Greylag Goose Leasing 1410 Designated Activity Company v P.T. Garuda Indonesia Ltd

Greylag Goose Leasing 1410 Designated Activity Company and Greylag Goose Leasing 1446 Designated Activity Company (together, the Appellants or Greylag Goose) are companies incorporated in Ireland which lease aircraft to PT Garuda Indonesia Limited (the Respondent or Garuda).

Garuda is a foreign company registered under Div 2 of Pt 5B.2 of the Corporations Act 2001 (Cth) and is the national airline of Indonesia. More particularly for present purposes, it was common ground that Garuda is a “separate entity” of a foreign State within the meaning of that term in the Foreign States Immunities Act 1985 (Cth) (FSIA) and thus, although not falling within the extended definition of a “foreign state” under s 3(3) of that Act, nevertheless is the beneficiary of s 22 of the FSIA which applies the provisions of Part II of the FSIA to a separate entity of a foreign State as they apply in relation to the foreign State (other than subparagraph 11(2)(a)(i), paragraph 16(1)(a) and subsection 17(3) which are not material for the purposes of the present appeal.)

Garuda was similarly recognised as a “separate entity” of Indonesia for the purposes of the FSIA in PT Garuda Indonesia Ltd v Australian Competition and Consumer Commission (2012) 247 CLR 240; [2012] HCA 33 (PT Garuda).

Section 9 of the FSIA, headed “General Immunity from jurisdiction” provides that “[e]xcept as provided by or under this Act, a foreign State is immune from the jurisdiction of the courts of Australia in a proceeding” (emphasis added) The combined effect of s 22 of the FSIA together with s 9 is that, except as provided by or under the Act, Garuda, as a separate entity of a foreign state, is immune from the jurisdiction of the courts of Australia in a proceeding.

By originating process filed in the Supreme Court of New South Wales on 15 August 2022, Greylag Goose applied for orders that Garuda be wound up “on the basis that it is unable to pay its debts or otherwise that it is just and equitable to do so”.

On 22 September 2022, Garuda filed a notice of motion seeking a declaration that the Court had no jurisdiction over it by reason of s 9 of the FSIA.

The Appellants in turn resisted Garuda’s application, invoking s 14(3) of the FSIA as a statutory provision which qualified the operation of s 9. Section 14(3) provides:

The Appellants’ simple contention was that, by virtue of s 22, Garuda as a separate entity was a “foreign state” for the purposes of s 14(3) of the FSIA and that the winding up proceedings which Greylag Goose commenced were proceedings concerning the winding up of a body corporate, namely Garuda, or were proceedings concerning insolvency in that Garuda’s failure to meet creditors’ demands for payment of two debts in the sums of US$193,003,254.55 and US$224,968,492.29 gave rise to a deemed insolvency of Garuda pursuant to s 583(c)(i) of the Corporations Act. Accordingly, it was contended that, as the proceedings concerned “insolvency or the winding up of a body corporate”, Garuda, as statutory surrogate of a foreign State (Indonesia), lacked immunity which s 9 of the FSIA otherwise provided because they fell within the exception to immunity supplied by s 14(3)(a).

This superficially attractive argument was rejected by Hammerschlag CJ in Eq (the primary judge) who acknowledged its apparent force: Greylag Goose Leasing 1410 Designated Activity Company v PT Garuda Indonesia Ltd [2022] NSWSC 1623. The core of his Honour’s reasoning was as follows:

On appeal, the Appellants urged upon the Court the plain or literal meaning of s 14(3) of the FSIA and that the reference to “a body corporate” in s 14(3)(a) could be to both a body corporate that was a “separate entity” within the meaning of that term as defined in the FSIA as well as a body corporate more generally, and that the primary judge’s observation at [24] of his reasons that the legislature would have made its intention clear if it intended to suscept the foreign State (and its separate entities) to a winding up, was, at best, a neutral factor, and appeared not to account for what was described as the presumption that a superior court’s jurisdiction should be construed broadly: see Owners of the Ship “Shin Kobe Maru” v Empire Shipping Company Inc (1994) 181 CLR 404 at 426; [1994] HCA 54 (Shin Kobe Maru).

