In any event, I finally noticed the depositions of these
gentlemen and they promptly took off for vacations in Hawaii and
Tahiti and various parts of the Pacific. After a lot of milling
around, they were finally ordered by the court to come back to be
deposed, and I went to Reno and participated in these depositions.
We asked them a lot of questions about their prior arrest records
and convictions, et cetera, which they found quite annoying. But
still it seemed hard to get a final disposition of the lawsuit.

Hicke: Did they answer these questions, or did they take the Fifth
Amendment?

O'Brien: No, the arrest records and the convictions were all on the record;
there was no use denying them. What I was trying to demonstrate
was that they were just acting on behalf of the true owners, who
were more menacing and sinister people in the underworld. I must
say that during the course of those investigations, I turned up all
sorts of remarkable information about San Francisco lawyers who
were bagmen for these gamblers, and foolish cafe society people who
thought that it was entertaining to consort with these hoods.

Hicke: Did you feel at risk yourself?

O'Brien: No, not particularly. Once in a while I felt a little uneasy.

I should say that the casino and the individual gamblers were
represented by one of the best firms in Reno. In fact, they were
the firm that normally represented the Standard Oil Company of
California, so that -



171



Hicke: Which firm was that?

O'Brien: I can't remember their names right now, it could easily be

checked. But they were putting every obstacle, every conceivable
obstacle in the way of a final resolution of the matter. One day
Eddie Hills came to see me and said that his wife was very
agitated about our seeming inability to get the case decided
and- -

Hicke: They were still building and going ahead with their - ?

O'Brien: No, the building had been suspended, because we had a temporary
restraining order. He handed me a shiny dime and said that he
was willing to bet me the dime that I'd never get a rope on these
gamblers .

Inspired by that challenge, I made an appointment to see the
governor of Nevada.

Hicke: Was it difficult to get in to see him?

O'Brien: No. As a matter of fact, I didn't really have any trouble making
the appointment nor were there a great many inquiries as to why I
wanted to see him.

Hicke: Interesting.

O'Brien: But in any event, I went to Carson City on the appointed day and
had my meeting with him. I explained what had happened to Mr.
Hills, the pendancy of the lawsuit, and concluded by saying in
effect that while it was inappropriate for me to comment about
the policy of the State of Nevada in raising its revenues through
the activities of gamblers, I though he should be aware of the
fact that these hoods were a bunch of musclemen who were pushing
around innocent, decent people who didn't deserve that sort of
treatment and which brought the State of Nevada into bad repute.

When I had finished my peroration he said to me, "Well, this
is all very interesting, because I just happen to have on my desk
the application of the casino for a renewal of its gambling
license, and in view of what you say to me , I will hold it up and
start an investigation of my own." Well, that investigation did
not last very long because by the next morning, I had received
word from the lawyers for the casino that they were prepared to
submit to any injunction that I could think of.

Hicke: His investigation consisted of thinking it over or something?



172



O'Brien: Yes. Veil, just the notion that their license might not be renewed

and could be suspended, which would put them out of business and

cut off their oxygen right now, was enough to bring the case to an

end. And so we got a very sweeping injunction to restore Hills ' s

property to its previous condition, pay damages, turn off the

casino loudspeakers, and act with a good deal more civility. That

ended the whole lawsuit. Kind of a back-door method of winning
such a suit.

The interesting thing was that the gamblers thought I had some
special clout with the governor and had been given access to the
confidential files of the Nevada Gambling Commission, which in its
efforts to keep out the really dangerous hoods from Chicago and
elsewhere, had a staff principally of ex-FBI agents that conducted
rigorous examinations of all of the applicants for gambling
licenses. But since I had spent a certain amount of money
investigating the background of these gentlemen, they were alarmed
to think that I had access to the gambling commission files. That
may also have persuaded them that it would be wise to settle. In
any event, just another lawsuit but a rather curious and unusual
one.

Hicke: Your information must have been excellent to give them that
impression.

O'Brien: Well, yes, we checked all of the available sources, public records
and things of that sort in compiling the dossiers on these
particular people.

