Equipo Nizkor - Singapore: N. V. De Bataafsche Petroleum Maatschappli & Ors. v. The War Damage Commission.

Court of Appeal, Singapore, April 13, 1956. Whyatt, C.J., Mathew, C.J., and Whitton, J. |1|

Oil stocks in the Netherlands East Indies, which were owned by Dutch corporations, were seized by Japanese armed forces and used for Japanese civilian and military purposes. They were not, however, requisitioned by the Japanese under the Hague Regulations. Large quantities of these stocks were found in Singapore at the end of the war, and were seized by the British Army as war booty. The Dutch corporations claimed compensation. Their claim was dismissed below, but on appeal was allowed. Whyatt, C.J., in an opinion |2| stating the facts more fully, said in part:

This is an appeal from a decision of the Board constituted under the Singapore Essential Regulations dismissing a claim by the appellants in respect of large quantities of petroleum which were seized as war booty by the armed forces of the Crown on the re-occupation of Singapore on the 5th September, 1945. The appellants contend that the petroleum was their property and not, as the respondents allege, the property of the Japanese State and in support of their contention, they rely upon two broad submissions, first, that they had a valid title to the petroleum under municipal law, and secondly, that they were never lawfully deprived of their title by the Japanese belligerent occupant.

Before examining these submissions in detail, it will be convenient to set out the relevant facts which have been proved or admitted in the course of these lengthy proceedings. The appellants are three oil companies, incorporated in Holland, who prior to the outbreak of the war with Japan in 1941, carried on the business of producers and refiners of oil in Sumatra. Between them, they held all the concessions in Sumatra and owned two large refineries in the Palem-bang area in the southern part of the island. The total number of concessions was 86 of which 61 were held by the first appellant, 2 by the second appellant and 23 by the third appellant. The earliest concession was granted by the Netherlands Indies Government in 1907, and thereafter concessions were granted at various dates for periods ranging from 40 years to 75 years, the last concession being granted in 1941. By the end of 1941, the appellants had established production in 32 oil reservoirs, as they are technically known, situated in various places in the concession areas as shown on a map produced at the hearing of the appeal. These oil reservoirs are geological structures enclosing the crude oil in its natural state and it was agreed by the parties that the oil does not escape from them except by means of boreholes, or wells, drilled into the reservoirs from the surface. No detailed information was supplied as to the number of wells which had been drilled into the reservoirs by the appellants by the end of 1941 or as to the rate of production of the wells at that date but it may be inferred that production was on a substantial scale from the fact that the two refineries already referred to had a total capacity of 90,000 gallons per day. The position, therefore, at the outbreak of hostilities, was that the appellants were producing cude oil in commercial quantities from some 32 reservoirs under concessions granted by the Netherlands Indies Government which still had substantial periods to run, and were refining crude oil obtained from these reservoirs on a large scale in their refineries at Palembang.

For the evidence of the events which occurred during the Japanese occupation, the parties were, of necessity, dependent upon the testimony of Japanese naval and military officers. The effect of this testimony, some of which was given orally, and some on affidavit, may be summarised as follows: When the Japanese armed forces occupied Sumatra, they immediately seized the appellants' installations in the field and also their refineries at Palembang because, as a Japanese naval officer, Admiral Watanabe, called by the respondents, put it, "oil was the most vital war material at that time, and personally, I thought we started the war for the sake of the oil." The installations had been badly damaged as part of the Netherlands Indies Government's denial policy, and the Japanese military authorities organized a special technical unit under military discipline to repair them. By the end of the first year of the Japanese occupation, they were all in working order again and crude oil was once more being extracted from the reservoirs and being processed in the appellants' refineries. The Japanese military authorities did not bring any new oilfields into production but continued to extract oil from the existing reservoirs throughout the period of the occupation. The oil so extracted, or at least a substantial part of it, was shipped as refined products, and sometimes as crude, to Singapore where it was kept in storage tanks, belonging in some cases to the appellants' associated companies, until eventually it was forwarded to various destinations in Malaya, Thailand, French Indo-China and Japan proper to meet not only military demands but also civilian requirements in those areas. The Japanese colonel in charge of the Shipping Department of the Petroleum Office in Singapore throughout the occupation estimated that 6,000,000 kilo-litres, or approximately, 1,200,000,000 gallons, of petroleum from the Sumatra oilfields were distributed during the war in this way from the Singapore "relay storage point," as he called it, to military and civilian consumers in the southern theatre of war: he gave no estimate of the respective quantities allocated to military and civilian consumers. When the British landed in Singapore on the 5th September 1945, they found in the storage tanks approximately 55,000,000 gallons of refined petroleum and 11,000,000 gallons of crude oil, all of which, as is admitted by the respondents, had been extracted from the oil reservoirs in Sumatra by the armed forces of the belligerent occupant, and after refining at Palembang in the case of the refined products, had subsequently been shipped by them to the storage relay point in Singapore. The British military forces seized the petroleum stocks as war booty. Later, by an arrangement which the parties agree does not affect the issues in this case, the appellants were allowed to withdraw 20,000,000 gallons of refined and crude oil, leaving a balance of 46,000,000 gallons of refined products, which has been valued, by agreement between the parties, on the basis of 1941 Gulf prices at $5,099,490, which is the amount claimed by the appellants in these proceedings.