The Appellants also contended that the context and purpose of s 14(3)(a) supported their construction, arguing that the purpose of the FSIA was to give effect to the so-called restrictive theory of foreign State immunity, a concept that was referred to both in the Australian Law Reform Commission’s Report concerning Foreign State Immunity (Report No 24, 10 October 1984) (ALRC Report) at xvi and the second reading speech of the FSIA (which will be referred to more fully below). In support of this general purpose, the Appellants noted that the FSIA created a series of broad exceptions from immunity, extending from commercial transactions (s 11), to employment (s 12), to personal injury (s 13), to taxation (s 20). These were said to demonstrate that the purpose of the FSIA was derogation from the former position of absolute immunity for foreign states, which, in turn, was said to tell in favour of a broad and literal construction of the exception to immunity in s 14(3)(a) urged by the Appellants.

The Appellants further submitted, by reference to PT Garuda Indonesia Ltd v Australian Competition and Consumer Commission (2011) 192 FCR 393; [2011] FCAFC 52 (Garuda FCAFC), that:

In my opinion, for the reasons given by the primary judge and the additional reasons set out below, his Honour was correct in his construction of s 14(3)(a) of the FSIA and the challenge to it, by way of appeal, should be rejected (although leave to appeal from what was an interlocutory decision should be granted given the size of the claim, its consequences if the appeal were upheld and the general importance of the construction of the FSIA: Supreme Court Act 1970 (NSW) s 101(2)(e).

The literal meaning of a statutory provision will not always accord with its legal meaning, which is to be derived from a full consideration of the language of the statute viewed as a whole and the context, general purpose and policy of the statute or a provision within it, to the extent that that is separately discernible: Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 at [78]; Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 320; [1981] HCA 26; Commissioner for Railways (NSW) v Agalianos (1955) 92 CLR 390 at 397, [1955] HCA 27; Sydney Seaplanes Pty Ltd v Page (2021) 106 NSWLR 1; [2021] NSWCA 204 (Sydney Seaplanes) at [26]; Park Trent Properties Group Pty Ltd v Australian Securities and Investments Commission (2016) 116 ACSR 473; [2016] NSWCA 298 at [77]. While the legal and the literal meaning of a statute will often coincide, it is the legal meaning of a statutory provision to which this Court must give effect.

To the extent that the primary judge did not favour what the Appellants contended was the plain or literal meaning of s 14(3)(a), that fact does not in and of itself bespeak error on his Honour’s part and, as will be seen, the Appellants’ submission in that regard tended to focus on the words of s 14(3)(a) in isolation from the balance of the subsection and indeed s 14 as a whole. It also paid insufficient regard to the modern approach to statutory interpretation which insists upon the importance of context in the construction of statutes and not merely at some later stage in the process if and when ambiguity might be thought to arise. "Context" is to be understood in its widest sense to include such matters as the existing state of the law and the mischief which the statute was intended to remedy, to the extent that that is discernible: CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408; [1997] HCA 2 (CIC).

In Sydney Seaplanes, I made the uncontroversial observation that words, whether used in a statute or more generally, always exist in and take their meaning from the particular context in which they are used, and that that context may expose any mischief which a statute is directed towards redressing and may reveal the purpose underpinning the enactment: at [31]. I went on to observe (at [33]) that:

The purpose (or purposes, for there may be a number) of any particular statute may be expressly stated, may be discerned only by inference upon examination of the legislation as a whole, or may be revealed from the nature and context of a particular statute’s enactment: Saraswati v The Queen (1991) 172 CLR 1 at 21; [1991] HCA 21; Sydney Seaplanes at [34]-[37].