Hicke: Whatever happened to that information?

O'Brien: Well, it's all in the file. I didn't do anything with it.

Hicke: But it didn't go anywhere else, like to the gambling commission.

O'Brien: No, it didn't go anywhere else, no. I was just trying to get rid
of the lawsuit, not chase anybody around.



173



IX ARAMCO ARBITRATION AWARD: 1955



Background



Hicke:
0' Brien:

Hicke:
O'Brien:



Okay, well then, maybe we can switch to the Aramco arbitration
award. This was - I think the award was in 1955, is that correct?



I have the award here in front of me.
February 23, 1955.



The award was made on



I guess we should start with the background of the problem.

Let me say to begin with that this arbitral award was undoubtedly
the most important international arbitraton affecting the rights of
foreign investors in host countries that had been decided in the
last fifty years. It is still the most important precedent in
international arbitration matters of this sort.



The original concession had been given to Standard of
California. It was an agreement made in May of 1933, and was
subsequently ratified by a Royal Decree in July of 1933.

Hicke: That is by the Saudi

O'Brien: - by the Saudi government. The original Aramco agreement, which

was years later supplemented by additional agreements granting more
territory, in effect granted to Standard of California most of the
onshore territory oil rights of the huge kingdom of Saudi Arabia.
At a later time, an agreement was negotiated for all of the
offshore rights of Saudi Arabia in the Persian Gulf.

After the concession was granted, the company created, as they
were required to under the agreement, a company called California
Arabian Oil Company (Casoc) exclusively for the purposes of
enterprise, and assigned to that company the rights and obligations



174



Hicke :



O'Brien:



under the concession agreement. As I said, at a later time, indeed
it was in October of 1948, the concession agreement was modified to
cover offshore rights.

By 1948, Standard of California had taken three partners in
the venture - Texaco, Standard Oil Company of New Jersey, and
Mobil. In 1947, Aramco entered into an agreement with Standard of
New Jersey, Caltex Oceanic - which was jointly owned by Texaco and
Socal - and Socony under which, to make a long story short, Aramco
sold its crude oil to the shareholders more or less in proportion
with their shareholding rights in Aramco, both crude oil and
refined products. That was the general shape and structure of the
venture until 1954, when the new king - after Ibn Saud's death -
in his first royal decree made an agreement with Aristotle Socrates
Onassis (described in the arbitration agreement as of Greek birth
and Argentine nationality, resident in Montevideo and domiciled in
Paris). 1



Can I stop you just for a minute?
interested in this venture?



Do you happen to know how he got



Oh, he was a real beady-eyed Greek tanker owner who had acquired a
lot of tankers after World War II when they were a dime a dozen.
Just as a footnote, he was subsequently indicted by the United
States government for his activities in the way in which he
acquired these V-2 tankers and was represented by an English
solicitor friend of mine, in responding to the criminal indictments
in the Southern District of New York. Onassis paid a
million-dollar fine. I remember my friend describing how he took
the million dollars in cash and slapped it down on the clerk's desk
in the United States District Court.



Hicke: Good heavens. So now he needed someplace for his tankers to go, is
that what that was about?

O'Brien: Right. So he persuaded the new king that he would make Saudi
Arabia a great maritime nation. He would establish a maritime
academy. He would transfer a large number of ships to the Saudi
flag and turn the Saudis into a seafaring race.

It seemed like a promising thing, and the only way he could do
that was to take away the rights of Aramco given under the
concession agreement to transport the crude oil and products which
they produced in Saudi Arabia on ships of their own choosing -
either their own ships or their customers' ships.

Hicke: They were going to make sailors out of desert nomads.



1. The new king was Saud ibn Abd Abdul-Azia, or Saud IV.



175



O'Brien: Yes, right. So that agreement was ratified by a royal decree in
April '54 and Aramco was officially notified for the first time
that it was going to be required to comply with this provision.
That was the heart of the dispute: whether the company and its
shareholders were compelled to recognize this new regulation of its
activities governing the transport of oil from Saudi Arabia.