It is against this background of facts that I now turn to consider the numerous issues of law which have been raised in this case. As I have already indicated, they fall broadly under two heads, municipal law and international law; but it would be wrong to suppose that this division represents a true dichotomy, and indeed the complexity and multiplicity of the arguments in this case may well be due, in part at least, to a tendency to treat the issues as belonging rigidly to one or other of these branches of the law. The substantial contest in this case is between the appellants and the respondents' predecessors in title, the Japanese belligerent occupant, who is an International Person, and therefore it follows that when their competing claims are considered under municipal law, there is inevitably introduced an element of international law in view of the international status of one of the claimants. ...

At the outset of their argument, the appellants recognized that it was incumbent upon them to show a good root of title under municipal law to the oil in the reservoirs in Sumatra prior to the Japanese invasion. It might be thought that an issue of this kind would not raise controversial questions of law but in the present instance this proved not to be the case for the respondents strenuously maintained that under the municipal law of the Netherlands Indies the oil in the reservoirs, far from belonging to the appellants, was a res nullius until it was seized vi et armis by the Japanese belligerent occupant. It, therefore, becomes necessary to examine in some detail the municipal law relating to the title to oil in Sumatra when it is existing in its natural state in reservoirs under the ground. The municipal law to be applied is, of course, the domestic law of the Netherlands Indies but since Netherlands Indies law is presumd to be the same as English law unless differences between the two are alleged and satisfactorily established, it will be useful, in the first place, to consider whether under the law of England oil in situ is a res nullius. It should perhaps be mentioned at this point that the lex fori in this case is the law of Singapore but as neither party has relied upon any distinction between the law of Singapore and the law of England in these proceedings, I propose to proceed upon the assumption that there are no material differences between the two systems affecting the present appeal. . . .

The question of the precise nature of the legal interest created in the appellants by these concessions is, however, of less importance than it might otherwise be in view of the conclusion which I have reached as to when the appellants reduced the oil in the reservoirs into their possession. Possession in this sense is, of course, a question of fact, and, as Dr. Veegens remarked in his evidence, sometimes a difficult question of fact. But being a question of fact and not of law, it was not altogether appropriate that an expert in law should be asked to give his opinion on it. Nevertheless Dr. Veegens was questioned about this matter and gave it as his view that the oil was reduced into possession as soon as, but not before, it got into the "vertical pipe." In giving this opinion, Dr. Veegens was handicapped, as indeed the Board was also, by the circumstance that there was very little evidence at the hearing before the Board as to the position in regard to the operations of the appellants in the oilfields at the relevant dates. During the course of the hearing of the appeal, however, the evidence on this aspect of the case was supplemented by further facts which were agreed between the parties, and as a result, a somewhat clearer picture of the appellants' operations in the field is now available to the Court. As I have already said, the oil in question was trapped in a number of underground reservoirs from which it could not escape by natural means. The appellants had tapped these reservoirs by drilling a number of bore-holes or wells into them and by means of these wells, they were, at the outbreak of hostilities, extracting oil from them in substantial quantities in accordance with ordinary commercial practice. The question is whether in this state of facts the appellants can be said to have had possession of the oil in the reservoirs and this must in turn depend upon such further questions as the kind of physical control of which oil in a reservoir is practically capable, whether the appellants had physical control over the whole of the reservoirs, and whether they had sufficient control for practical purposes to prevent strangers interfering with the oil whilst it was still in the reservoirs. Unlike solid minerals, where control is acquired by sinking shafts and driving underground workings into the mineral deposits, control of oil in an underground reservoir is acquired by drilling wells--inserting "vertical pipes," as Dr. Veegens called them--into the reservoir from the surface. It was not suggested physical control could be exercised in any other way over the oil in an underground reservoir. The question whether the control is effective over the whole of the reservoir must depend, it seems to me, upon whether the number of wells is sufficient to enable the oil to be extracted from every part of the reservoir. In the present case, it appears to be reasonable to infer from the fact that the appellants were extracting oil from these reservoirs in substantial quantities in accordance with ordinary commercial practice, that they had drilled a sufficient number of wells to enable them to exercise effective control over all parts of the reservoirs. It is clear also from the evidence in this case that the appellants had sufficient control to exclude strangers from interfering with the reservoirs, subject to a few possible exceptions to which I will refer presently. In my opinion, therefore, the oil in the reservoirs was under the control of the appellants to the extent that it was capable of being under control and they were in fact dealing with it as fully and completely as any owner could deal with oil trapped in an underground reservoir. Accordingly I reach the conclusion that the appellants were in actual possession of the oil in the reservoirs at the time of the Japanese invasion. "With regard to the possible exceptions, it was pointed out by counsel for the respondents that there were three or four reservoirs which, according to the map, appeared to be on or near the boundaries of the appellants' concessions and, therefore it was possible that they might extend beyond the appellants'concessions areas under the adjoining land, in which event another concessionaire might, at some future date, drill wells into these reservoirs which are at present being exploited solely by the appellants. If this were to happen, some of the oil at present in the appellants' portion of the reservoirs might flow into portions of the reservoirs underneath the new concession areas, replacing oil which the new concessionaire had extracted through his wells, as occurred, or at least as was envisaged, in the case of Borys v. Canadian Pacific Railway, (1953) A.C. 217, (at page 220). However, until this actually happens, it seems to me that the correct view is that the appellants have possession of the oil in these reservoirs subject to the possibility that they may be divested of possession of some of it if a new concession is granted enabling the reservoirs to be tapped from the surface of the adjoining land. As this has not yet occurred, it does not affect my finding that at the outbreak of hostilities, the appellants had acquired possession of the oil in these reservoirs by drilling wells into them and extracting the contents on a commercial scale. In view of this finding, it matters not whether the interest created in the appellants by the concessions is to be regarded as analogous to a lease or to a profit a prendre; they had actual possession of the oil in the reservoirs and this, combined with the sole right to dispose of it, gave the appellants as complete a title to the oil as it was possible for any one to have during the period of the concession.

