Foreign states in Australian courts.

• Jurisdiction: Australia
• Author: Garnett, Richard
• Date: 01 December 2005

[The increase in transnational litigation before Australian courts has also seen a rise in the number of cases involving foreign states. While a number of doctrines currently exist in Australian law that protect the interests of foreign states from adjudication, their combined effect has been to frustrate the vindication of private rights. Principles of personal jurisdiction and appropriate forum, where private and public interests may be weighed against each other in the decision to adjudicate, offer a more balanced and equitable solution.]

CONTENTS

 I Introduction II Background: The Doctrines of Abstention III Personal Jurisdiction and Appropriate Forum IV The Abstention Doctrines in Detail A Foreign State Immunity

B The Act of State Doctrine C Non-Justiciability V Conclusion.

I INTRODUCTION

With the increased volume of transnational litigation before Australian courts, there is likely to be greater involvement of, and impact upon, the interests of foreign states. Such interests may be implicated in various ways before domestic courts: the case may involve the law of that country, an act of its executive government or an action by or against the foreign state. More indirectly, an Australian court may be asked to pronounce upon a treaty, or an agreement to which that foreign state is a signatory, in litigation between wholly private parties. Australian courts have recognised and developed a range of doctrines, the broad purpose of which is to protect the interests of foreign states from adjudication by the courts of other countries. The object of this article is to assess the utility of, and justification for, such doctrines.

II BACKGROUND: THE DOCTRINES OF ABSTENTION

The first doctrine of relevance to foreign states is 'foreign state immunity' or 'sovereign immunity', whereby a state is immune from the jurisdiction of an Australian court when sued as a defendant. As will be noted more fully below, the scope of this doctrine has narrowed in recent years from a position of 'absolute' immunity, where a foreign state could never be impleaded before an Australian court, to the current 'restrictive' view, whereby immunity can only be generally claimed where the foreign state is engaged in sovereign, as opposed to commercial, activity. (1) This doctrine exists as a principle of public international law and has been codified in the Foreign States Immunities Act 1985 (Cth) ('FSIA'). While there have been few Australian cases decided so far involving immunity, the number is likely to grow in the future, possibly raising some difficult problems of interpretation--in particular, the 'commercial transaction' exception to immunity.

Another principle created by common law courts to protect foreign state interests is the 'act of state' doctrine. Pursuant to this doctrine, an Australian court may not adjudicate upon the acts of a foreign state within its own territory. (2) While this doctrine sounds simple, its precise content and field of application remains unclear both in Australia and in other common law countries. In particular, there is a serious question as to whether the doctrine is required at all, given that, unlike state immunity, it is not found in civil law countries, (3) nor is it a principle of public international law.

Yet another doctrine that may have the effect of shielding the acts of foreign states from adjudication in an Australian court is that known as 'non-justiciability'. Pursuant to this principle, an Australian court may not review the acts or transactions of foreign states where there are no 'manageable judicial standards' to resolve the issues, or where adjudication would cause embarrassment to the Australian executive. (4) The content and rationale of this doctrine is also highly controversial, with the focus not being simply to protect the interests of the foreign state but also the executive of the forum state in conducting foreign policy. Again, this doctrine is unknown in civil law countries and in public international law.

Hence, the picture presented by this series of doctrines of 'abstention' in Australian law is one of great deference to foreign state interests. A key issue to consider is whether it is now time for Australian courts to treat foreign states more akin to fellow players in the litigation process rather than a unique species worthy of exemption from ordinary adjudication. As transnational litigation increases in volume and intensity, the influence of concepts such as territorial sovereignty and state interests should proportionately diminish to allow the full vindication of private rights and the free flow of international trade and commerce. Where cross-border litigation was rare and exceptional, little harm was done to private litigants by the preservation of unique protections for states--but these are harder to justify today. Arguably, then, doctrines that continue to confer special treatment upon states must be closely scrutinised and clearly justified to be worthy of retention.

