NETTLE AND GORDON JJ. This is an appeal from a judgment of the Court of Appeal of the Supreme Court of New South Wales (Bathurst CJ, Beazley P and Basten JA). It concerns whether the first respondent, the Republic of Nauru ("Nauru"), is immune under the Foreign States Immunities Act 1985 (Cth) ("the Immunities Act") from the registration and execution in Australia under the Foreign Judgments Act 1991 (Cth) of a judgment of the Tokyo District Court for moneys found to be due to the appellant, Firebird Global Master Fund II Ltd ("Firebird"), under a guarantee by Nauru of the payment of Japanese bearer bonds issued by the Republic of Nauru Finance Corporation ("RONFIN").
The Court of Appeal held that Nauru is immune from the registration and execution of the judgment. It also held that Firebird was required to serve the initiating summons seeking orders for registration and enforcement of the Japanese judgment on Nauru in accordance with the Immunities Act.
The questions to which the appeal gives rise are:
(1) Does the exception to foreign state immunity for commercial transactions in s 11(1) of the Immunities Act apply to Firebird's application under the Foreign Judgments Act for registration of the Tokyo District Court judgment?
(2) Can the Tokyo District Court judgment be enforced against Nauru without Firebird having first served the initiating process on Nauru in accordance with Pt III of the Immunities Act?
(3) Does the exception to foreign state immunity for execution against commercial property in s 32 of the Immunities Act apply to the bank account deposits against which Firebird seeks to execute the judgment?
For the reasons which follow, those questions should be answered:
(1) Yes.
(2) Yes.
(3) No.
The facts
Between 1988 and 1989, RONFIN borrowed a total of ¥9 billion in the form of Japanese bearer bonds. Payment of the bonds was guaranteed by Nauru. RONFIN defaulted on its repayment obligations and Nauru refused to meet its obligations as guarantor.
Firebird held ¥6.5 billion of the Japanese bearer bonds and brought proceedings in the Tokyo District Court against RONFIN and Nauru for payment of the amount due. Nauru unsuccessfully asserted sovereign immunity in the Tokyo proceedings and raised other defences which were only partially successful. Ultimately, in October 2011, Firebird obtained judgment from the Tokyo District Court against Nauru for ¥1.3 billion plus interest ("the Japanese judgment").
As it does not have a central bank, Nauru holds a large proportion of its money in Australia in accounts with the second respondent, Westpac Banking Corporation ("Westpac"). For this reason, Firebird sought to enforce the Japanese judgment in the Supreme Court of New South Wales by registering the Japanese judgment under the Foreign Judgments Act.
Part 53 of the Uniform Civil Procedure Rules 2005 (NSW) ("the UCPR") provides that an application for registration of a judgment under the Foreign Judgments Act is to be made by summons naming the judgment debtor as defendant. The application may proceed without service of the summons on the defendant. The Supreme Court may make a registration order on the papers and only after that has been made must notice of registration be served on the defendant. The defendant then has a set time in which to apply to set aside the order for registration and the judgment cannot be enforced until that time has expired without the order for registration having been set aside.
In accordance with that procedure, Firebird filed a summons in May 2012 and an order for registration was made by a Deputy Registrar of the Supreme Court of New South Wales in June 2012. In March 2013, a judge of the Supreme Court ordered that the order for registration could be served on the Secretary for Justice of Nauru. The order for registration was so served on 18 August 2014 and, after expiration of the time limit for an application to be made to set aside the order for registration, Firebird obtained a garnishee order against Westpac to attach to the accounts of Nauru for the amount due under the judgment.
Nauru then applied to set aside the order for registration and garnishee order under s 38 of the Immunities Act on the basis that it was entitled to immunity. The judge at first instance (Young AJA) set aside the order for registration and garnishee order on the basis that Nauru enjoyed immunity from suit and the service requirements of the Immunities Act had not been complied with when the registration order was made.
Firebird appealed to the Court of Appeal, but the appeal was dismissed. The Court of Appeal held that Nauru was entitled to immunity from suit and therefore to have the order for registration and garnishee order set aside under s 38 of the Immunities Act.
By special leave granted on 13 February 2015, Firebird now appeals to this Court.
Foreign Judgments Act
Part 2 of the Foreign Judgments Act provides for the registration and enforcement in Australia of judgments of foreign courts specified in the Foreign Judgments Regulations 1992 (Cth). The Regulations apply Pt 2 of the Foreign Judgments Act to judgments of the Tokyo District Court. Firebird's application to the Supreme Court of New South Wales to have the Japanese judgment registered and enforced against Nauru was made under s 6 of the Act. Section 6(1) provides:
"A judgment creditor under a judgment to which this Part applies may apply to the appropriate court at any time within 6 years after:
(a) the date of the judgment; or
(b) where there have been proceedings by way of appeal against the judgment, the date of the last judgment in those proceedings;
to have the judgment registered in the court."
Section 6(4) of the Foreign Judgments Act stipulates that the court must state the "period within which an application may be made under section 7 to have the registration of the judgment set aside" and s 6(5) allows the court to extend that period.
Pursuant to s 6(6), a judgment is not to be registered if at the date of the application "it has been wholly satisfied" or "it could not be enforced in the country of the original court". Neither of those conditions applied to the Japanese judgment.