I now turn to consider whether the appellants were at any time lawfully deprived of their title by the Japanese belligerent occupant in accordance with international law but before doing so, it will be convenient to mention briefly two subsidiary arguments on the res nullius aspect of the case, in view of the possibility that this case may be considered by another Court. The respondents contended that under Netherlands Indies law a trespasser who wrongfully reduces a res nullius into possession, as, for example, a poacher who wrongfully kills game on another's land, becomes the owner of the res. In this, Netherlands Indies law differs from English law which, as is clearly laid down in Blades v. Higgs, 11 H.L.C. 621, provides that a res nullius reduced into possession by a trespasser becomes the property, not of the trespasser, but of the owner of the land. The respondents argued, therefore, that, on the assumption that the Japanese armed forces in extracting oil from the reservoirs were to be regarded as trespassers reducing a res nullius into possession, they would, under Netherlands Indies law, become the owners of the extracted oil. The short answer to this argument, in my view, is that an individual who commits a trepass when reducing a res nullius into possession is in a very different category from a belligerent occupant who does so. The former is subject to the restraints of the police and of municipal courts, whereas the latter is subject to no control at all and could, therefore, commit trespass continuously throughout the period of his occupation. The respondents maintained that this distinction was immaterial, but, in my view, it is very relevant in considering whether the municipal law of the Netherlands Indies relating to trespassers who reduce a res nullius into possession should be interpreted as being so benevolent as to include a belligerent occupant. I should require very cogent evidence to persuade me that "trepasser" in this context includes a belligerent occupant and as this was not forthcoming, I reject this alternative argument of the respondents.

The second subsidiary argument was an argument advanced by the appellants and was based on a Netherlands Indies Ordinance known as the "Wartime Legal Eelations Ordinance enacted in 1940. This Ordinance, which was said to resemble in some respects the English Trading with the Enemy legislation, provided that if any act was performed without the previous permission of a Committee acting under the Netherlands Indies' Director of Economic Affairs, which might directly or indirectly benefit the enemy, it would be void ipso jure. Therefore, according to this contention, the act of the belligerent occupant in reducing the res nullius into possession when he extracted the oil from the reservoirs (assuming it to be a res nullius, for the purpose of this argument) without first obtaining the permission of the Director of Economic Affairs' Committee, was void, ipso jure, and consequently no title was acquired by the belligerent occupant to the extracted oil. This argument illustrates the difficulty which arises if, as seemed to me to occur too frequently in the course of this ease, international law is regarded as an entirely separate matter instead of being treated as an integral part of the law governing the issues in this appeal. The provisions of the Wartime Legal Relations Ordinance were, no doubt, very appropriate when applied to "persons," as defined in section 1 of the Ordinance, but to contend that they apply to a belligerent occupant, that is to say, to an International Person, who is thereby placed under a statutory obligation to seek the permission of the Director of Economic Affairs before doing any act which might benefit the enemy (which is, of course, himself) is, to my mind, an untenable proposition.

