Firebird Global Master Fund II Ltd v Republic of Nauru and Another

• Jurisdiction: Australia Federal only
• Judge: French CJ,Kiefel,Gageler,Nettle,Gordon JJ
• Judgment Date: 02 December 2015
• Neutral Citation: [2015] HCA 43
• Court: High Court
• Date: 02 December 2015

([2015] HCA 43)

Australia, High Court.

(French CJ; Kiefel, Gageler, Nettle and Gordon JJ)

Firebird Global Master Fund II Ltd

and

Republic of Nauru and Another1

State immunity — Jurisdictional immunity — Proceedings for registration of foreign judgment — Commercial transaction to guarantee bonds — Whether immunity exception for proceedings concerning “commercial transactions” applicable — Foreign States Immunities Act 1985 (Cth), Sections 9 and 11(1)

State immunity — Immunity from execution — Whether property “in use” or “set aside” for non-commercial purpose — Whether immunity exception for “commercial property” applicable — Whether bank accounts immune from execution — Foreign States Immunities Act 1985 (Cth), Sections 30 and 32(1)

Relationship of international law and municipal law — International law on State immunity — Customary international law — Australia's obligations under international law — Foreign States Immunities Act 1985 (Cth) — Interpretation — Whether immunity extending to commercial transactions — Whether Immunities Act inconsistent with Foreign Judgments Act 1991 (Cth) — The law of Australia

Summary:2The facts:—Firebird Global Master Fund II Ltd (“the appellant”), held bonds issued by the Republic of Nauru Finance Corporation, a statutory corporation established under Nauruan law by the Republic of Nauru (“the respondent”). The appellant obtained judgment in Japan against the respondent as guarantor which was then registered in Australia under the Foreign Judgments Act 1991 (Cth) (“the Foreign Judgments Act”).3

Garnishee orders were also made against Nauruan bank accounts in Australia. The appellant did not first serve initiating process on the respondent. The respondent sought to set aside the order for registration and garnishee orders on the grounds that it was immune from the jurisdiction of Australian courts and from execution against its property.

Under Section 6(7) of the Foreign Judgments Act, a registered judgment had the same force and effect as a judgment of the registering court. A party could set aside registration on various grounds, including where a judgment debtor was entitled to immunity (Section 7(4)(c)). Under the Foreign States Immunities Act 1985 (Cth) (“the Immunities Act”), foreign States were immune from the jurisdiction of Australian courts in a proceeding except as provided under Section 9 of that Act. They were not immune if the proceeding concerned a “commercial transaction” (Section 11(1)), which meant a commercial, trading, business, professional or industrial or like transaction (Section 11(3)).4 Furthermore, a foreign State's property was not subject to any process or order for the satisfaction or enforcement of a judgment except as provided under Section 30 of the Immunities Act.5 This did not however apply to commercial property, which was property set aside or in use substantially for commercial purposes pursuant to Section 32.6 In the present case, a certificate had been issued under Section 417 that the bank accounts in Australia were held as cash reserves of the Nauruan Government to provide for future government services.

The Court of Appeal of the Supreme Court of New South Wales upheld the primary judge's finding that the respondent was entitled to immunity, finding that the exception in case of a commercial transaction did not apply to the proceedings for registration under the Foreign Judgments Act. It ordered that the registration of the foreign judgment be set aside. It also held that the funds in all of the bank accounts were immune from execution under the garnishee order. The appellant appealed.

Held:—The order concerning the registration of the judgment was to be set aside. The appeal was otherwise dismissed.

(1) The proceedings for registration of the foreign judgment under the Foreign Judgments Act were proceedings to which Section 9 of the Immunities Act applied. The respondent was immune from the jurisdiction of Australian courts, subject to the exceptions under the Immunities Act. Section 9 of the Immunities Act had to be construed, as far as its language permitted, in conformity with international law, especially given that the statute implemented or codified Australia's obligations under international law (paras. 44, 128, 131 and 185).

(2) The respondent was not immune from the jurisdiction of Australian courts. Its immunity was lost because the foreign judgment was based on the guarantee of bonds, which was a commercial transaction within the meaning of Section 11(3) of the Immunities Act. The purpose of Section 11(1) of the Immunities Act was to give effect to the restriction on the general immunity from jurisdiction. The view which prevailed in the international community at the time this legislation was drafted was that the immunity should not be extended to cover commercial transactions. This construction was consistent with the approach taken by the courts of countries which were signatories to the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters, 1968 (paras. 54, 58, 66, 71, 79, 131 and 202).