Section 7 of the Foreign Judgments Act is directed to setting aside the registration of a judgment. Section 7 relevantly provides:
"(1) A party against whom a registered judgment is enforceable, or would be enforceable but for an order under section 8, may seek to have the registration of the judgment set aside by duly applying to the court in which the judgment was registered ... to have the registration of the judgment set aside.
(2) Where a judgment debtor duly applies to have the registration of the judgment set aside, the court:
(a) must set the registration of that judgment aside if it is satisfied:
(i) that the judgment is not, or has ceased to be, a judgment to which this Part applies; or
...
(iv) that the courts of the country of the original court had no jurisdiction in the circumstances of the case; or
...
(4) In spite of subsection (3), the courts of the country of the original court are not taken to have had jurisdiction:
...
(c) if the judgment debtor, being a defendant in the original proceedings, was a person who under the rules of public international law was entitled to immunity from the jurisdiction of the courts of the country of the original court and did not submit to the jurisdiction of that court."
Section 17 of the Foreign Judgments Act provides that rules regulating the practice and procedure of a superior court and which are not inconsistent with the Act or any regulations may be made prescribing all matters necessary or convenient to be prescribed for carrying out or giving effect to the Act. It was not in dispute that this rule-making power authorises Pt 53 of the UCPR, which provides for various procedural matters including the commencement of proceedings and evidence in proceedings under the Foreign Judgments Act in New South Wales.
Foreign state immunity
Until 1975, the common law of England, and therefore probably the common law of Australia, was that the courts had no jurisdiction to entertain an action or other proceedings against a foreign state or the head of government or any department of the government of a foreign state; and an action or other proceeding against the property of any of those entities was regarded as an action or proceeding against the entity. That "absolute" doctrine of sovereign immunity was founded on broad considerations of public policy, international law and comity and protected a foreign state in proceedings directly against the state and also in indirect proceedings against the state's property. If a foreign state had an interest in property situated in the jurisdiction, regardless of whether it was proprietary, possessory or of some other nature, an action affecting that interest would be stayed even though it was not brought against the foreign state. As Lord Atkin explained in The Cristina:
"[T]he courts of a country will not implead a foreign sovereign, that is, they will not by their process make him against his will a party to legal proceedings whether the proceedings involve process against his person or seek to recover from him specific property or damages."
In the same case, Lord Wright said:
"[T]he rule is not limited to ownership. It applies to cases where what [the foreign sovereign] has is a lesser interest, which may be not merely not proprietary but not even possessory."
As was noticed in the ninth edition of Dicey and Morris' The Conflict of Laws, which was published in 1973, the history of the doctrine of sovereign immunity in England up to that point had largely been one of "gradual extension combined with a restriction on the scope of the doctrine of waiver". But all of that was about to change.
Twenty-one years before, in Sultan of Johore v Abubakar Tunku Aris Bendahar, the Privy Council had observed that it was not finally established in England that a foreign sovereign could not be impleaded in any circumstances. In 1975, however, in Philippine Admiral (Owners) v Wallem Shipping (Hong Kong) Ltd, the Privy Council decisively rejected the absolute doctrine of foreign state immunity in relation to an action in rem and held that it was more consonant with justice in such a case to apply a "restrictive" doctrine of foreign state immunity. Just over one year later, in Trendtex Trading Corporation v Central Bank of Nigeria, which concerned an action based on a commercial letter of credit arising out of the purchase of cement, the English Court of Appeal held that, as a matter of contemporary international law, the restrictive theory of foreign state immunity should generally be applied.
The prospects of further development in the English common law of foreign state immunity were thereafter effectively brought to an end by the enactment of the State Immunity Act 1978 (UK) ("the SIA").
Three years later, however, in I Congreso del Partido, a 1981 decision concerning a transaction undertaken between 1973 and 1975 (before the SIA came into force), the House of Lords unconditionally adopted the restrictive doctrine of foreign state immunity as part of the common law of England applicable to transactions not covered by the SIA. Lord Wilberforce delivered the leading speech. After referring with evident approval to the decision in Trendtex, his Lordship continued:
"The basis upon which one state is considered to be immune from the territorial jurisdiction of the courts of another state is that of 'par in parem' which effectively means that the sovereign or governmental acts of one state are not matters upon which the courts of other states will adjudicate.
The relevant exception, or limitation, which has been engrafted upon the principle of immunity of states, under the so called 'restrictive theory,' arises from the willingness of states to enter into commercial, or other private law, transactions with individuals. It appears to have two main foundations: (a) It is necessary in the interest of justice to individuals having such transactions with states to allow them to bring such transactions before the courts. (b) To require a state to answer a claim based upon such transactions does not involve a challenge to or inquiry into any act of sovereignty or governmental act of that state. It is, in accepted phrases, neither a threat to the dignity of that state, nor any interference with its sovereign functions."
As Lord Wilberforce observed, in some cases the process of deciding upon the character of the relevant act presents no difficulty. In other situations, "it may not be easy to decide whether the act complained of is within the area of non-immune activity or is an act of sovereignty wholly outside it". Based, however, on a number of American and European decisions, his Lordship concluded that:
"[I]n considering, under the 'restrictive' theory whether state immunity should be granted or not, the court must consider the whole context in which the claim against the state is made, with a view to deciding whether the relevant act(s) upon which the claim is based, should, in that context, be considered as fairly within an area of activity, trading or commercial, or otherwise of a private law character, in which the state has chosen to engage, or whether the relevant act(s) should be considered as having been done outside that area, and within the sphere of governmental or sovereign activity."