I now proceed to consider whether the Japanese belligerent occupant had a right, under international law, to seize the crude oil in the ground and so deprive the appellants of their title to it. It was common ground that if such a right did exist in the belligerent occupant, it was derived from Article 53 of the Hague Regulations. Before, however, I examine this Article, it is necessary to consider a formidable submission advanced by the appellants which, if sound, renders a detailed examination of the Hague Regulations academic. The appellants contended that Japan commenced the war, or at least launched an invasion against the Netherlands Indies, in order to secure the oil supplies of that country, because oil is an indispensable raw material in conditions of modern warfare. Therefore the Japanese invading armies, as soon as they had established the necessary military superiority, seized the appellants' installations, "lock, stock and barrel," and then proceeded, as speedily as possible, to repair and put them into operation, using for that purpose civilian technicians, called "Gunzokus," who were attached to the army and placed under service discipline. The whole operation, according to the appellants' argument, was prepared and executed by the Japanese military forces in accordance with Japan's Master Plan to exploit the oil resources of the Netherlands Indies in furtherance of their war of aggression. The plan was successful and enabled the Japanese forces in South East Asia in the course of the war to distribute vast quantities of oil, both crude and refined, to meet the needs of military and civilian consumers in the territories under their control and in Japan proper. This exploitation of the oil resources of the Netherlands Indies was, so the appellants contend, premeditated plunder of private property by the Japanese State on a totalitarian scale and, as such, it was contrary to the laws and customs of war.

The appellants rely upon the evidence of Japanese naval and military officers to prove the facts upon which this submission is based. The Chief of the Fuel Section of the Supply Depot of the Ministry of the Navy in Tokyo stated that he was concerned in the spring of 1942 with plans for restoring the oil fields of the Netherlands Indies and later he toured the captured oil fields and arranged for personnel and material to be sent to repair them and put them into working order again. From October 1943 onwards he was stationed in Singapore which was then being used as a storage and forwarding point for naval and military fuel; some of it was crude oil which was forwarded to Japan to be refined, some of it was aviation spirit and diesel oil and was used by the army and navy in Singapore. Further details concerning the processing, refining and distribution of the oil were given by the Japanese military officers who were stationed at Palembang and at the Headquarters of the Petroleum Office in Singapore which clearly show that it addition to supplying military requirements, the oil was also used to meet civilian demands. In my view this evidence establishes that the seizure of the appellants' oil installations in Sumatra by the invading army was carried out as part of a larger plan prepared by the Japanese State to secure the oil resources of the Netherlands Indies, not merely for the purpose of meeting the requirements of an army of occupation but for the purpose of supplying the naval, military and civilian needs of Japan, both at home and abroad, during the course of the war against the Allied Powers.

These facts being proved, the nest question to be determined is whether seizure of private property on such a scale and for such purposes was contrary to the laws and customs of war. On this point there is, fortunately, considerable authority available from decisions arising out of the war in Europe. First, there is the decision of the Nuremberg Tribunal, delivered in 1946, in which the principle is laid down that to exploit the resources of occupied territories in pursuance of a deliberate design to further the general war of the belligerent without consideration of the local economy, is plunder and therefore a violation of the laws and customs of war. This principle has been approved and further expounded in the cases of In re Flick, (1947) U.S. Military Tribunal, Nuremberg, and In re Krupp, (1948) U.S. Military Tribunal, Nuremberg, and In re Krauch, (1948) U.S. Military Tribunal, Nuremberg, where it was applied to the acts of German industrialists who systematically plundered the economy of occupied territories by acquiring substantial or controlling interests in private property contrary to the wishes of the owners. The present case is much stronger as the plunder of the appellants' property was committed not by Japanese industrialists but by the Japanese armed forces themselves, systematically and ruthlessly, throughout the whole period of the occupation. In my opinion, these authorities fully support the appellants' submission. Accordingly I reach the conclusion that the seizure and subsequent exploitation by the Japanese armed forces of the oil resources of the appellants in Sumatra was in violation of the laws and customs of war and consequently did not operate to transfer the appellants' title to the belligerent occupant.

I now turn to the alternative argument urged by the appellants under this head, namely, that in any event the seizure was illegal as the crude oil in the ground was not "munitions-de-guerre" within the meaning of Article 53 of the Hague Regulations because it was then a raw material and, moreover, an immoveable raw material. According to the British Manual of Military Law issued by the Army Council pursuant to the provisions of Article I of the Hague Regulations, "munitions-de-guerre" are such "things as are susceptible of direct military use." The respondents accept this interpretation of "munitions-de-guerre," as indeed they are bound to do since they are, in fact, the Crown although not appearing as the Crown eo nomine in these proceedings. Consequently they are compelled to argue that crude oil in the ground, although a raw material, is susceptible of direct military use or at least had a sufficiently close connection with direct military use to bring it within Article 53. No direct authority was cited for the proposition that raw materials could be "munitions-de-guerre" but the respondents referred to a passage in Oppenheim's International Law (7th Edition) at page 404 where it is said that "all kinds of private moveable property which can serve as war material, such as............cloth for uniforms, leather for boots ............ may be seized . . . for military purposes . ..." which they contend supports the view that raw materials can be "munitions-de-guerre." On the other hand, Professor Castren, a Finnish Professor, in "Law of "War and Neutrality," at page 236, says that "Raw materials and semi-manufactured products necessary for war can hardly be regarded as munition of war." It may be that certain types of raw material or semi-manufactured products, such as cloth for uniforms and leather for boots, which could possibly be made up into finished articles by army personnel without the assistance of civilian technicians and outside plant can, without stretching the meaning of "munitions-de-guerre" unduly, be regarded as having a sufficiently close connection with direct military use to bring them within Article 53. It is not, however, necessary to decide this point as the facts of this ease show that there is no such close connection in the present instance. According to the evidence, elaborate installations and civilian technicians were needed by the army to enable them to appropriate this oil and prepare it for use in their war machines. It had to be extracted from underground reservoirs, and then transported to a refinery, and then subjected to a complicated refining process before it was of any use to any one. In these circumstances, it cannot be said, in my opinion, that at the moment of its seizure in the ground, the oil had a sufficiently close connection with direct military use to bring it within the meaning of "munitions-de-guerre" in Article 53.