As I say, the agreement with the new company that Onassis
created, called Saudi Arabian Maritime Tankers Company (Satco), was
to maintain a minimum of 500,000 tons of tankers under the Saudi
flag. The tankers were to bear Saudi Arabian names, and Satco was
to establish a maritime school at Jeddah and employ the graduates
of that school on the Satco tankers. Preference was to be given to
Saudis as employees and workmen on the tankers, and also Satco was
going to carry free of charge X thousands of tons of oil for the
Saudi government to ports in Saudi Arabia.

Aramco protested that new decree and claimed that it was
contrary both to the letter and spirit of existing agreements
between the Saudi government and Aramco; would be contrary to
long-established business arrangements and procedures that had been
developed in reliance on the agreement; would violate international
worldwide custom and practice in the oil business, et cetera.
Ultimately, when it was impossible to reconcile the views of the
company and the Saudi government, the matter went to arbitration.

Hicke: Was this a problem? Was everybody agreeable to submitting it?
O'Brien: Yes, they were.



Drafting the Arbitration Agreement



O'Brien: The parties then met in Jeddah in January and February of 1955 to
draft the text of an arbitration agreement. They were unable to
agree on the text of the joint questions that they wanted to ask
the tribunal; so they therefore agreed that each party would submit
its own question or questions to the arbitration tribunal, and
these separate questions were formulated by the government and by
the company for submission to the tribunal.

Hicke: Was Mr. Onassis involved in this at all?

O'Brien: No, Onassis was not involved in this in any way, so far as I know.

The general counsel of Aramco was George Ray. George was
selected as the agent of the company for the purposes of the



176



arbitration. Lowell Wadmond of White & Case was the chief trial
counsel. On the government side there was first a professor, Hamad
Sultan. Each of those agents and counsels had a very imposing team
of assistants. In the case of the Saudi government, Professor
Roberto Ago, a famous international lawyer -

Hicke: Where was he from?

O'Brien: He was from Italy, I believe.

Also the Right Honorable Sir Lionel Heald, who had been
attorney general in England, and Professor Myers McDougal, one of
the great mountain peaks of international law in the United
States - Yale professor - but very widely known around the world.

On our side, we had Lord McNair, who had been the president of
the International Court of Justice, Professor Maurice Bourquin,
Arthur Boal, a Dutchman by the name of [K.] Jansma, and behind the
scenes were the counsel for all of the companies. I was one of
those representing Standard of California from this distance.

Hicke: You were here?

O'Brien: Yes. From my point of view the case was really won in the drafting
of the arbitration agreement, because the Saudi government in that
arbitration agreement implicitly acknowledged that they were bound
to perform the agreement, and that was the major issue really.
They claimed that if the agreement was properly interpreted, we did
not have the exclusive right to select the means under which the
crude oil and products would be shipped from Saudi Arabia. But at
the outset, they didn't undertake to question the binding force of
the agreement. Later on in the arbitration, their memorials argued
that because they are a sovereign state they had special rights to
regulate us, which was the equivalent of saying that the agreement
had less than binding effect.

Hicke: This came about because they could see that -
O'Brien: They had a lot of new lawyers who were attempting to -

H

- nullify that original provision of the arbitration agreement.
Hicke: What was your part? Somebody told me that you studied the Koran -

O'Brien: Well, we agreed in the arbitration agreement that the agreement
would be interpreted in accordance with the law of Saudi Arabia,
which of course was the Islamic law based on the Koran, and upon
the sacred Shar'iah. The Wahabi tribes of central Saudi Arabia,



177



from which the House of Saud came, followed the Hanbali Code, which
was one of the three or four schools of Islamic law, and it was the
most how shall I say it - the most fundamentalist, the most
rigorous, the most absolute in its terms. I did make an effort to
read and understand the provisions of the Koran and, so far as
could be known, of the Hanbali school of Islamic law to try and
understand how they would affect the issues of the case.