The Australian Law Reform Commission report
As was noted in PT Garuda Indonesia Ltd v Australian Competition and Consumer Commission, the Immunities Act was based on a comprehensive report by the Australian Law Reform Commission ("the ALRC") which traced the development of the common law doctrine of foreign state immunity from the former rule of absolute sovereign immunity to the now current restrictive view of foreign state immunity. The report proposed Australian legislation on the topic which was designed to reflect the more restrictive view of the common law immunity that had been taken in other countries and adopted in their legislation. For present purposes, 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.
Immunity from the jurisdiction of Australian courts
Immunities Act
Part II of the Immunities Act (ss 9-22), which is headed "Immunity from jurisdiction", is exhaustive of the common law and, in s 9, indicates that the Immunities Act provides the sole basis for foreign state immunity in Australian courts. Section 9 is, however, expressly subject to other provisions of the Act, of which the most important for present purposes is the exclusion by s 11(1) of the immunity in a proceeding in so far as the proceeding concerns a commercial transaction.
Section 9 of the Immunities Act provides that:
"Except as provided by or under this Act, a foreign State is immune from the jurisdiction of the courts of Australia in a proceeding."
Section 11 is headed "Commercial transactions" and provides that:
"(1) A foreign State is not immune in a proceeding in so far as the proceeding concerns a commercial transaction.
(2) Subsection (1) does not apply:
(a) if all the parties to the proceeding:
(i) are foreign States or are the Commonwealth and one or more foreign States; or
(ii) have otherwise agreed in writing; or
(b) in so far as the proceeding concerns a payment in respect of a grant, a scholarship, a pension or a payment of a like kind.
(3) In this section, commercial transaction means a commercial, trading, business, professional or industrial or like transaction into which the foreign State has entered or a like activity in which the State has engaged and, without limiting the generality of the foregoing, includes:
(a) a contract for the supply of goods or services;
(b) an agreement for a loan or some other transaction for or in respect of the provision of finance; and
(c) a guarantee or indemnity in respect of a financial obligation; but does not include a contract of employment or a bill of exchange."
As was concluded in Garuda, the phrase "in so far as" in s 11(1) indicates that the provision is capable of application to a proceeding which is only partly concerned with a commercial transaction. But in Garuda it was unnecessary to consider what effect that had on the interaction between the Immunities Act and the Foreign Judgments Act.
The decision in NML
Section 11(1) of the Immunities Act is, to some extent, based on s 3(1) of the SIA. The latter provides as follows:
"A State is not immune as respects proceedings relating to -
(a) a commercial transaction entered into by the State; or
(b) an obligation of the State which by virtue of a contract (whether a commercial transaction or not) falls to be performed wholly or partly in the United Kingdom."
In NML Capital Ltd v Republic of Argentina, a majority of the Supreme Court of the United Kingdom concluded that s 3(1)(a) did not apply to a proceeding to enforce a foreign judgment under the Civil Jurisdiction and Judgments Act 1982 (UK). Lord Mance JSC delivered the principal judgment in favour of that interpretation. His Lordship reasoned, in substance, as follows:
(1) At the time of enactment of the SIA, the rules of court provided no basis for obtaining leave for service out of the jurisdiction of a claim to enforce a foreign judgment or arbitral award. But s 12(7) of the SIA expressly maintained the need to obtain leave to serve out of the jurisdiction where required by the rules of court. The failure to provide for a means of obtaining leave to serve out of the jurisdiction in relation to the enforcement of a foreign judgment implied that, as originally enacted, the SIA was not intended to apply to proceedings for the enforcement of foreign judgments. Thus foreign state immunity in relation to such proceedings continued to be governed by the common law until identified provisions of the SIA were expressly applied to the enforcement of foreign judgments by s 31 of the Civil Jurisdiction and Judgments Act.
(2) Section 3(1) was calculated to adopt a restrictive theory of foreign state immunity. But, at the time of enactment of s 3(1), the English common law of foreign state immunity was unsettled. It was not until 1981 that it was finally determined by the House of Lords in I Congreso del Partido that foreign states were not immune under English common law in respect of commercial transactions. The uncertainty as to the extent of foreign state immunity at common law at the time of enactment of s 3(1) of the SIA raised a question as to whether the drafters of the SIA appreciated or covered the full possibility allowed by international law. More specifically, it threw doubt on whether they intended s 3(1)(a) of the SIA to apply to proceedings to enforce a foreign judgment or whether the drafters intended to leave that matter over to be dealt with later, as ultimately it was, in the Civil Jurisdiction and Judgments Act.
(3) If the SIA had lifted foreign state immunity in respect of foreign judgments, it had done so in a very haphazard way. For example, under s 2, a foreign state was not immune as respects proceedings where it submitted to the jurisdiction of the courts in the United Kingdom but s 3 did not lift foreign state immunity in relation to the enforcement of foreign judgments where the foreign state had submitted to the jurisdiction of the foreign court. There were corresponding anomalies in ss 4-8. And there was no mention in the Civil Jurisdiction and Judgments Act of it being designed to replace such a haphazard relaxation of immunity with the comprehensive scheme provided for in the latter Act.