A further argument advanced by the appellants was that "munitions-de-guerre" does not include an immoveable and as the crude oil, when seized, was part of the realty, it was not a "munitions-de-guerre." The appellants conceded that certain things included in the categories specified in Article 53 which partake of the character of the realty, as for example, a railway transportation system, are seizable but they contended that these are exceptional cases and ordinarily Article 53 does not apply to immoveables. It was contended that oil in the ground could not be regarded as an exceptional case and in support of this view, reliance was placed on a dictum of Lord Simon in Schiffahrt-Treuhand v. Procurator General, (1953) A.C. 232, (at page 262) to the effect that "it was not legitimate to seize enemy private property on land (unless it was ammunition or arms which could be used against the enemy in fighting). ..." Lord Simon was not, of course, intending to give an exhaustive interpretation of "munitions-de-guerre" but, it would, I think, be a startling extension of his phrase "arms or ammunition which could be used against the enemy in fighting" to say that it could include minerals in situ. In my judgment, Article 53 was intended to apply, generally speaking, to moveables and only in those categories where the description is wide enough to include things which may belong, in part, to the realty, as, for example, "appliances for the transport of persons or things" mentioned at the beginning of the second paragraph of the Article, is it permissible to interpret it so as to include immoveables. "Munitions-de-guerre" is not, in my view, such a category. Accordingly I hold that crude oil in the ground, being an immoveable and not susceptible of direct military use, is not a "munitions-de-guerre" within the meaning of Article 53.

The appellants, who were nothing if not prolific in preferring alternative arguments, contended that even if crude oil in the ground could be seized as "munitions-de-guerre" under Article 53, the seizure in this case was invalid because no receipt was given to the owners or any one representing them. Article 53 does not in terms require a receipt whereas Article 52 (which deals with requisitioning) expressly provides for one; consequently it might be said, as a matter of pure construction, that the omission in Article 53 was deliberate on the part of those who framed the Regulations and such a requirement ought not to be implied. This, however, is not the view taken by municipal courts which have construed this Article. In the case of Billotte, (1948) Netherlands District Court, Arnhem ... it was held that the failure of German military personnel to give a receipt when seizing a car rendered the seizure invalid. The Court of Cassation at the Hague took a similar view in Hinrichsen's case in 1950. In that case a German Customs Frontier Guard seized two motor cycles without giving a receipt to the owner and the Court held that "this may not be done without in some way being officially acknowledged, in order to ensure compliance with the rule that such goods must be returned and compensation fixed when peace is made." In reaching their decision the Court of Cassation referred to the report of the proceedings at the First Hague Peace Conference (1899) in which it was stated that although it had not seemed opportune to make a special stipulation with regard to a receipt, the Committee nevertheless were of the opinion that the fact of seizure should be clearly stated one way or another if only to furnish the owner with an opportunity to claim an indemnity. Furthermore, as the Court of Cassation pointed out, the British Manual of Military Law contains a statement to the same effect. The respondents sought to distinguish these authorities from the present case on the ground that a receipt or acknowledgement was not required when the seizure was otherwise notorious. No authority was cited in support of this view, but in any case it does not meet the case where, as here, the fact of seizure is notorious but the quantity seized is unknown. The appellants do not know and have no means of discovering how much crude oil was seized from their oil reservoirs during the Japanese occupation and even if everything else had been done according to law, it would not now be possible for them to claim the compensation expressly provided for in Article 53. It would have been quite a simple matter for the Japanese belligerent occupant to have given an official acknowledgment to the Custodian of Enemy Property who, so the Court was told, was appointed by the Japanese in Sumatra to represent absent owners, and to have furnished him with proper records of the crude oil they extracted; but nothing of the kind was done and the failure to do so, was, in my opinion, an infringement of Article 53 and renders the seizure invalid.