III PERSONAL JURISDICTION AND APPROPRIATE FORUM

Principles of personal jurisdiction and appropriate forum applied by Australian courts can also, in a sense, be seen as a form of 'protection from adjudication' for foreign states. Yet there is a critical difference between these principles and the doctrines of abstention mentioned above. In the case of personal jurisdiction and appropriate forum, the same rules, by and large, apply to all foreign defendants before Australian courts.

Service of process on a foreign state must be effected through the diplomatic channel--that is, by sending the writ to the Australian Department of Foreign Affairs and Trade for transmission to the foreign state: unless the state has agreed to accept an alternative method of service. (6) Once this has been done, the plaintiff, to secure jurisdiction, must show that a basis for service outside the jurisdiction under the relevant Australian state, territory or federal rules of court is established. This is the same procedure employed to authorise service upon any defendant located outside Australia. A basis for service out will normally exist where there is a connection between the cause of action and the Australian forum--such as, in a contract action, that the contract was made or breached there, governed by the law of the forum, or involved a submission to the jurisdiction of its courts; (7) or, in the case of torts, that the place of the tort, or the place of damage arising from the tort, was the forum. (8)

In addition, the Australian court must be persuaded by the claimant that it is not a 'clearly inappropriate forum' before it will accept jurisdiction. (9) Such a test is a discretionary principle that allows the court to consider a wide range of factors before jurisdiction will be exercised, such as the location of the evidence and the parties, the applicable law, the sensitivity of the subject matter to the foreign state, and whether the plaintiff will obtain justice in the courts of the foreign state. (10) There is therefore significant scope for the interests of foreign states to be considered in the decision whether or not to adjudicate but, instead of such interests being determinative, they are weighed in the balance against other factors. (11)

A major question to be considered in this article is whether it is preferable for Australian courts to rely simply and exclusively upon principles of personal jurisdiction and appropriate forum in actions involving foreign states, in place of the other doctrines of abstention. A proper determination of this issue can, however, only be made after a more detailed analysis of these doctrines in foreign state cases.

IV THE ABSTENTION DOCTRINES IN DETAIL

A Foreign State Immunity

As noted above, foreign state immunity in Australia is now governed almost exclusively by the FSIA. The FSIA creates a rule of immunity in any case where a 'foreign State' (that is, the executive government and departments of the state) (12) or 'separate entity' of such state (that is, an 'agency or instrumentality' of the state, such as a wholly-owned trading corporation) (13) is sued in an Australian court. The purpose of the FSIA is broadly to give effect to the public international law principle of restrictive state immunity, whereby foreign states are entitled to retain their immunity in the case of sovereign acts but not private or commercial conduct. (14) Consequently, the immunity rule is subject to a list of exceptions, such as commercial transactions, (15) employment contracts (16) (but not those involving diplomatic or consular officers), (17) personal injury or property damage (18) and intellectual property rights. (19) Immunity can also be waived by a state agreeing to submit to the jurisdiction of the forum, either by prior agreement or by entering an appearance to contest the merits. (20)

The FSIA also requires, in some cases, a territorial connection with Australia before immunity will be removed--for example, the employment contract must have been made or performed in Australia (21) or the personal injury or property damage must have been caused by an act or omission occurring in this country. (22) Such an approach reveals an overlap with the principles of personal jurisdiction referred to earlier. For example, in the case of contracts, the bases for service outside the jurisdiction under the rules of court of Australian states and territories are that the contract was made or breached in the forum, governed by local law, or contains a submission to the jurisdiction of the forum. (23) Such a provision largely renders unnecessary the required territorial links in the employment contract exception and the waiver of immunity provision. In the case of torts, the bases for service out of the jurisdiction are that the tort was committed in the forum or damage was suffered there. (24) While the 'damage' ground of personal jurisdiction is more liberal than the relevant...