(4) Nor was it appropriate to ascribe an ambulatory meaning to "relating to a commercial transaction", such that even though it did not at first include the enforcement of a foreign judgment relating to a commercial transaction, it could be taken to have assumed that meaning once it was established at common law that the restrictive doctrine of foreign state immunity would henceforth be applied.
The judgments below
The judgments given in the Court of Appeal were in large measure directed to a comparison of s 11 of the Immunities Act with s 3(1) of the SIA and to the applicability of the reasoning in NML to s 11.
Bathurst CJ, with whom Beazley P agreed, considered the broader and narrower constructions of s 3(1) of the SIA in NML and found that little assistance was to be gained from the extrinsic materials relevant to the Immunities Act because the ALRC report did not deal with the question of whether the commercial transaction exception to foreign state immunity applied to the proceedings or the underlying transaction. His Honour therefore approached the question by focusing on the text of the provision considered in the context of the Immunities Act as a whole. He considered that the words "proceeding concerns" suggest that what is being looked at is the issues raised by the proceedings themselves and that that was supported by the words "in so far". He also rejected the idea of s 11(1) being given an ambulatory meaning so as to pick up the common law's now changed approach to foreign state immunity. He concluded that:
"In circumstances where the legislation in its terms did not consider the question of registration of foreign judgments, where at the time it was passed the extent of the restriction on the immunity was uncertain and the words in question are narrower than the words 'relating to' in the [SIA], it does not seem to me appropriate to adopt an 'updated' construction. It is of significance in this regard that no amendment to the Immunities Act was made consequent upon the enactment of the Foreign Judgments Act."
Basten JA considered that it was significant that the ALRC's proposals made no reference to an intention to cover registration of foreign judgments and, in his Honour's view, that consideration, coupled with the ALRC's express recommendation of provision for immunity in relation to the exercise of supervisory jurisdiction in respect of arbitrations, weighed heavily against construing s 11(1) as an exception to immunity with respect to proceedings for the registration of a foreign judgment.
Like Bathurst CJ, Basten JA concluded that there were sound reasons not to apply an "updated construction" to s 11(1). His Honour stated that was in part "because the relationship between Australian and independent sovereign states is very much a matter for the Federal government to assess and determine, rather than for a state court exercising federal jurisdiction".
The application of s 9
Firebird contended that an application for the registration of a foreign judgment under the Foreign Judgments Act was not a "proceeding" within the meaning of s 9 of the Immunities Act, and therefore that Nauru was not entitled to any immunity from that process.
That contention must be rejected. As was explained in PT Bayan Resources TBK v BCBC Singapore Pte Ltd, an application to a State Supreme Court for the registration of a foreign judgment under the Foreign Judgments Act is, from its inception, a proceeding in a matter within the federal jurisdiction of the Supreme Court. Since the evident purpose of s 9 of the Immunities Act is to provide comprehensively for immunity from all forms of jurisdiction in all forms of proceedings in Australian courts, it cannot seriously be doubted that s 9 affords immunity against the exercise by a State Supreme Court of federal jurisdiction in a proceeding for the registration of a foreign judgment under the Foreign Judgments Act.
The proper construction of s 11(1)
Nauru sought to uphold the Court of Appeal's construction of s 11(1) of the Immunities Act on the basis of what it submitted were close similarities between s 11(1) and s 3(1) of the SIA and therefore between this case and the decision in NML. But, despite the apparent similarities between s 11(1) of the Immunities Act and s 3(1) of the SIA, the starting point for the proper construction of s 11(1) of the Immunities Act is not the decision in NML. It is the words of s 11(1). And, according to the plain and ordinary meaning of the words of s 11(1), a proceeding for the registration of a foreign judgment for a money sum owed under a commercial transaction is a proceeding which "concerns" a commercial transaction.
The fact that such a proceeding might also be described as one which concerns the registration of a foreign judgment does not detract from the semasiological propriety of describing it as a proceeding which concerns a commercial transaction. The connecting term "concerns" connotes a relationship between the proceeding and a commercial transaction. There is nothing in that term that suggests that a proceeding which concerns a commercial transaction must be one that bears only that single character.
Nauru submitted that the subject matter of the registration proceeding is the Japanese judgment rather than the underlying bond instruments. But that submission obscures the practical reality that, from the perspective of a party to a commercial transaction that is seeking to recover a debt owed to it by a foreign state, there is no distinction between initiating proceedings, the registration of the judgment in another country and the steps taken to enforce that judgment against property of the foreign state. Although the nature or legal form of the proceeding varies at each stage, in substance each stage is directed towards the same end of enforcing the claimant's rights arising from a commercial transaction. Thus, each stage of the proceeding can fairly be said to "concern" that commercial transaction.
The next step is to note that there is no indication elsewhere in the Immunities Act or beyond it of a statutory purpose of exempting proceedings for the registration of foreign judgments from the operation of s 11(1). The Immunities Act was enacted to give effect to the restrictive doctrine of foreign state immunity. In terms, it does so by denying immunity in relation to proceedings, whatever their nature, which concern a commercial transaction. There is nothing in that or otherwise implicative of an intention to exclude a proceeding for the registration of a foreign judgment from the class of proceedings to which immunity does not attach.
