PT Garuda Indonesia v ACCC [Australia, High Court.]

• Jurisdiction: Australia Federal only
• Court: High Court
• Judge: French CJ,Gummow,Hayne,Heydon,Crennan JJ
• Judgment Date: 07 September 2012
• Date: 07 September 2012

([2012] HCA 33)

Australia, High Court.

(French CJ; Gummow, Hayne, Heydon and Crennan JJ)

PT Garuda Indonesia Ltd

and

Australian Competition and Consumer Commission1

State immunity Jurisdictional immunity Exceptions to immunity Proceedings concerning commercial transaction Antitrust law and anticompetitive behaviour Proceedings instituted by regulator Public and private law distinction Agreements or understandings as commercial transactions The law of Australia

Summary:2The facts:The respondent, the Australian Competition and Consumer Commission (ACCC), commenced proceedings in the Federal Court of Australia against the appellant, PT Garuda Indonesia Ltd (Garuda), for alleged contraventions of Section 45 of the Trade Practices Act 1974 (Cth) (the TPA). The ACCC contended that Garuda had engaged in anticompetitive arrangements or understandings with other airlines in relation to the carriage of commercial air freight to and from Australia. The ACCC sought injunctive relief under Section 80 of the TPA, declaratory relief under Section 21 of the Federal Court of Australia Act 1976 (Cth) and pecuniary penalties under Section 76 of the TPA.

Garuda was a company incorporated in Indonesia with 95.5 per cent of its shares owned by the Republic of Indonesia and the remaining 4.5 per cent of its shares owned by Indonesian State-controlled corporations. Garuda claimed immunity from jurisdiction pursuant to the Foreign States Immunities Act 1985 (Cth) (the FSI Act). Section 11(1) of the FSI Act provided that: a foreign state is not immune in a proceeding in so far as the proceeding concerns a commercial transaction. Garuda argued that this exception to immunity did not apply, because the ACCC was a public regulatory authority, not a party to a contract seeking to exercise a private law right in respect of such a contract.

Garuda's claim for immunity from jurisdiction was dismissed at first instance in the Federal Court of Australia. Garuda was unsuccessful on appeal

to the Full Court of the Federal Court of Australia (152 ILR 365). Garuda was granted special leave to appeal to the High Court of Australia on 7 October 2011

Held:The appeal was dismissed.

(1) (per French CJ, Gummow, Hayne and Crennan JJ; Heydon J concurring): The exception to immunity in Section 11(1) of the FSI Act was not restricted by a perceived dichotomy between public and private law. The proceeding brought by the ACCC, though regulatory in nature, nevertheless concerned a commercial transaction. The exception to immunity was not limited to circumstances where one party to a contract seeks to enforce its private contractual rights against another party (paras. 413, 589, 68 and 74).

(2) (per French CJ, Gummow, Hayne and Crennan JJ; Heydon J concurring): It was not necessary to prove the existence of a contractual relationship for there to be a commercial transaction within the meaning of the FSI Act. The arrangements and understandings in the instant case were of a commercial, trading and business character and so fell within the definition of commercial transaction (paras. 42, 61 and 735).

(3) (per Heydon J): Proceedings brought under Section 45(2)(b)(ii) of the TPA, which required corporations not to give effect to provisions in contracts which had the purpose of lessening competition, or which were likely to have that effect, concerned an underlying contractual relationship which related to the supply of services. Therefore, a case brought under Section 45(2)(b)(ii) concerned a commercial transaction which would also give rise to the exception to immunity under Section 11 of the FSI Act (paras. 513 and 72).

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

[682]French CJ, Gummow, Hayne AND Crennan JJ

1. The appellant, PT Garuda Indonesia Ltd (Garuda), argued this appeal on the uncontested footing that it is a foreign corporation within the meaning of s 51(xx) of the Constitution. The controversy turns on its character as an emanation of the Republic of Indonesia.

2. Ninety-five-point-five per cent of the issued shares in Garuda are owned directly by the Republic of Indonesia, the minority shareholding is held by government-controlled corporations associated with Indonesian airports, and at the relevant times four of the five members of its Board of Commissioners were senior officials of the Indonesian Government. That state of affairs is said to attract Pt II of the Foreign States Immunities Act 1985 (Cth) (the Act) and thereby to render Garuda immune from the exercise of jurisdiction of the Federal Court of Australia in a proceeding for contravention of Pt IV of the Trade Practices Act 1974 (Cth) (the TPA)1 instituted against it in 2009 by the respondent, Australian Competition and Consumer Commission (the ACCC).