Purpose may also be disclosed, in particular cases, by reference to secondary materials including the reports of law reform bodies which form part of the context of a statute: CIC at 408; Newcastle City Council v GIO General Ltd (1997) 191 CLR 85 at 112; [1997] HCA 53. Both of those decisions made extensive reference to the Australian Law Reform Commission’s Report No 20, Insurance Contracts, issued in 1982 and which led to the passage of the Insurance Contracts Act 1984 (Cth). In CIC at 408, Brennan CJ, Dawson, Toohey and Gummow JJ noted that:

The FSIA was the direct product of the ALRC’s Report No. 24, Foreign State Immunity (1984). The Commissioner in Charge of that report was the late Professor James Crawford AC SC FBA, then of the University of Adelaide Law School and subsequently the Whewell Professor of International Law at the University of Cambridge and ultimately a judge of the International Court of Justice.

The bridge or lineage between the ALRC Report and the FSIA is made plain by recourse to both the Second Reading Speech for the Foreign State Immunities Bill 1985 and the Explanatory Memorandum to the FSIA, the latter of which, at p 2, states clearly that:

To similar effect, the then Attorney General Bowen (Commonwealth, Parliamentary Debates, House of Representatives, 21 August 1985, 141) noted that:

As Nettle and Gordon J observed in Firebird Global Master Fund II Ltd v Republic of Nauru (2015) 258 CLR 31; [2015] HCA 43 (Firebird) at [173], “the ALRC report is significant because, although it cannot displace the clear meaning of the Immunities Act, it assists in ascertaining the legislative context and purpose and the particular mischief that the legislation is seeking to remedy”. The ALRC Report was also considered at length in this Court’s previous consideration of the FSIA in Zhang v Zemin (2010) 79 NSWLR 513; [2010] NSWCA 255 (Zhang) at [138]-[148], [158], [161].

Attention is first turned to the text of the legislation.

The key provisions of the FSIA for the purposes of the present case have already been noted in the introductory section of these reasons however the full text of s 14 should be set out. It supplies one of a number of exceptions to the general principle of immunity given effect by s 9 of the FSIA and provides as follows:

The FSIA has been considered on three occasions in the High Court: PT Garuda, concerning the construction of s 11 of the FSIA, the “commercial transactions” exception to s 9’s general immunity, and whether it was limited to proceedings concerning “private law rights”; Firebird, concerning whether the “commercial transactions” exception extends to a proceeding to register a foreign judgment (which it does, if the underlying judgment concerns a “commercial transaction” within the meaning of s 11); and, most recently, Kingdom of Spain v Infrastructure Services Luxembourg S.a.r.l (2023) 97 ALJR 276; [2023] HCA 11 (Kingdom of Spain), concerning the distinction between recognition, enforcement and execution of arbitral awards in the context of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1965).

Unsurprisingly, all three of these High Court decisions make extensive reference to the ALRC Report: PT Garuda at [7], [18]; Firebird at [5]-[11], [140]-[142], [173]-[198]; and Kingdom of Spain at [11], [17]-[18]. In none of these decisions, however, has s 14 of the FSIA been considered directly although the joint judgment of Nettle and Gordon JJ in Firebird makes some general observations in relation to the suite of exceptions to the general immunity conferred by s 9 in ss 12-16 of the FSIA. Thus, their Honours observed at [199] that, taken together, ss 12-16:

The Appellants placed reliance upon the following two passages from the joint judgment of French CJ and Kiefel J in Firebird at [44] and [80]:

The references in these two passages to “Australia’s obligations under international law” and “Australia’s international obligations” are, with respect, somewhat elusive in the context of sovereign immunity.

Unlike, for example, the International Arbitration Act 1974 (Cth) and the Civil Aviation (Carriers' Liability) Act 1959 (Cth), which give effect to the New York Convention and the Warsaw Convention respectively, there was no international instrument at the time of passage of the FSIA which provided a source of Australia’s international obligations in relation to sovereign immunity, and it has been said, at least as late as 1999, that there were no clear customary international law rules of foreign state immunity: R Garnett "Should Foreign State Immunity be Abolished?" (1999) 20 Australian Year Book of International Law 175 (Garnett) at 175, 182; I Brownlie, Principles of Public International Law (3rd ed, 1979, Oxford (1985 reprint)) (Brownlie (3rd ed) at 333. In Zhang, Spigelman CJ observed at [139] that “[a]t the time that the ALRC Report was presented and acted upon by the Commonwealth Parliament, there was no clarity in the principles of international law which determined what kinds of official conduct were entitled to immunity”; see also Rahimtoola v Nizam of Hyderabad [1958] AC 379 (Nizam of Hyderabad) at 417-418, quoted in Zhang at [139].