Thirdly, according to ordinary canons of statutory construction, an Act must be construed so far as possible to give the same meaning to the same words wherever those words appear in the statute. It is clear that "proceeding" in s 9 includes a proceeding for the registration of a foreign judgment under the Foreign Judgments Act. Otherwise, there would be no provision for the immunity of foreign states from proceedings for the registration of foreign judgments. In the absence of a contrary indication, it is to be presumed that "proceeding" has the same meaning in s 11(1). So, where s 11(1) refers to a proceeding which concerns a commercial transaction, it is prima facie to be read as including a proceeding for the registration of a foreign judgment under the Foreign Judgments Act which concerns a commercial transaction.
It was submitted for Nauru that the fact that s 17 of the Immunities Act makes specific provision for proceedings for the supervision and enforcement of foreign arbitral awards, but does not make specific provision for immunity in relation to the registration of foreign judgments under the Foreign Judgments Act, implies a statutory purpose that s 11(1) not extend to the registration and enforcement of foreign judgments under the Foreign Judgments Act.
That argument is unconvincing. Although the bulk of arbitrations are concerned with commercial transactions, there are some which are concerned with matters other than commercial transactions. The evident purpose of s 17 is to provide comprehensively for immunity in relation to proceedings for the supervision of arbitral proceedings and the enforcement of arbitral awards regardless of whether or not they concern commercial transactions. The exemption for proceedings which concern commercial transactions would not achieve that objective.
A further difficulty, as will be seen, is that s 17(2)(a) of the Immunities Act provides, inter alia, for exemption from immunity in relation to proceedings which concern a commercial transaction where, as a result of an agreement entered into under s 11(2)(a)(ii), the operation of s 11(1) has been excluded.
It was next contended on behalf of Nauru that, because the exceptions from immunity provided for in ss 12-16 of the Immunities Act all have some link to matters in Australia, it is unlikely that s 11(1) is directed to a proceeding to enforce a foreign judgment by registration under the Foreign Judgments Act.
In general terms, s 12 of the Immunities Act provides that a foreign state is not immune in a proceeding in so far as the proceeding concerns the employment of a person under a contract of employment made in Australia or to be performed wholly or partly in Australia. Section 13 provides that a foreign state is not immune in a proceeding in so far as the proceeding concerns death, personal injury or loss or damage to tangible property caused by an act done or omitted to be done in Australia. Section 14 provides that a foreign state is not immune in a proceeding in so far as the proceeding concerns a state's interest in, possession of or use of immovable property in Australia or its interest in property which arose by way of gift made in Australia. Section 15 provides that a foreign state is not immune in a proceeding in so far as the proceeding concerns the ownership, registration or protection of intellectual property in Australia. Section 16 provides that a foreign state is not immune in a proceeding in so far as the proceeding concerns its membership, or a right or obligation that relates to its membership, of a body corporate, unincorporated body or partnership that has a member that is not a foreign state or the Commonwealth and is incorporated or established under the law of Australia or is controlled from or has its principal place of business in Australia. In summary, therefore, ss 12-16 apply where a proceeding concerns an act done or omitted to be done in Australia.
It was contended that, while that makes sense if s 11(1) is construed as limited to proceedings that are directly concerned with the subject matter of a dispute, it would make no sense if s 11(1) extended to a proceeding for the registration of a foreign judgment concerning the subject matter of a dispute. In Nauru's submission, that is a strong indicator that a proceeding for the enforcement of a foreign judgment which concerns a commercial transaction is not a proceeding which concerns a commercial transaction within the meaning of s 11(1).
As will be appreciated, that argument is based on some of the observations of Lord Mance JSC in NML which are summarised above. With respect, however, it should be rejected. There is nothing surprising or anomalous about a foreign state being amenable to the jurisdiction of an Australian court under one of ss 12-16 in a proceeding under the Foreign Judgments Act to register a foreign judgment which concerns one of the matters the subject of ss 12‑16.
As may be discerned from the ALRC report, the purpose of each of the exceptions to immunity provided for in ss 12-16 is to deal specifically with the different considerations which apply to different kinds of cases. So, in the case of employment contracts which are provided for in s 12, the basis of the exception to immunity is that, where a foreign state enters into an employment contract in Australia or which is to be performed in Australia, the interest of Australia in providing a local forum outweighs the interest of the foreign state in exclusive jurisdiction. In the case of personal injuries and property claims dealt with in s 13, the basis of the exception to immunity is that, where a foreign state wrongfully causes death or injury or damage to tangible property in Australia, there is no merit in requiring the plaintiff to litigate in the defendant's national courts when Australian courts can provide the obvious and convenient local remedy. In the case of immovable property in Australia, which is dealt with in s 14, the basis of the exception to immunity is the generally accepted proposition of public international law that there should be no immunity in actions arising out of the ownership by a foreign state of immovable property in the forum. In the case of intellectual property, notwithstanding that it was recognised that there would be a considerable degree of overlap between s 15 and one or other of the more general provisions, particularly the commercial transaction and property exemptions, s 15 was included to provide specific guidance to courts rather than leaving them to work out solutions on the basis of the more general provisions and because the overlap was not complete. Similarly, in the case of s 16, although it was recognised that, in many cases concerning disputes which might arise out of a foreign state's participation in a body corporate, unincorporated association or partnership, the foreign state would be denied immunity under the commercial transaction exemption, it was considered preferable to include a specific provision to ensure that all relevant matters were covered and to provide greater precision.