The last alternative argument advanced by the appellants on the construction of Article 53 was that even where the seizure is valid in all respects, the belligerent occupant obtains only a provisional title to the seized property and must restore it to the original private owner if it is still in esse at the cessation of hostilities. They contended that in the present instance the seized property was still in esse when hostilities ended and therefore the rights of the appellants revived and the propetry should have been restored to them. In support of this proposition, the appellants relied, first, upon the express words of the Article which states that "seized articles must be restored . . . when peace is made," secondly, upon the views of Westlake (War, Vol. II, page 115) and Bolin (Le Droit Moderne de la guerre, paragraph 492), and lastly on two cases decided in municipal courts in 1943 and 1947 (Pigeat et Hazard v. Cie de Traction sur Les Voies Navigables, (1943) Dijon Court of Appeal; Austrian Treasury v. Auer, (1947) Supreme Court, Austria). The respondents conceded that the provisions about restoration apply to some seizures and that if, for example, the seized article had been a motor lorry, the belligerent occupant would have been bound to restore it to the owner; but they contended that it would be contrary to common sense to apply these provisions to consumable war materials, such as petroleum, which are not readily identifiable as belonging to any particular owner. Such a distinction does not appear to be based on any principle but rather on the supposed difficulty of carrying out the provisions of the Article in practice. But if, in fact, there is no practical difficulty in identifying the owner of the property, as was the position in this case, I can see no justification for departing from the plain words of Article 53. The respondents further objected that if there was a duty to restore these petroleum stocks, it did not arise until peace was actually made. It is obvious, however, that the right of the belligerent occupant to use "munitions-de-guerre" must cease with the cessation of hostilities, and it appears to me that when this occurs, the only right then remaining in the belligerent occupant is a right to retain possession of the property on behalf of the owner, all other rights in the property revesting in the original owner. Accordingly I am of the opinion that, on any view of the matter, the appellants were entitled to require the belligerent occupant to hold these surplus petroleum stocks on their behalf until such time as they could be restored in accordance with the provisions of Article 53.

I have now dealt with the many contentions put forward by the appellants in respect of the Hague Regulations. At the outset of his argument, counsel for the appellants claimed that in seizing this crude oil, the Japanese military forces had contravened the rules of international law in every single particular. It was a sweeping claim but I am bound to say that I think he has made it good [that] the seizure of the oil resources of the Netherlands Indies was economic plunder, the crude oil in the ground was not a "munitions-de-guerre," the failure to give a receipt was a fatal omission and the duty to restore the unconsumed petroleum was not fulfilled. In all these matters, the belligerent occupant, in my judgment, contravened the laws and customs of war and consequently failed either to acquire a valid title for himself or to deprive the appellants of the title which I have found existed in them prior to the seizure.

Before I leave the subject of the Hague Regulations I will refer briefly to the appellants' contention that in a war of aggression, such as this was, the aggressor state cannot in any circumstances acquire any legal title under the Regulations. This question was not very fully argued as counsel for the appellants asked that the appeal should be decided on narrower grounds although he naturally asked for the point to be kept open. Certainly this contention raises grave issues, reaching and extending far beyond the present case, touching indeed the springs of international law. The compelling logic of those who assert that all legal rights should be refused to an aggressor is opposed by persuasive reasoning of those who maintain that such rules of war as are accepted by States should continue to prevail, notwithstanding the illegality of the war. Learned jurists differ profoundly on this matter and municipal courts have yet to give a decisive answer. In this state of uncertainty of the law, it is not, I think, desirable to express views on a matter which is not necessary for the decision in this case, and accordingly I do not pass upon it.

Before dealing with the last major issue in this case, namely, the issue of specificatio, I would mention an argument which was strongly relied upon by the appellants at one stage of the proceedings but later receded somewhat in importance. In 1943, a number of the Allied Governments, including the United Kingdom and the Netherlands Governments, made a formal Declaration that they reserved the right to declare invalid any dealings with property in occupied territories, and, in a covering statement, stated they were mutually pledged to examine and, if necessary, implement the invalidation of such dealings when they extended across national frontiers. The appellants contended that this Declaration was, in effect, a treaty and although it did not affect the rights of individuals in the absence of legislation, it did, nevertheless, mitigate the Crown's belligerent rights by excluding from the category of enemy public property liable to seizure as war booty, any property which had been plundered from private owners by the Japanese armed forces in the first instance. The respondents challenged this argument at every step, contending that the Declaration did not amount to a treaty, and that in any case it did not detract from the rights of armed forces of the Crown to seize war booty. They added that even if the Crown's seizure was invalid for the reasons urged by the appellants, this could not confer any title on the appellants, and therefore the contention based on the Inter-Allied Declaration was irrelevant to any issue which the Court had to determine in this case. The logic of this reasoning appears to me convincing and accordingly I reject the appellants' argument on this point.

Finally I turn to the issue of specificatio upon which the respondents succeeded before the Board and which assumed great prominence in the arguments presented by the respondents to this Court. Stated in its simplest terms, the issue of specificatio is no more than this: if the Japanese armed forces did not deprive the appellants of their title when they seized the crude oil and shipped it to Singapore, does it make any difference that in some instances (of which the present is one), they refined it before shipment? The respondents strenuously maintained that it made a fundamental difference because, according to their contention, the action of the belligerent occupant in refining crude oil extinguished the appellants' title and vested the ownership of the refined product in the belligerent occupant; or, to put the matter another way, the belligerent occupant, by refining the crude oil, purged himself of his offences against the Hague Regulations and by virtue of this process created a new title in himself which was untainted by the original illegality and, therefore, valid against the appellants. They relied in support of this proposition, not upon the laws of war but upon an ancient doctrine of municipal law, derived from Roman Law, and known in the Netherlands Indies as "specificatio." This doctrine was embodied in the Netherlands Indies Civil Code in 1830 and is contained in Article 606 which reads as follows:-- "He who makes of a material not belonging to him a thing of a new sort becomes the owner of such thing provided he pays the price of the material. ..." The belligerent occupant, so the argument runs, made a thing of a new sort when he refined the crude oil, and therefore became the owner.