It was not until 2 December 2004 that the General Assembly of the United Nations adopted the UN Convention on Jurisdictional Immunities of States and their Property: General Assembly Resolution 59/38, Annex, 2 December 2004.

Apart from the three instances where it has been considered in the High Court, the FSIA has also been the subject of some eight intermediate appellate decisions in Australian courts: Garuda FCAFC; Walker v Vanuatu [2011] FCAFC 138, concerning the general s 9 immunity in the context of the Admiralty Act and the seizure of a ship; Republic of Italy (Ministry of Foreign Affairs and International Cooperation Adelaide Consulate) v Benvenuto (2018) 261 FCR 19; [2018] FCAFC 64, concerning unpaid wage claims and the construction of s 12 of the FSIA; Victorian Aircraft Leasing Ltd v United States of America (2005) 12 VR 340; [2005] VSCA 76, concerning the construction of the “commercial transactions” exception in s 11, and whether certain promises in respect of loans and economic assistance were “commercial”; Zhang, concerning whether a party must raise the s 9 immunity and whether the immunity applies to officers of a foreign state based on their status at the time of the alleged conduct, or as at the institution of proceedings, and whether further exceptions to immunity could be derived from jus cogens norms of international law; Australian International Islamic College Board Inc v Kingdom of Saudi Arabia [2014] 2 Qd R 1; [2013] QCA 129, concerning the construction of “scholarship” in s 11(b), and in particular whether payment to an educational institution for the education of children was a “scholarship”; Li v Zhou (2014) 87 NSWLR 20; [2014] NSWCA 176, concerning whether China’s accession and ratification of the Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment amounted to “submission” for the purpose of s 10; and Firebird Global Master Fund II Ltd v Republic of Nauru (2014) 89 NSWLR 477; [2014] NSWCA 360 which went on appeal to the High Court.

The Appellants placed reliance upon the judgment of Rares J (with whom Lander and Greenwood JJ generally agreed) in Garuda FCAFC. In that judgment, his Honour said (at [207]) of the exception to immunity in s 11 of the FSIA:

Rares J went on to use that purpose to justify a broad reading of the exception created by s 11, saying at [218] that:

The Appellants contended that this passage justified a similarly broad reading of the exception in s 14(3)(a). None of the decisions referred to in the above passage in terms refers to giving exceptions to the principle of immunity a “broad reading”; rather, their concerns were to ensure that the relevant exception was to be given some work to do consistent with the restrictive theory of immunity. It is preferable to adopt the observations of Spigelman CJ in Zhang that “[w]here, as here, an Australian statute applies to circumstances to which international law also applies, an Australian court must apply the local statute in accordance with its terms”, subject to all principles of statutory interpretation: at [125].

Contrary to the Appellants’ submission, I do not consider that the “presumption” associated with Shin Kobe Maru, namely that a superior court’s jurisdiction should be construed broadly, is applicable in this context. As has been observed, the statement made in that case “does not mean that the express words are to be given their broadest possible construction, regardless of all considerations of context, purpose or consequences”: P Herzfeld and T Prince, Interpretation (2nd ed., 2020, Lawbook Co) at [9.700]. The principle is, as the authors suggest, accurately formulated in PMT Partners Pty Ltd (in liq) v Australian National Parks & Wildlife Service (1995) 184 CLR 301 at 313; [1995] HCA 36 where it was said that “a provision conferring a power to be exercised judicially should be construed as liberally as its terms and context permit”.