Taken together, ss 12-16 thus reflect the idea that, although a foreign state is, generally speaking, immune to the jurisdiction of Australian courts, there are some acts and omissions and some forms of property which are so closely connected to Australia that it is appropriate that a foreign state be amenable to the jurisdiction of Australian courts in proceedings concerning such matters.
It is true that, if a proceeding concerning one or other of the matters the subject of ss 12-16 is taken to include a proceeding to register a foreign judgment concerning one or other of those matters, the basis on which the foreign court assumes jurisdiction to render the foreign judgment will very likely be something other than that the proceeding concerns an act or omission or some form of property which is so closely connected to Australia that it is appropriate that the foreign state be amenable to the jurisdiction of Australian courts.
It is, however, not the function of the Immunities Act to regulate the susceptibility of a foreign state to the jurisdiction of the foreign court. As is recognised in s 7(4)(c) of the Foreign Judgments Act, Australian courts are concerned with whether the foreign state would have immunity according to the rules of public international law. And, if the foreign state is amenable to the jurisdiction of the foreign court according to the rules of public international law, it is then both logical and appropriate that the foreign state be amenable to the jurisdiction of an Australian court in a proceeding under the Foreign Judgments Act to enforce the foreign judgment, provided the judgment concerns one of the exceptions to immunity contemplated by ss 12-16 of the Immunities Act.
The same holds true for s 11(1). The exception to immunity provided for in s 11(1) in relation to a proceeding which concerns a commercial transaction rests on the basic principle that a foreign state should not be immune from the jurisdiction of Australian courts in a commercial matter within the ordinary jurisdiction of Australian courts. Logic dictates a similar approach in relation to a proceeding to register a foreign judgment concerning a commercial transaction. A judgment of a foreign court against a foreign state in a proceeding which concerns a commercial transaction may not be registered in Australia under the Foreign Judgments Act if the foreign state is immune under the rules of public international law from the jurisdiction of the foreign court. But, if the foreign state is not immune from the jurisdiction of the foreign court under the rules of public international law, it is both logical and appropriate that the foreign state be amenable to the jurisdiction of an Australian court in a proceeding under the Foreign Judgments Act to register the foreign judgment, if the judgment concerns a commercial transaction within the meaning of s 11(1).
The Solicitor-General of the Commonwealth highlighted the fact that, under s 17(2)(a) of the Immunities Act, if a foreign state has contracted out of the s 11(1) exemption from immunity in relation to proceedings which concern a commercial transaction but has agreed to submit a dispute about the commercial transaction to arbitration, the foreign state is not immune from the jurisdiction of an Australian court in a proceeding for the enforcement of the arbitral award. The Solicitor-General submitted that that was inconsistent with interpreting s 11(1) such that a proceeding under the Foreign Judgments Act to register a foreign judgment concerning the commercial transaction is a proceeding which concerns a commercial transaction. He argued that, if a proceeding for the registration of a foreign judgment which concerns a commercial transaction is a proceeding to which s 11(1) applies, a proceeding for the enforcement of an arbitral award which concerns a commercial transaction would also be a proceeding to which s 11(1) applies and, therefore, that there would be no need for the special provision for the enforcement of an arbitral award under s 17(2).
That argument should also be rejected. Plainly enough, if a proceeding to register a foreign judgment which concerns a commercial transaction is properly described as a proceeding to which s 11(1) applies, a proceeding for the enforcement of an arbitral award about a dispute which concerns a commercial transaction might properly be described as a proceeding to which s 11(1) applies. Non constat, however, that there is no need for s 17(2) in order to render such an award enforceable. In terms, s 17(2) operates only where a foreign state has contracted out of the operation of s 11(1) pursuant to s 11(2)(a)(ii) (with the consequence that the arbitral award cannot be enforced pursuant to s 11(1)). Were it not for s 17(2), there would be no means of enforcing the award.
It is also to be observed that, as appears from the ALRC report, s 17(1) was intended to reflect the wider view that, where a foreign state agrees to arbitration, it should be amenable to the supervisory jurisdiction of the court whether or not it would have been immune from the jurisdiction of the court in a proceeding concerning the underlying transaction; whereas s 17(2) is intended to reflect the idea that, in the case of a proceeding to enforce a foreign arbitral award, a foreign state should be immune notwithstanding that it agreed to the arbitration unless the foreign state would not be immune in a proceeding concerning the underlying transaction or event the subject of the award. In point of principle, that accords with the way that s 11(1) applies to a proceeding to enforce a foreign judgment where the foreign state would not be immune from the jurisdiction of an Australian court in a proceeding directly concerning the underlying transaction.