I went to New York with considerable frequency to participate
in the discussions that took place there about the tactics and
strategy of the arbitration. It was agreed that the arbitration
would take place in Geneva, that it would be conducted in Arabic
and English with one exception, that at least one oral argument
could be made in French. We had practically simultaneous
translation, and the lead counsel in these arguments - I think the
French was selected for him - the lead counsel on our side was
Maurice Bourquin. While Wadman is listed in the book as the chief
trial counsel, Bourquin carried the bulk of the arguments before
the tribunal.



Members of the Tribunal



O'Brien: After the arbitration agreement was signed, each of the parties was
required to select an arbitrator, and those two arbitrators were in
turn to select a referee. The Saudis selected a gentleman named
[Helmi Bahgat] Badawi; Aramco selected Saba Habachy. Both of these
gentlemen were Eqyptians. Saba Habachy became a very dear,
intimate, personal friend of mine, which also stimulated my
interest in Islamic law, because he was a great scholar of Islamic
law and one of the most remarkable men I ever encountered in my
whole life.

I have to take a moment to say a word about him. By the time
I met him, he had been functioning as a consultant to Aramco on
Islamic law matters for some considerable period of time, probably
for seven or eight years and perhaps longer. He had been a
minister, I believe the minister of trade and commerce in Egypt,
under the regime of King Farouk. He was a nobleman in the Egyptian
society, a man of great distinction, slated to become the prime
minister; magnificently educated. Fell out with Farouk in the
later days of Farouk 1 s regime, had his estates confiscated, and
left Egypt and became in effect a refugee.

He went first in Geneva. He then came to the United States
and taught Islamic law and international law at Columbia
University, which promptly granted him an honorary degree. A man
of great distinction and attainments, and I would counsel anybody



178



Hicke:
O'Brien:



Hicke:
O'Brien:



interested in Islamic law to read the series of articles that he
wrote in the Columbia Law Review about the sacred Shar'iah. It
will do more, I think, to illuminate for a Western mind the
concepts of Islamic law than anything else I've ever encountered.

Anyway we became fast friends. He is a small, plump gentleman
with exquisite manners, modest, a Christian - in fact, the lay
head of the Coptic church, the man who ultimately was able from
time to time to resolve the differences - the factional
differences - within the Coptic church between the the Ethiopian
Copts and the Egyptian Copts.

Well, rarely have I met any man that I thought was his equal
and certainly in his standards of excellence and his standards of
ethics, his compassionate view of people, an extraordinary and
wonderful guy.

Another footnote: when it was decided that we needed a new
forum to express some of the traditional view of international law
in the United States, a forum was created in Dallas under the aegis
of the Southwestern Legal Foundation - a new International and
Comparative Law Center. I was involved with that, with many
others, and it was decided that the first thing we ought to do in
advance of holding the first symposium under the aegis of this new
center on international and comparative law was to publish a book
of readings about international law. So we got some of the most
distinguished and able and prestigious people in this country and
others to submit articles, including Lord McNair and Saba Habachy.
I believe Arthur Dean of Sullivan & Cromwell prepared an article,
and others.

When was that published?

It was in the '60s I think. As a consequence of the Aramco
arbitration, I got deeply interested in the question of the rights
of foreign investors in host states, the international law, the
rights and obligations of sovereign states toward investors in
their country.

You must have been on the cutting edge of that.

I followed the problems in the United Nations, where all sorts of
efforts were being made by the U.S.S.R. and its satellites and some
other countries to break down all the international concepts.
Aided and abetted, I should say, by the Arabs and others who began
to feel restive under the concepts of traditional international law
and who felt that since they had gained their independence after
World War II and were now new and sovereign nations, none of the
traditional principles of international law or of acquired rights




James E. O'Brien, as a member of Advisory Board and the Southwestern
Legal Foundation, introduces His Excellency Nobuhiko Ushiba at the
June 1971 Symposium on Private Investments Abroad.



179



should be applied to them. According to them, a new age was
dawning and we should tear up all of the traditional principles.