3. A judge of the Federal Court (Jacobson J) dismissed a motion by Garuda that the proceeding be stayed or dismissed.2 The Full Court (Lander, Greenwood and Rares JJ) granted Garuda leave to appeal but dismissed the appeal.3

4. For the reasons which follow the appeal by Garuda to this court should be dismissed.

The Common Law

5. In the Restatement Third of the Foreign Relations Law of the United States, adopted in 1986,4 it is said with reference to the rule of absolute immunity and the development of a more restrictive view of immunity:

6. To this it may be added that in Playa Larga (Owners of cargo lately laden on board) v. I Congreso del Partido (Owners)ELRUNK5 Lord Wilberforce observed that the restrictive theory had developed from the willingness of states to enter into commercial and other private law transactions and added:

The Scheme of the Act

7. The Act was preceded in 1984 by a comprehensive report6 (the report) by the Law Reform Commission (the LRC).7 In Ch 2 of the report, the LRC traced the development of common law doctrine from the rule of absolute immunity to a more restrictive view of immunity. The report followed the enactment of legislation in the United States and the United Kingdom and preceded that in Canada, to which reference will be made below. The Outline contained in the explanatory notes for the proposed legislation, which is contained in App. A to the report, identified the purpose of the proposed Australian legislation as being to reflect the more restrictive view of the common law immunity which had been taken in other countries and adopted in legislation.

8. Part II of the Act (ss 922) is headed Immunity from jurisdiction. These provisions do not affect any immunity or privilege conferred by or under other federal laws including the Consular Privileges and Immunities Act 1972 (Cth), the Defence (Visiting Forces) Act 1963 (Cth), and the Diplomatic Privileges and Immunities Act 1967 (Cth). This is the effect of s 6 of the Act. However, the general provision in s 9 is exhaustive of the common law and indicates that statute provides the sole basis for foreign state immunity in Australian courts.8 This is an important consideration for Garuda in this litigation. It is only by bringing itself within the operation of the Act that Garuda can establish a claim to immunity.

9. Section 9 provides:

10. What is a foreign State within the meaning of s 9 and by what means is it to be identified? The term foreign State is defined in s 3(1) so as to identify an independent sovereign state and a separate territory (whether or not it is self-governing) that is not part of an

independent sovereign state. Section 40 gives effect to what has been called the one voice principle respecting foreign state recognition.9 A certificate under s 40 by the responsible minister that a specified country is, or was on a specified day, a foreign State, or that a specified territory is or is not, or was or was not, part of a foreign state, is admissible as evidence of the facts and matters stated in it; moreover, the certificate is conclusive of those facts and matters.

11. The conferral of immunity by s 9 is expressly subject to other provisions made by the Act. The critical provision is s 11(1):

The phrase in so far as indicates that, as to part, the proceeding may not concern a commercial transaction. The present appeal, however, has been argued on an all or nothing basis.

12. At common law, a question would be presented whether Garuda could be identified with Indonesia as a foreign State for the purposes of s 11(1).10 However, by force of the specific provision made by s 22, s 11(1) applies to a separate entity of a foreign State. The term separate entity is relevantly defined in s 3(1) as a body corporate, not established under Australian law, which is an agency or instrumentality of a foreign state but is not a department or organ of the executive government thereof. No provision is made by s 40 for the issue by the minister of a certificate respecting status as a separate entity.

13. A claim to immunity from jurisdiction will be a matter arising under a federal law, within the meaning of s 76(ii) of the Constitution, and thus attract the exercise of federal jurisdiction. The subject matter of Pt II of the Act itself relates to the conduct of foreign relations and so to external affairs within the meaning of s 51(xxix) of the Constitution. There appears to be no dispute respecting these basic propositions.

Immunity from Jurisdiction

14. However, something more should be said immediately concerning the term jurisdiction, to identify that from which Garuda claims immunity under the Act. Jurisdiction is a generic term used in a

variety of senses, some of which relate to matters of geography, some to persons and procedures, and others to constitutional and judicial structures and powers such as those sourced in Ch III of the Constitution.

15. It was said in the joint reasons in Lipohar v. RUNKUNKUNKUNKUNKUNK11 that (at [79]):

16. Thus, a court may be seised of jurisdiction in the sense of the subject matter of a particular proceeding, whether it be an action in contract or tort at common law or, as here, for contravention of a statutory...