It might also be observed that s 14(3)(a) does not bear the character of “a provision conferring a power to be exercised judicially”. For that reason, the Appellants’ reliance upon the observation in PT Bayan Resources TBK v BCBC Singapore Pte Ltd (2015) 258 CLR 1; [2015] HCA 36 at [29] that the “relevant general principle of statutory interpretation is that “a law of the Commonwealth is not to be interpreted as withdrawing or limiting a conferral of jurisdiction unless the implication appears clearly and unmistakably” misses the mark.

Furthermore, where the effect of s 14 is to qualify the general immunity in s 9, it is inapposite to say that the exceptions to immunity should be read broadly. Rather, the provisions of the FSIA – both the general immunity and the catalogue of exceptions – must be construed as a whole, purposively and in context.

One of the weaknesses of the Appellants’ argument is that it focussed almost exclusively on the text of s 14(3)(a) without paying sufficient or any real regard to the immediate context of that subsection or s 14 as a whole cf. the authorities referred to at [14] above. Section 14(3) is concerned with a variety of types of judicial proceedings which involve questions of property including potential claims in respect of property.

That focus on property is only reinforced by the terms of s 14(1) and (2). Sections 14(1), in particular, reflects an almost universal notion that disputes concerning immoveable property should and, for practical purposes, invariably must, be heard locally: see British South Africa Co v Companhia de Mocambique [1893] AC 602; Potter v Broken Hill Pty Company Ltd (1906) 3 CLR 479; [1906] HCA 88. The strength of that principle extends, by virtue of s 14(1) and (2) of the FSIA, to cases where a foreign State had or claimed or was given or bequeathed an interest in such property; see also in this context, s 33 of the FSIA.

The interconnection between immoveable and moveable property is reflected in the common treatment of those two topics in s 14 of the FSIA as well as in the ALRC Report, considered further below. There is also a common rationale. In the administration of an estate, trust proceedings, bankruptcy, insolvency and winding up proceedings, there will frequently be competing claims or asserted interests in property. Practicality and, ultimately, considerations of justice and equal treatment (subject to statutory priorities) dictate that such claims be resolved in one place at the one time. In [26] of his reasons extracted at [9] above, the primary judge gave some examples as to how a foreign State’s interest in property may need to be dealt with in a bankruptcy, winding up or other insolvency proceedings.

Further, as was observed in Re Rafidain Bank [1992] BCLC 301 at 304 in relation to s 6(3) of the State Immunity Act 1978 (UK), one of the statutory analogues to s 14(3) referred to in the ALRC Report and the text of which is extracted at [70] below, “the winding up of a company does not directly implead a foreign State which is simply a creditor”. As Sir Nicholas Browne-Wilkinson V-C went on to say:

The effect of s 6(3) of the State Immunity Act 1978 (UK) is reflected in Exception 6 to Rule 22 relating to jurisdictional immunity in the 16th edition of Dicey, Morris & Collins: on the Conflict of Laws (2022, Sweet & Maxwell) at [9E-055] as follows:

Returning to the FSIA, the purpose of s 14(3) and indeed the whole of s 14 emerges with clarity from the ALRC Report which forms a vital part of the context within which s 14(3) must be interpreted: see [18]-[22] above and [53]ff below. Contrary to the Appellants’ submissions, the significance of that Report extends far beyond the purpose of the Act expressed at a very high level of generality, namely what they described as being to “give effect to the so-called restrictive theory of foreign State immunity”.

As will be seen, reference to the ALRC Report makes plain that the legislative reforms recommended by it in partial implementation of a restrictive view of sovereign immunity were in no way intended to subject a foreign body corporate which the FSIA, by operation of s 22, treated as having the benefits of a foreign State’s immunity, to winding up proceedings in Australia. Moreover, as will be seen, the ALRC Report provides direct and clear guidance as to the purpose of what became s 14 of the FSIA.

