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Anglo-Iranian Oil Co Ltd v.

Jaffrate (The Rose Mary) [1953] 1 WLR 246 (Supreme Court of Aden) Recognition of the expropriation of property by the government of a foreign country may be refused as contrary to forum public policy if the expropriation was unlawful under public international law on account of the absence of prompt, adequate and effective compensation. [The plaintiff, Anglo-Iranian Oil Co Ltd, an English company, owned and operated oil fields in Iran under a 60 year agreement made in 1933 between the plaintiff and the Iranian government. On 1 May 1951, the Iranian government put into effect an Oil Nationalization Law which expropriated the plaintiffs oil fields in Iran without compensation. A quantity of oil extracted from the plaintiffs oil fields was sold by the National Iranian Oil Co, an Iranian government agency which had taken over the plaintiffs property and business, to an Italian buyer and loaded on the tanker Rose Mary for a voyage from Iran to Italy. In the course of the voyage, the Rose Mary put into Aden (now the main port of Yemen but, at the time, British territory commanding the entrance to the Red Sea). While the Rose Mary was in Aden harbour, the plaintiff commenced proceedings in the Supreme Court of Aden for the tort of detinue (wrongful detention of goods). In these proceedings, which were brought against the master of the Rose Mary (Mr Jaffrate) and the owner and charterer of the ship, the plaintiff contended that the cargo of 700 tons of oil on the Rose Mary was the plaintiffs property. By way of defence, it was asserted that the charterer of the ship was the bona fide purchaser for value of the oil from the National Iranian Oil Co.] CAMPBELL J. [252] The plaintiffs [sic] contended that this Oil Nationalization Law was contrary to international law as being expropriation without compensation, and was really only confiscation, and that, as this court was bound to administer international law where it was appropriate, it should refuse to recognize any act which was contrary to international law. [253] In discussing what is meant by the word compensation in relation to international law it has sometimes been said that it must be adequate, effective and prompt. The question of adequacy may often be difficult for a court to decide, and no doubt this has caused and will cause considerable trouble in other cases in dealing with the extraterritorial effect of foreign nationalization. But here I can only find to be true the plaintiffs contention that expropriation has taken place without any compensation and that this is confiscation. That the courts in England will do nothing to invalidate an act of confiscation by a sovereign State of the property of its nationals is not disputed by the plaintiffs. The cases of AM Luther Co v. James Sagor & Co [1921] 3 KB 532 and Princess Paley Olga v. Weisz [1929] 1 KB 718 are authority for the proposition. What has to be decided is whether the reverse is true when the property confiscated is that of a nonnational.
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The plaintiffs contention can be based on two grounds: first, that no State can be expected to give effect within its territorial jurisdiction to a foreign law that is contrary to its own public policy or essential principles of morality; and secondly, that a foreign law that is contrary to international law or in flagrant violation of international comity need not be regarded. International law is the settled practice of nations. As was said by Lord Atkin in the Privy Council in Chung Chi Cheung v. R [1939] AC 160, 168:
The courts acknowledge the existence of a body of rules which nations accept amongst themselves. On any judicial issue they seek to ascertain what the relevant rule is, and, having found it, they will treat it as incorporated into the domestic law, so far as it is not inconsistent with rules enacted by statutes or finally declared by their tribunals.

This settled practice can be ascertained from decided cases and from the writings of jurists, and to these I now turn. ... [Campbell J discussed a number of English and foreign decided cases, including Wolff v. Oxholm (1817) 6 M & S 92 and In re Fried Krupp AG [1917] 2 Ch 188 and continued.] [257] In 1938 the government of Mexico nationalized their oil [i.e. foreign owned oil fields in Mexico]. A long correspondence then took place between the government of Mexico and Cordell Hull, the Secretary of State of the United States. In many communications the latter contended that confiscation of the property of aliens was contrary to, and would not be recognized by, international law. He argued that confiscation did not cease to be so because there might be the express desire to pay at some time in the future. The plaintiffs invoke this correspondence in aid. They say that it is not only the [258] opinion of the writer, but as he was then Secretary of State it is a statement of the opinion, and thus is an expression of what would be the practice, of the government of the United States. This may well be, but it is an opinion set out when arguing a brief and as such, I think, it cannot have the weight which should be given to a judicial opinion. It has not got that salutary check upon the writer of the overhanging shadow of a Court of Appeal. But I think that the plaintiffs are entitled to invoke the dispute in their aid by reason of the fact that throughout the argument the Mexican government do not appear to have denied the main premise of their adversarys argument. They refer to the blood of Mexicos sons shed in the revolutionary struggle, and assert that their acts were inspired by legitimate causes and the aspirations of social justice. But they do not deny the principle of compensation. The defendants have cited Princess Paley Olga v. Weisz [1929] 1 KB 718 and AM Luther Co v. James Sagor & Co [1921] 3 KB 532 as being in their favour. The first of these does no more than lay down the principle, as enunciated by Russell LJ (at 736), that This court will not inquire into the legality of acts done by a foreign government against its own subjects in respect of property situate in its own territory. It said nothing regarding property of those not its own subjects. AM Luther Co v. James Sagor & Co also concerned confiscation of property belonging to subjects of the confiscating government. It was also held that the confiscation was

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3 valid and would be upheld by the English court. The dicta in the judgments on which the defendants seek to rely are chiefly those of Scrutton LJ, who said (at 556, 558):
Should there be any government which appropriates other peoples property without compensation, the remedy appears to be to refuse to recognize it as a sovereign state. But it appears a serious breach of international comity, if a state is recognized as a sovereign independent state, to postulate that its legislation is contrary to essential principles of justice and morality.

The court was considering the effect of the conduct of a sovereign State in regard to its subjects. If Scrutton LJ had been specifically considering such conduct in regard to aliens, a far wider question of international law, I feel no confidence that he would have expressed the same opinion. His remarks were a good deal wider than necessary for the decision of the case. On the whole I think that the relevance to this case of a great part of the judgment in AM Luther Co v. James Sagor & Co [1921] 3 KB 532 is more apparent than real, and that the case is in no way decisive here. [259] British courts are inclined towards resting international law on practice and precedent rather than on the opinions of speculative writers, however unanimous or eminent they may be. Nevertheless I have examined the opinions of jurists on international law in such of their writings as are available here. The conclusion I arrive at is that Dicey, Oppenheim, Cheshire, Fachiri and Hackforth endorse the view that expropriation without compensation is contrary to international law. I can find no opinions to the contrary . For the reasons set out above, I am satisfied that, following international law as incorporated in the domestic law of Aden, this court must refuse validity to the Persian [Iranian] Oil Nationalization Law in so far as it relates to nationalized property of the plaintiffs which may come within its territorial jurisdiction. I find the oil in dispute to be still the property of the plaintiffs. The defendants urge that even if the court has come to the above general conclusion there are certain obstacles which must prevent the oil which is in the Rose Mary from being handed back to the plaintiffs. It is argued that a British court has no jurisdiction to adjudicate upon the right to ownership or possession of foreign immovables. Practical considerations would make a decree concerning them ineffective. It is said that this oil must be classed as an immovable. [260] It is true that it can be argued that oil can be classed as an immovable. But there is nothing to show that it must necessarily be so classed. It is merely necessary or convenient to do so in certain circumstances and for certain purposes. To extend what is really only a fiction would lead to obvious absurdities. The oil in this case is clearly in the category of movables. [262] I therefore find that the plaintiffs are entitled to succeed in this action, and that the cargo of oil must be returned to them. ... Judgment for plaintiffs ____________________________________

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