On the other side were companies like the Standard Oil Company
of California, which had invested hundreds of millions of dollars
in oil exploration and production in various foreign countries on
the faith of the binding force of contracts negotiated in good
faith and performed in good faith. So it was a period in which
there was a great convulsion taking place on all of these
questions .

Hicke: It must have somehow been resolved or there wouldn't be this

enormous increase in overseas investments that all the Western
countries -

O'Brien: I wouldn't say it was resolved, because the effort has gone on ever
since the '50s by the underdeveloped countries, so-called - the
less developed countries, what is now called the Group of
Seventy-Seven in the U.N. - to modify, if not repeal, the
traditional concepts of international law including respect for
binding force of contractual obligations by sovereign states.

About the same time, Aramco had on its payroll a young man who
was quite an expert on the U.N. He was located in New York, and he
attended the sessions of the U.N. and kept track of all of the
resolutions and initiatives that were being made by these
underdeveloped countries, aided and abetted by the U.S.S.R., which
was constantly propagandizing the Middle East that they should tear
up all of their concession arrangements. I got very much
interested and very much involved with that.

This is a long aside, if you like. At a subsequent time I
persuaded the company officials that they were not taking enough of
a lively interest in all of these affairs; that it was important
for us to try to influence the position of the United States
delegation to the General Assembly and to the Economic and Social
Council in Geneva (and to some of the specialized agencies) when we
felt that our vital interests were engaged by initiatives that were
being put forward by other countries. That's another story. It's
a story that's kind of relevant to this, because somewhere along in
this period, and we'll have to talk about it another day, the U.N.
decided to adopt some resolutions on permanent sovereignty over
natural resources. I got deeply involved in that in Geneva, and
that's another long story.

Hicke: I would like to get that; that sounds absolutely fascinating.

O'Brien: Anyway, to go back to this arbitration. After Badawi and Habachy
had been appointed, and you can understand Habachy 's position with
the greatest oil concession in the history of the world on the



180



Hicke:
O'Brien:



Hicke:
O'Brien:



table, that these four enormous, international, integrated oil
companies thought he was the man to carry their case. The question
then arose about the referee, and we spent months preparing
dossiers on the candidates that might be selected or considered for
selection as the referee. I was involved in that to some degree.

Cahill, Gordon in the person of John Sonnett in New York was
also involved, and we and the lawyers for the other shareholders
canvassed all of the conceivable people we could think of in the
United States, in France, in Sweden, in England, Australia, former
members of the international court of justice, and so on. We tried
to do a fairly comprehensive job reviewing the opinions they had
written in arbitral proceedings, talking to other lawyers, talking
to banks and to commercial entities about the reputation and
balance and stability and integrity of all of these possible
arbitrators or referee in this case.

I was in New York in the final stages of this process when we
sat down and established our priorities: who was our number one
pick and who was number two and who was number three and number
four. I had been designated as the man to go along with Saba
Habachy and talk out this question with the Saudis. Saba was in
Geneva, and I was to fly the next morning to Geneva to meet him
with my dossiers and my list of priorities and so on.

We called Saba to make sure everything was in order and he
called us back and said that he had gotten a peek at the Saudi list
of referees, and number one on their list was number one on our
list.

Oh, no.

So I didn't have to go. He was a most distinguished professor,
member of the permanent court of international arbitration, a Swiss
gentleman by the name of Georges Sauser-Hall. So Saba Habachy,
Badawi, and Georges Sauser-Hall started out as the arbitration
tribunal.

Would that be fairly unusual, that both sides would pick the same?

I would think so. What it proved to me was the quality of the
people who were representing the Saudi government and the integrity
of the Saudi government itself in not trying to slicker us into
some trained seal that they might select. They were prepared to
put their case to a most distinguished, able man.

In the meantime, our side had retained as consultants to write
opinions - which is the way it's done in these international
arbitrations - we had retained most of the Islamic law experts in
the Western world - and some of them not in the Western world -



181



distinguished professors of law in the faculties of universities in
England and Holland, Belgium, and the United States.
Mr. Dickinson, who was at the University of California on the
Berkeley faculty at Boalt Hall, was one of those. When we talk