(3) The respondent was immune from execution against its property, which was represented by the Australian bank account deposits, because the funds were used or set aside for a non-commercial purpose, namely for the exercise of governmental functions (paras. 115, 124–7, 131 and 226–55).

(4) The Immunities Act and the Foreign Judgments Act were not inconsistent but could operate harmoniously. The earlier statute was not impliedly repealed (paras. 87–8, 131 and 210).

(5) The New South Wales Supreme Court had jurisdiction to register the foreign judgment. However, this was liable to be set aside on the respondent's assertion of immunity. Part III of the Immunities Act did not first require service of the summons prior to the registration order being made under the Foreign Judgments Act (paras. 96, 129 and 215).

Per Gageler J (dissenting in part): A construction which conformed to customary international law as explained in the Jurisdictional Immunities case8 was to be preferred to a construction which would place Australia in breach of customary international law. The New South Wales Supreme Court had acted inconsistently with the procedural immunity extended to foreign States under Section 27(1) of the Immunities Act by making an ex parte order for registration. This order ought to have been set aside because the application for that order had not first been served on the respondent (paras. 132, 134 and 147–8).

The following is the text of the judgments delivered in the Court:

French CJ AND Kiefel J

1. The appellant, Firebird Global Master Fund II Ltd (“Firebird”), is the holder of bonds which were issued by the Republic of Nauru Finance Corporation (known as “RONFIN”), a statutory corporation

established under the Republic of Nauru Finance Corporation Act 1972 (Nauru). RONFIN is no longer in existence.1 Firebird obtained judgment in the Tokyo District Court in the sum of ¥1,300 million together with interest and costs2 against the first respondent, the Republic of Nauru (“Nauru”), as guarantor for the bonds (“the foreign judgment”).

2. Firebird subsequently obtained an order from the Supreme Court of New South Wales that the foreign judgment be registered under Pt 2 of the Foreign Judgments Act 1991 (Cth) (“the Foreign Judgments Act”). The summons for the order for registration was not served on Nauru. The order for registration stated the period within which Nauru could apply to have the registration of the foreign judgment set aside. Further orders were subsequently made granting leave to serve the notice of registration outside Australia and on the Secretary for Justice of the Republic of Nauru.

3. There was some delay in effecting service in Nauru. After the time within which Nauru was permitted to file an application to set the registration of the foreign judgment aside had expired, Firebird obtained a garnishee order against the Australian bank in which the accounts of Nauru were kept. Nauru filed motions seeking to set aside the registration of the foreign judgment and the garnishee order. The question whether Nauru could apply to set aside the registration order notwithstanding that the time for doing so had passed no longer remains in issue.

4. Principal amongst the issues raised by Nauru on those motions was its entitlement under the Foreign States Immunities Act 1985 (Cth) (“the Immunities Act”) to foreign State immunity from the jurisdiction of Australian courts and from execution against its property. Those issues and the others raised on this appeal involve the interaction of the Immunities Act with the Foreign Judgments Act.

The Immunities Act

5. Prior to the passing of the Immunities Act, the entitlement of foreign States to immunity from the jurisdiction of the courts of Australia was governed by the common law. In 19843 a report was prepared by the Australian Law Reform Commission (“the ALRC”) following the reference to it of the subject of the law in Australia of

foreign State immunity.4 At the commencement of the summary of its report,5 the ALRC observed there had been a progressive reduction in the scope of foreign State immunity in other jurisdictions. It recommended that the Commonwealth legislate on the subject, as other countries had done. The Immunities Act was based upon draft legislation prepared by the ALRC. It is now the sole basis for foreign State immunity in Australian courts.6

6. The ALRC explained7 that the central argument behind the shift away from the absolute immunity of a foreign State from the jurisdiction of local courts was that when a foreign State acts in a “commercial” matter within the ordinary jurisdiction of local courts, it should be subject to that jurisdiction.8 The ALRC recommended an exception to the general immunity of a foreign State in relation to “commercial transactions” and that the term should be defined...