Nauru drew attention to s 21 of the Immunities Act, which provides that, if a foreign state is not immune in so far as a proceeding concerns a matter, the foreign state is not immune in any other proceeding arising out of or relating to the first-mentioned proceeding. Nauru contended that, if a proceeding to register a foreign judgment which concerns a commercial transaction fell within the meaning of s 11(1), it would follow more generally that any proceeding to enforce a judgment was a proceeding concerning the underlying transaction the subject of the judgment. Thus, it was submitted, s 21 would have no work to do.
That argument should similarly be rejected. Section 21 is directed generally to proceedings arising out of other proceedings from which a foreign state is not immune. The absence of immunity from the other proceedings will in each case depend on the nature of the other proceedings. For example, in the case of a proceeding for the enforcement of a foreign judgment which concerns a commercial transaction, the absence of immunity will be because the proceeding concerns a commercial transaction. By contrast, in the case of a proceeding to enforce a foreign arbitral award, where s 11(1) has been excluded by agreement under s 11(2)(a)(ii), the absence of immunity under s 17(2) will be because the foreign state agreed to submit the underlying dispute to arbitration. More precisely, lack of immunity under a provision like s 11(1) will rest on the fact that a proceeding concerns a matter but lack of immunity under a provision like s 17(2) will rest on agreement. Accordingly, while it may not have been necessary to have a provision like s 21 in cases arising under provisions like s 11(1), it plainly was necessary, or at least highly desirable, to have a provision like s 21 in cases arising under provisions like s 17(2). This being so, it would be drawing a very long bow to accept that the fact that s 21 applies generally to all cases implies that s 11(1) should not be construed according to its natural and ordinary meaning.
Next, with respect to the construction of s 11(1), it is to be recalled that, in following the reasoning of a majority in NML, the Court of Appeal took the view that s 11(1), as enacted, excludes registration of a foreign judgment from the scope of the exception and it does not have an ambulatory or "updated" operation sufficient to import subsequent public international law developments in the doctrine of foreign state immunity.
As will be apparent from the reasons already given, however, the text of s 11(1) should not be construed as excluding proceedings for the registration of foreign judgments under the Foreign Judgments Act. Hence, for present purposes, it is unnecessary to consider whether the provision has an ambulatory or "updated" operation sufficient to accommodate developments in the public international law doctrine of foreign state immunity from time to time.
Finally on this aspect of the matter, because the Immunities Act is capable of operating harmoniously with the Foreign Judgments Act, Firebird's submission that the Foreign Judgments Act impliedly repealed the Immunities Act must be rejected.
The need for service in accordance with the Immunities Act
As was earlier recorded, the Court of Appeal held that Firebird was required to serve Nauru before applying to register the Japanese judgment under the Foreign Judgments Act.
Firebird challenged that conclusion on the basis that the only obligations of service imposed by the Immunities Act are under s 27 in relation to judgments in default of appearance and under s 28 in relation to the enforcement of default judgments. It was submitted that registration of a judgment under the Foreign Judgments Act should not be conceived of as a default judgment or a judgment entered in default of appearance within the meaning of Pt III of the Immunities Act. Firebird submitted that, apart from ss 27 and 28, the only function of Pt III is to provide an exclusive means of service in cases where service is required by some other statutory provision or rule of court dehors Pt III; and, it was said, that view of the matter is supported by parts of the ALRC report which show that the aim of Pt III was to provide a means of service which would eliminate the uncertainties and other problems which, until then, had attended other forms of service on foreign states.
There is force in those contentions. According to ordinary conceptions, an order for the registration of a foreign judgment under the Foreign Judgments Act is not a judgment in default of appearance or a default judgment. As was held in Hunt v BP Exploration Co (Libya) Ltd with respect to the Queensland predecessor of the Foreign Judgments Act, an application for registration of a foreign judgment does not involve an action in personam or, therefore, necessitate service of the initiating process in or outside the jurisdiction. Instead, the Foreign Judgments Act contemplates that an application for registration of a foreign judgment will be made ex parte and that notice of registration will be given to the judgment debtor, who may then apply to set aside the registration under s 7.
The argument to the contrary, which found favour with the Court of Appeal, is based on s 3(1) of the Immunities Act, which defines "initiating process" as "an instrument (including a statement of claim, application, summons, writ, order or third party notice) by reference to which a person becomes a party to a proceeding", and s 3(6), which provides that "[a] reference in this Act to the entering of appearance or to the entry of judgment in default of appearance includes a reference to any like procedure". Rule 53.2 of the UCPR provides that proceedings for registration of a judgment under Pt 2 of the Foreign Judgments Act are to be commenced in the Supreme Court by summons and that, in any such proceedings, the judgment creditor is to be the plaintiff and the judgment debtor is to be the defendant. Thus, it was said, although the UCPR contemplate that an application for registration of a foreign judgment will ordinarily proceed ex parte, the summons by which the proceeding for the registration of a foreign judgment is commenced in accordance with r 53.2 is an "initiating process" within the meaning of s 3(1) of the Immunities Act and, because registration of a foreign judgment gives the foreign judgment the same effect as a judgment of the registering court entered on the date of registration, the process for registration is sufficiently akin to a default judgment to be classed as a "like procedure" within the meaning of s 3(6).