The body corporate being referred to in s 14(3)(a) and which is not otherwise defined in the FSIA should be understood and interpreted as referring to a body corporate “in and of the Commonwealth”: Acts Interpretation Act 1901 (Cth) s 21(1)(b). On this basis, the expression “winding up of a body corporate” in s 14(3)(a) cannot refer to Garuda. In this context, it is as well to emphasise that a “separate entity in relation to a foreign State” is a term relevantly defined in s 3 of the FSIA as a body corporate or corporation sole (other than a body corporate or corporation sole that has been established by or under a law of Australia), who or that (a) is an agency or instrumentality of the foreign State; and (b) is not a department or organ of the executive government of the foreign State.

There is the added consideration that the reference to a “foreign State” in the chapeau to s 14(3) of the FSIA does not only apply to foreign bodies corporate which may be separate entities in relation to a foreign State such as Garuda. It applies, in terms, to the foreign State itself. By s 3(3) of the FSIA, that term is given the following extended definition:

Neither a foreign State nor a province, state, self-governing territory or other political subdivision (by whatever name known) of a foreign State nor a department or organ of the executive government of a foreign State is capable of being placed into bankruptcy or subjected to insolvency proceedings in an Australian court, as Mr Leopold SC, who appeared for Greylag Goose, accepted. It follows that the “proceeding” to which s 14(3) is referring cannot be a proceeding concerning the foreign State’s bankruptcy or insolvency. In short, as the primary judge put the matter succinctly, the foreign state is the subject and not the object of s 14(3)(a).

Another consequence of the Appellants’ argument is that, given that the head of a foreign State or of a political subdivision of a foreign State falls within the extended definition of a foreign State (see [46] above), such an individual could be the subject of bankruptcy proceedings in Australia. While I would not go so far as Sir Richard Scott VC in Banco Nacional de Cuba v Cosmos Trading Corp [2001] 1 BCLC 813 at 820 in a related context in describing this consequence as “a ludicrous one”, Mr Leopold was constrained to accept that it is a necessary consequence of the construction which the Appellants propound. As will be seen below, such a construction or consequence garners no support whatsoever from the ALRC Report or from commentaries on cognate provisions in other countries: see, for example, the commentary in Dicey, Morris & Collins noted at [42] above.

Although the Appellants contend that the construction of s 14 favoured by the primary judge (and with which I agree) works against the interests of the creditors of a separate entity of a foreign State, it is important not to overlook the fact that s 11(1) of the FSIA, the exception considered by the High Court in PT Garuda and Firebird, provides that a “foreign State is not immune in a proceeding in so far as the proceeding concerns a commercial transaction.”

A matter related to this last point, although not ultimately necessary to decide, was raised by way of Notice of Contention, namely that Parliament has legislated a specific form of execution against foreign States in Part IV of the FSIA, and allowing that to be circumvented by s 14(3)(a) on the basis that it would permit the winding up of Garuda would undermine that purpose. As the Respondent put it:

The foregoing analysis as well as the primary judge’s construction of s 14(3)(a) of the FSIA, rejecting the Appellants’ proposed construction, is powerfully reinforced by consideration of the ALRC Report to which attention is now turned.

Consideration of the ALRC Report also supplies a compelling answer to an additional argument which the Appellants sought to advance for the first time on appeal, namely that, if they were wrong in relation to proper construction of the phrase “winding up of a body corporate” in s 14(3)(a) with the consequence that it did not extend to a foreign body corporate which was “a separate entity in relation to a foreign State”, the reference to “insolvency” in s 14(3)(a) was not so qualified and was “at large” with the consequence that their application to wind up Garuda on the basis of its deemed insolvency under the Corporations Act (see [8] above) brought the proceedings within the exception to immunity.

As with the Insurance Contracts Act and the Admiralty Act, the origins of the FSIA can be tracked directly to the work of the Australian Law Reform Commission and, in the case of the FSIA, the ALRC Report. None of the Insurance Contracts Act, the Admiralty Act nor the FSIA in any material sense replaced previous statutory regimes. Unlike the other two statutes that emerged from the statutory maternity ward or laboratory that was the Australian Law Reform Commission of the 1980s, however, the FSIA’s conception coincided with a number of similar exercises in law reform that were taking place or had recently taken place throughout the world as globalisation grew and governmental power came increasingly to be devolved through state instrumentalities and state owned corporations.

