The Supreme Court may soon decide whether American judges can examine the motives behind the official acts of a foreign power.
The government wants the justices to review this "important issue," seeing in it major implications for the conduct of foreign policy and for private enforcement of the antitrust laws against foreign corporations in international trade.
The case in point involves Libys's nationalization of the extensive oil-producing concession of Nelson Bunker Hunt, an American, in 1973.
Hunt claims to be the victim of a conspiracy by the "Seven Sisters" - Mobil, Texaco, Standard of California, British Petroleum, Shell, Exxon and Gulf - and has filed an antitrust suit seeking $475 million in damages from them.
One of the claims in the suit is that the seven intergrated companies conspired to disadvantage Libyan crude as against the crude they produced in the Perisan Gulf, and "to climinate Hunt from the industry."
In a 2-to-1 ruling in January, the Second U.S. Circuit Court of Appeals affirmed dismissal of the claim on the ground that the motive behind nationalization - by the revolutionary government of Col Muammar Qaddafi - is logically inseparable from the legal validity of the expropriation.
And, the Second Circuit said, judicial examination of the validity of a foreign government's official act isn't allowed under the so-called "Act of State doctrine." The opinion cited an [WORD ILLEGIBLE] Supreme Court ruling that the doctrine prevents the courts of one liation from sitting in judgment on acts done by another inside its own boundaries.
The United States disagreed, in a brief filed by Solicitor General Wade H. McCree last month Analyzing subsequent rulings by the court, he told the justices that the claim in question "does not require any inquiry into the validity of the Libyan government's act in any way that implicates the Act of State doctrine.
The companies dispute him, arguing that a distinction between motive and legality "is not valid or viable."
McCree said the rulings have barred claims under the doctrine when they are based on a contention that a foreign power had acted illegally.
This means the court "has concluded that the doctrine should be applied in a flexible fashion," McCree wrote.
He acknowledged that a court inquiry into Libya's motives may have a "potential of embarrassing that government and of affecting our government's conduct of foreign relations."
But, McCree said, no Supreme Court ruling suggests that the doctrine "precludes all lines of investigation that may embarrass a foreign state or affect the political branch's conduct of foreign relations."
At a trial, he said. Hunt may or may not be able to prove that his refusal to negotiate triggered the seizure, he may or may be able to contradict the official accounts of Libya and the United States: that the seizure was a reprisal against this country.
Similary, the solicitor general said, a trial would enable the Seven Sisters to prove that other reasons underlay the nationalization.
Hunt, a non-integrated producer, got concessions to search for oil in Libya in 1957 under an earlier regime. His engineers discovered the huge Sarir field - one of the world's half-dozen largest - and began in 1967 to produce up to 450,000 barrels a day.BP acquired a half interest in 1960.
In 1970, Col. Qaddafi won and increased share, or "take," of the value of crude produced in his country. Later that year, the Organization of Petroleum Exporting Countries made comparable demands for crude produced elsewhere. Libya then demanded a still-higher take and ordered Hunt and Occidental Petroleum, another "independent," to respond by Jan. 16, 1971.
Before the deadline, the Seven Sisters, trying to prevent further price leap-frogging, banded together to confront the OPEC countries as a unit. They invited Hunt and other smaller firms to join them.
The heart of the plan was the socalled "safety net" or sharing agreement under which any signatory company that suffered production cut-backs or were shut down in resisting Libyan demands would be entitled to get substitute crude from other parties to the "safety net."
Libya nationalized BP's half of the Sarir field on Dec. 7, 1971. Hunt compensated BP with millions of barrels of crude.
Libya then made increasing demands on Hunt. Their relationship deteriorated as Hunt resisted. Finally, Libya nationalized the concession.
In his antitrust suit, Hunt charged the Seven Sisters with having conspired against him. The result, he alleged, was that he did not receive replacement crude as required by the agreement. Moreover, he charged, the other signatories failed to negotiate with Libya for Hunt's reistatement after many of them accepted the very terms to do business there that they had induced Hunt to reject. The companies denied the charges.
Hunt initially filed his suit in April, 1974, in federal court in Alexandria, but in March, 1975, he refiled the complaint in New York. It has yet to come to trial.