Before examining the evidence on this matter given by the experts on Netherlands Indies law, it will be convenient to consider the English law applicable to this subject, since, if the Netherlands Indies law is not satisfactorily proved, it will be necessary, as in the case of the law relating to res nullius referred to earlier in [t]his judgment, to fall back on the presumption that it is the same as English law. The relevant principle of English law is expressed with simplicity and clarity in In re Oatway, (1903) 2 Ch. 356, (at page 359) where Joyce J. states: "It is a principle settled as far back as the time of the Year Books that, whatever alteration of form any property may undergo, the true owner is entitled to seize it in its new shape if he can prove the identity of the original material: Blackstone, Vol. ii, page 405, and Lupton v. White, (1808) 15 Ves. 432." The same principle is approved in Salmond on Torts, 11th Edition at page 355: "If my corn is wrongfully taken from me and made into flour, the flour is mine, and if my tree is cut down and sawn into timber, the timber is mine." It seems clear, therefore, that under English law, ownership in crude oil would not be extinguished by the process of refining, whether it is done by a private person or by a belligerent occupant.

It is against this background of English law that I now turn to consider the Netherlands Indies law on this matter. The experts on both sides were in substantial agreement that under Article 606 of the Civil Code, a private individual who refined crude oil belonging to someone else would become the owner of the refined product, but when they came to consider whether the same would hold good if a belligerent occupant refined crude oil which he had unlawfully seized in violation of the Hague Regulations, they were in strong disagreement. The respondents contended that a belligerent occupant could acquire title to private property under municipal law in the same way as any private individual and referred to the practice of military commanders in occupied territory obtaining supplies by purchase under the ordinary law. The respondents also cited the case of The French State v. Lemarchand's, (1948) Rouen Court of Appeal, where, it was contended, the Court had, by implication, approved a belligerent occupant acquiring property under the local law by means of accessio, which, it was said, was similar in principle to a belligerent occupant acquiring title by specificatio under the local law. I very much doubt whether Lemarchand's case, will bear the interpretation which the respondents seek to place upon it but in any event, it is not necessary in my view to consider exhaustively all the ways by which a belligerent occupant might acquire title to private property under municipal law independently of the Hague Regulations, as the only point for decision in this case is whether the method of specificatio was available to the Japanese armed forces after they had seized the crude oil belonging to the appellants contrary to the provisions of the Hague Regulations. The answer to this question turns upon the construction of Article 606 of the Civil Code read together with the Hague-Regulations, in particular, Articles 46 and 53 of those Regulations, which form part of the statute law of the Netherlands Indies, having been enacted as a statute in 1910. Oddly enough, the appellants' experts, Dr. Nysingh and Dr. Punke, were not specifically questioned on this point of construction, but the respondents' expert, Dr. Veegens, when asked about it, said that in his opinion the Japanese belligerent occupant could obtain a title by specificatio because a belligerent occupant has the same rights as any one else in the territory. Dr. Veegens fortified his opinion by reference to an official explanatory memorandum issued in 1947 to accompany the Rehabilitation of Rights Ordinance 1947 which states that where a Japanese body has administered a business during the occupation for itself, any products made by the business from raw materials belonging to another, would become the property of the Japanese body by specificatio. It should be observed that this memorandum does not refer to the Japanese belligerent occupant as such, but to "Japanese or Japanized bodies" which ran businesses in the Netherlands Indies as going concerns during occupation, but, subject to this comment, the memorandum gives some support to Dr. Veegens' view that a belligerent occupant could acquire property by specificatio in the occupied territory. The appellants' experts, however, profoundly disagreed with this view and went so far as to say that the memorandum could not have been drawn up by good jurists. Moreover they were not content merely to deny the correctness of the memorandum but, so to speak, counter-attacked by alleging that the doctrine of specificatio could not, in any circumstances, be applied to an enterprise, or, as Dr. Funke called it, a universitas rerum, like the appellants' installations in Sumatra. In other words they said that if a person makes a new thing from material belonging to another by means of the "enterprise" of that other person, the finished product does not, in such a case, become his property because specificatio does not apply to the operations of an enterprise. Dr. Veegans disgreed with this view just as emphatically as Dr. Nysingh and Dr. Funke disagreed with his interpretation of the memorandum on the Rehabilitation of Rights Ordinance. He stated quite categorically that the doctrine of a universitas rerum had nothing to do with the doctrine of specificatio. A further argument advanced by Dr. Nysingh and Dr. Funke was that specificatio was "an act" prohibited by the Wartime Legal Relations Ordinance and therefore void ipso jure, but Dr. Veegens would have none of this, saying that only an "act-in-the-law," that is to say, an act which is a manifestation of the will directly aimed at producing a legal effect, was prohibited by this section of the Ordinance. There was, unfortunately, practically no common ground between the experts on any of these topics, many of which involved legal concepts unfamiliar to an English lawyer. In these circumstances, it seems to me appropriate to recall the words of Lord Greene in Rouyer Quillet & Co. v. Bouyer Quillet & Co. Ltd., (1949) 1 All E.R. 244, when speaking of the construction of foreign statutes: "When you come to the statute law itself," he said, "although it is right that prima facie what must be considered is the evidence of the experts and not the text of the law, when the experts differ as to its meaning an English court is entitled and, if it is to perform its function properly, is indeed, bound, to apply its own mind, fortified by the opinion of the witnesses and giving what weight it thinks ought to be given to it, to the text itself and to examine it in order to make up its mind on the question of interpretation as between the two sets of witnesses."