Such international activity was reflected in the terms of reference which ultimately resulted in the ALRC Report. These were as follows:

The “work of the United Nations International Law Commission on the ‘Jurisdictional immunities of States and their property’” was a reference to that body’s report on the work of its Thirty-fifth session, 3 May - 22 July 1983, reproduced in 1983 Yearbook of the International Law Commission vol II (2) at pp.17-36.

The reference to “legislation recently enacted, or under consideration, in other countries on the subject of foreign State immunity” was a reference to at least the State Immunity Act 1978 (UK), the State Immunity Act 1979 (Singapore); the State Immunity Ordinance 1981 (Pakistan), the Foreign Sovereign Immunity Act 1981 (South Africa) and the State Immunity Act 1982 (Canada).

Professor Garnett has dated the origin of calls for a serious reappraisal of foreign state immunity to Professor Lauterpacht’s article ‘The Problem of Jurisdictional Immunities of Foreign States’ published in (1951) 28 British Yearbook of International Law 220: see Garnett at 175.

Professor Shearer identified as important landmarks on the way to legislative reform the “Tate letter” of 1952, signalling a shift in United States State Department’s approach to requests for sovereign immunity by foreign states, the decision of Lord Denning in Nizam of Hyderabad at 422, the 1972 European Convention on State Immunity and Additional Protocol, the Foreign Sovereign Immunities Act 1976 (United States) and the decisions of the Privy Council and Court of Appeal for England and Wales in The Philippine Admiral (Owners) v Wallem Shipping (Hong Kong) Ltd [1977] AC 373 (The Philippine Admiral) and Trendtex Trading Corporation v Central Bank of Nigeria [1977] QB 529 (Trendtex) respectively: I A Shearer, Starke’s International Law (11th ed, 1994, Butterworths) at 196-199. The significance of the Philippine Admiral and Trendtex was noted by Nettle and Gordon JJ in Firebird at [169].

A similar but more detailed chronological overview may be found in Brownlie 3rd ed at 326-339. But perhaps the most detailed review of the evolution and at times divergence in approaches of various states to the doctrine of sovereign immunity is to be found in Chapter 2 of the ALRC Report itself.

The nature and desirable extent of the reach of the doctrine of sovereign immunity was (and remains) highly contestable as a matter of both theory and policy, some commentators considering it outmoded, confused, fragmented and anathema to the rule of law, and making the point that there are “no clear customary international law rules of foreign state immunity”: Garnett at 182 and passim.

The Australian Law Reform Commission in its Report adopted a model of a general principle of immunity with enumerated exceptions designed so as to reflect “not a single governmental/commercial dichotomy but rather the full range of considerations outlined in chapter 3” of the Report: at [65]. Although rejecting reciprocity as a criterion for identifying exceptions or derogations from a starting point of immunity, the ALRC Report noted the importance of adopting a “careful and balanced position”: at [38].

One type of matter identified in Chapter 3 of the ALRC Report as appropriate for derogation from immunity concerned “title to immoveable property within the jurisdiction, the administration of local trust funds or the law relating to local companies” on the basis that “the local courts may be the only appropriate local forum”: at [42] (emphasis added). As shall be seen, this observation was linked to more detailed discussion later in the ALRC Report which in turn led to what became s 14(3) of the FSIA.

The only divergence (and an immaterial one for present purposes) between the ultimate text of s 14(3) of the FSIA and the Foreign States Immunities Bill which formed Appendix A to the ALRC Report was that, whereas the former employed the expression “in a proceeding in so far as the proceeding concerns”, the latter used the expression “in a proceeding concerning”. An identical and similarly immaterial change was made in s 14(1) and (2) of the FSIA to what had been provided in the corresponding clauses of the Bill and indeed in other exceptions to the general immunity supplied by s 9: see PT Garuda at [11] and Firebird at [177] where it was observed that the expression “in so far as” indicated that the exception is capable of application to a proceeding which is only partly concerned with the subject matter of the particular exception.

