engage, in any act or practice

constituting a violation of subsection

(a) of this section, the Attorney General

may, in his discretion, bring a civil

action in an appropriate district court

of the United States to enjoin such act

Or practice, and upon a proper showing

a permanent or temporary injunction

or a temporary restraining order shall

be granted without bond.

E-18

Definitions

(d) As used in this section:

(1) The term "domestic concern”

means (A) any individual who is

a citizen, national, or resident

of the United States; or (B) any

corporation, partnership, associa-

tion, joint-stock company, business

trust, unincorporated organization,

or sole proprietorship which has

its principal place of business in

the United States, or which is orga-

nized under the laws of a State of

the United States or a territory,

possession, or commonwealth of the

United States.

(2) The term "foreign official”

means any officer or employee of

a foreign government or any depart-

ment, agency, or instrumentality

thereof, or any person acting in

an official capacity for or on

E-19

behalf of any such government or

department, agency, or instrumenta-

lity. Such term does not include

any employee of a foreign government

Or any department, agency, or in-

Strumentality thereof whose duties

are essentially ministerial or cler-

ical.

(3) The term "interstate commerce"

means trade, commerce, transporta-

tion or communication among the

several States, or between any

foreign country and any State or

between any State and any place or

ship outside thereof. Such term

includes the intrastate use of (A) a

telephone or other interstate means

of communication, or (B) any other

interstate instrumentality.

§78dd-2. Foreign corrupt practices by

domestic concerns - Prohibited practices

(a) It shall be unlawful for any domestic

E-20

concern, other than an issuer which is

subject to section 78dd-l1 of this title,

or any officer, director, employee, or

agent of such domestic concern, to make

use of the mails or any means or instru-

mentality of interstate commerce cor-

ruptly in furtherance of an offer,

payment, promise to pay, or authorization

of the payment of any money, or offer,

gift, promise to give, or authorization

of the giving of anything of value to-

(1) any foreign official for purposes of-

(A) influencing any act or decision

of such foreign official in his

official capacity, including a deci-

sion to fail to perform his official

functions; or

(B) inducing such foreign official

to use his influence with a foreign

government or instrumentality there-

of to affect or influence any act or

decision of such goverrment or in-

E-21

strumentality,

in order to assist such domestic concern

in obtaining or retaining business for or

with, or directing business to, any per-

son;

(2) any foreign political party or offi-

cial thereof or any candidate for foreign

political office for any foreign politi-

cal party or official thereof, or to any

candidate for foreign political office,

for purposes of-

(A) influencing any act or decision

of such foreign official, political

party, party official, or candidate

in his or its official capacity,

including a decision to fail to

perform his or its official func-

tions; or

(B) inducing such foreign official,

political party, party official,

or candidate to use his or its in-

fluence with a foreign government or

E-22

instrumentality thereof to affect or

influence any, act or decision of

such government or instrumentality,

in order to assist such issuer in obtain-

ing or retaining business for or with, or

directing business to, any person.

(3) any person, while knowing or having

reason to know that all or a portion of

such money or thing of value will be of-

fered, given, or promised, directly or

indirectly, to any foreign official,

to any foregn political party or official

thereof, or to any candidate for foreign

political office for purposes of-

(A) influencing any act or decision

of such party, official, or candi-

date in its or his official capa-

city, including a decision to fail

to perform its or his official func-

tions; or

(B) inducing such party, official,

Or candidate to use its or his in-

E-23

fluence with a foreign government

Or instrumentality thereof to affect

Or influence any act or decision of

such government or instruentality.

in order to assist such issuer in obtain-

ing or retaining business for or with, or

directing business to, any person.

Definition

(b) As used in this section, the

term "foreign official” means any

officer or employee of a foreign

government or any person acting in

an official capacity for or on

behalf of such government or depart-

ment agency, or instrumentality.

Such term does not include any

employee of a foreign government or

any department, agency, or instru-

mentality thereof whose duties are

essentially ministerial or clerical.

78f£. Penalties

(a) Any person who willfully vio-

lates any provision of this chapter

(other than section 78dd-1 of this

title), or any rule or regulation

thereunder the violation of which is

made unlawful or the observance of

which is required under the terms of

this chapter, or any person who

willfully and knowingly makes, or

causes to be made, any statement in

any application, report, or document

required to be filed under this

chapter or any rule or regulation

thereunder or any undertaking con-

tained in a registration statement

as provided in subsection (d) of

section 780 of this title or by any

self-regulatory organization in

connection with an application for

membership or participation therein

Or to become associated with a

member thereof, which statement was

E-25

false or misleading with respect to

any material fact, shall upon

conviction be fined not more than

$10,000, or imprisoned not more

than five years, or both, except

that when such person is an ex-

change, a fine not exceeding $500,

000 may be imposed; but no person

shall be subject to imprisonment

under this section for the viola-

tion of any rule or regulation if he

proves that he had no knowledge of

such rule or regulation.

(b) Any issuer which fails to file

information, documents, or reports

required to be filed under subsec-

tion (d) of section 780 of this

title or any rule or regulation

thereunder shall forfeit to the

United States the sum of $100 for

each and every day such failure to

to file shall continue. Such

E-26

forfeiture, which shall be in lieu

of any criminal penalty for such

failure to file which might be

deemed to arise under subsection (a)

of this section, shall be payable

into the Treasury of the United

States and shall be recoverable ina

civil suit in the name of the United

States. (c)(1) Any issuer which

violates section 78dd-l(a) of this

titie shall, upon conviction, be

fined not more than $1,000,000.

(2) Any officer or director of an issuer,

or any stockholder acting on behalf of

such

tion

issuer, who willfully violates sec-

78dd-l(a) of this title shall, upon

conviction, be fined not more than $10,

000,

or imprisoned not more than five

years, or both.

(4)

Whenever a fine is imposed under

paragraph (2) or (3) of this subsection

upon

any officer, director, stockholder,

E-27

employee, or agent of an issuer, such

fine shall not be paid, directly or indi-

rectly, by such issuer.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.