Accordingly I now proceed to examine the text of Article 606 of the Civil Code and the relevant Articles of the Hague Regulations, in the light of the principle laid down by Lord Greene in that case. Article 606 begins with the pronoun "he" and therefore before a belligerent occupant can come within the scope of this Article, the word "he" must be construed so as to include not only a private person, but also an International Person, namely, a belligerent occupant. It is, to my mind, unlikely that the Netherlands Indies' legislature, when they enacted this Article of the Civil Code in 1830, intended it to apply to a belligerent occupant who, normally, is quite independent of the laws and the courts of the occupied territory. Dr. Nysingh apparently shared this view because he stated, in his somewhat faltering English: "Article 606 is not meant, does not apply, to cases like this when it came into existence during the occupation of this country." But the other expert witnesses apparently did not address their minds specifically to this point. The further question to be considered is whether in any event the rest of Article 606 can be reconciled with the Hague Regulations, particularly Article 46, which states that private property must be respected, and Article 53 which prescribes the methods by which private property may be lawfully seized. If it cannot be reconciled, then all the experts agree that the Hague Regulations must prevail. It is clear that Article 606 postulates that the person acquiring title to property by specificatio is a person having no lawful title to the raw material from which the new thing is made. Therefore a belligerent occupant seeking to acquire title under Article 606, must, ex hypothesi, have acquired the raw material unlawfully and this, in the case of a belligerent occupant, necessarily means inconsistently with the Hague Regulations. Consequently a belligerent occupant cannot bring himself within both the Hague Regulations and the provisions of Article 606. The two are irreconcilable and since the Hague Regulations prevail, it follows a belligerent occupant cannot avail himself of Article 606. But if this construction is not correct, the matter is, in my view, at best left in doubt and therefore a presumption arises in favour of English law, which, as I have already explained, preserves the title of the true owner if he can prove the identity of the original materials. Accordingly in my judgment the plea of specificatio fails.

The further question whether a British court would apply the Netherlands Indies' law if it gave a title by specificatio to a belligerent occupant in circumstances such as occurred in this case, does not, therefore, arise, but if it were necessary to consider the point, I should be prepared to hold that it was contrary to public policy for a British court to recognize a foreign law which confers validity on illegal acts committed by a belligerent occupant in violation of the Hague Regulations.

I would only add that it would indeed be strange, if after committing a breach of the Hague Regulations, the belligerent occupant could invoke the municipal law of the hostile state, not only to avoid the consequences of his deliquency but also to give him a good title against the world. The conclusion I have reached avoids this ironical result and harmonizes with the maxim "Ex injuria jus non oritur" which, as Professor Lauterpacht has said, expresses a principle of particular importance in the international sphere where sanctions cannot easily be applied against wrongdoers.

For these reasons I am of the opinion that the appeal should be allowed. The appellants should have the costs of the appeal and of the proceedings before the Board. [Other opinions omitted.]

[Source: The American Journal of International Law, Vol. 51, No. 4, October 1957, pp. 802-815]

Notes:

1. Opinion furnished by courtesy of G. "W. Haight, Esq., of the New York Bar. [Back]

2. Citations inserted and punctuation occasionally supplied. [Back]

13Apr1956 - SGP

Court of Appeal Judgment:
N. V. De Bataafsche Petroleum Maatschappli & Ors. v. The War Damage Commission

[Source: The American Journal of International Law, Vol. 51, No. 4, October 1957, pp. 802-815]

Judicial Decision
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13Apr1956 - SGP

Court of Appeal Judgment:N. V. De Bataafsche Petroleum Maatschappli & Ors. v. The War Damage Commission

[Source: The American Journal of International Law, Vol. 51, No. 4, October 1957, pp. 802-815]

Court of Appeal Judgment:
N. V. De Bataafsche Petroleum Maatschappli & Ors. v. The War Damage Commission