The ALRC addressed what became s 14 of the FSIA at [116]-[117] under the heading “Ownership, Possession and Use of Property”. Those paragraphs, omitting footnotes, were in the following terms:

In support of the second sentence of [117], reference was made to para 92 of the International Law Commission Report (ILC Report) which stated that:

The text of article 15 to which reference was made in this passage was as follows:

The “overseas legislation” which was identified in a footnote in support of the penultimate sentence of [117] of the ALRC Report was the European Convention on State Immunity, art 14; the State Immunity Act 1978 (UK) s 6(3); the State Immunity Act 1979 (Singapore) s 8(3); and the State Immunity Ordinance 1981 (Pakistan) s 7(3). It was also noted that “The International Law Commission has provisionally adopted an article containing a provision to similar effect: ILC, 35th Report, para 95, art 15(1)(c)-(e).”

Given that the final sentence of [117] of the ALRC Report made plain that the legislation it proposed should achieve the same outcomes as the “overseas legislation” that was referred to, it is relevant to set out the respective statutory provisions, acknowledging that, whilst they are not identical, they are all directed to the same functional end to which the ALRC Report indicated its proposed s 14(3) was itself directed.

Article 14 of the European Convention on State Immunity (1972), provides, consistently with the ILC Report:

Section 6(3) of the State Immunity Act 1978 (UK) provides:

It is tolerably clear from these statutory extracts and draft Article 15 of the International Law Commission (also extracted above) that all were directed towards a circumstance where a State had or claimed an interest in property that fell to be administered in a local court, whether the form of the administration was the administration of a deceased estate or a trust, the judicial administration of the affairs of a person of unsound mind in the exercise of a local’s court’s protective jurisdiction, or the orderly winding up and administration of an individual or a corporation’s affairs.

That a State’s interest or claimed interest in property was the focal point of these provisions is confirmed by the fact that each of the provisions noted in [67] above followed materially identical provisions in the same sections of each enactment to the effect that:

The Appellants did not engage in any meaningful way with [116]-[117] of the ALRC Report.

None of the relevant statutory provisions referred to in either [116] or [117] of the ALRC Report lends any support to the submission, as advanced by the Appellants, that a corporate emanation of a foreign state (or indeed a head of a foreign state) could be made the subject of winding up, insolvency or bankruptcy proceedings in Australia. Indeed, in Chapter 3 of the ALRC Report, referred to at [62] above, the exception to immunity ultimately formulated in what became s 14(3) of the FSIA concerned “the law relating to local companies” and not foreign companies, with the local relationship of the company in insolvency and its administration in that financial state warranting an exception to the general immunity. In this context, insofar as a “separate entity” is a body corporate, it is “a body corporate or corporation sole (other than a body corporate or corporation sole that has been established by or under a law of Australia)”: see the definition of “separate entity” in s 3 and [45] above.

Had what would have been a quite radical legislative initiative been recommended and intended, namely that a corporate or personal emanation of a foreign state be rendered susceptible to winding up, insolvency or bankrupt proceedings, one would have expected the thorough and scholarly ALRC Report of Professor Crawford to have gone into the merits of such a legislative initiative in considerable detail. There is no hint in the ALRC Report that such a reform was intended or recommended, and [116] and [117] of the ALRC Report in particular lend no support to that view.

In that context, part of the contextual significance of the ALRC Report lies in what it does not say.

The Appellants’ additional argument noted in [52] above drawing on the word “insolvency” has the same limitation as the contentions relating to “the winding up of a body corporate” in that it focuses on one word, “insolvency”, without taking into account the broader context of s 14(3) or the important context supplied by the ALRC’s Report. The observations made in [74]-[76] above equally apply to this argument.

For all the above reasons, leave to appeal in this important and skilfully argued case should be granted but the appeal dismissed with costs.

MEAGHER JA: I agree with the Chief Justice.

KIRK JA: I agree with Bell CJ.