That argument should be rejected for at least three reasons. First, there is no default involved in the registration of a foreign judgment. As was noted in BP Exploration, it is a designedly ex parte procedure. Secondly, s 6(4) of the Foreign Judgments Act provides that the Australian court must specify a period in which the judgment debtor may apply to set aside the order for registration, and, as was also noted in BP Exploration, it is implicit in s 6(4) that the Australian court will require service of the notice of the registration of judgment on the judgment debtor within that period. Thirdly, s 7(2) allows the judgment debtor to apply to set aside the order for registration on the ground that it is not a judgment to which Pt 2 of the Foreign Judgments Act applies, which among other things would include a case in which the judgment debtor is immune from the jurisdiction of the Australian court. Taking those considerations together, the scheme of the Foreign Judgments Act in its intersection with the Immunities Act presents as being that, despite any possibility of a judgment debtor being immune to the jurisdiction of an Australian court, the application for registration of a foreign judgment may proceed ex parte - as it would in the case of a judgment debtor who was not immune to the jurisdiction of the Australian court - with the issue of immunity being determined when and if the judgment debtor seeks to set aside the order for registration on the ground of immunity to the jurisdiction of the Australian court. Accordingly, the judgment the subject of registration would not be one to which the Foreign Judgments Act applies.
Of course, that does not mean that an Australian court cannot require service of the summons before proceeding to registration where that is considered to be expedient. The UCPR allow for that possibility and, in any event, a court may so require if in doubt about the amenability of a judgment debtor to the court's jurisdiction. There may also be practical difficulties associated with some foreign states responding to a notice of the registration of a foreign judgment within the minimum 14-day requirement for such an application under the UCPR. Thus, where a foreign state is a judgment debtor, a court would usually set a longer period for an application to be made to set aside the registration under s 6(4) of the Foreign Judgments Act and, similarly, there may be good reason to extend that period following an application under s 6(5) by a foreign state. The point remains, however, that the rules in this respect are facultative. They enable appropriate orders for service to be made according to the facts and circumstances of each case, rather than imposing an inevitable and ineluctable service requirement regardless of the facts and circumstances of the case.
Immunity from execution against property of foreign states
Part IV of the Immunities Act provides separately for immunity of the property of a foreign state from execution of a judgment, order or arbitral award. As appears from the ALRC report, that is so because, although the restrictive doctrine of immunity from jurisdiction reflects a plurality of principles embodied in the general exception to immunity concerning commercial transactions and the specific exceptions to immunity provided for in ss 12-17, the sole criterion of what property of a foreign state remains immune from execution is the distinction between property used for governmental, public or "sovereign" purposes and property used for private or commercial purposes.
As is also highlighted in the ALRC report, the criteria of commerciality for the purposes of the exception to immunity from jurisdiction differ from those of commerciality for the purposes of the exception to immunity from execution. In the case of the exception to immunity from jurisdiction, the sense of what is "commercial" is to be discerned from the nature of the specific transaction, with the consequence that "purpose" or "motive" are largely beside the point. By contrast, in the case of the exception to immunity from execution, "purpose" is the principal consideration and "commercial purpose" is defined in s 3(5) as including "a trading, a business, a professional and an industrial purpose" (emphasis added).
Pursuant to s 30 of the Immunities Act, the property of a foreign state is immune from any process or order of an Australian court for the satisfaction or enforcement of a judgment "[e]xcept as provided by this Part". Section 32(1) creates a general exception to this immunity in relation to "commercial property" and s 32(3) provides that for the purposes of the section:
"(a) commercial property is property, other than diplomatic property or military property, that is in use by the foreign State concerned substantially for commercial purposes; and
(b) property that is apparently vacant or apparently not in use shall be taken to be being used for commercial purposes unless the court is satisfied that it has been set aside otherwise than for commercial purposes."
Section 41 of the Immunities Act states that "a certificate in writing given by the person for the time being performing the functions of the head of a foreign State's diplomatic mission in Australia to the effect that property specified in the certificate ... is or was at a specified time in use for purposes specified in the certificate is admissible as evidence of the facts stated in the certificate". In this matter, such a certificate was given by the Consul-General for Nauru, Mrs Chitra Jeremiah ("the s 41 certificate"). Additionally, the Honourable David Adeang MP, Minister of Finance and Minister of Justice for Nauru swore an affidavit and gave oral evidence about the purposes of Nauru's bank accounts.
Comparison between the Immunities Act and the US, UK and Canadian approaches
In the United States, the Foreign Sovereign Immunities Act of 1976 allows for the execution of a judgment against foreign state property which "is or was used for the commercial activity upon which the claim is based" and provides that the commercial character of an activity is to be determined by reference to its "nature" rather than its "purpose". By contrast, under Pt IV of the Immunities Act, a foreign state's property is immune from execution unless it is used "substantially for commercial purposes".
In so providing, Pt IV of the Immunities Act is designedly different from the way in which, in the United Kingdom, the SIA links the test for the immunity of a foreign state's property from enforcement to the definition of "commercial transaction" that applies to the immunity of a foreign state from jurisdiction. As was emphasised in the ALRC report, Pt IV is thereby calculated to avoid the result in Alcom Ltd v Republic of Colombia, in which the English Court of Appeal held that, since all contracts for goods and services and all financial transactions, irrespective of purpose, were defined as commercial transactions, money held in a bank account to pay the running expenses of an embassy was money used for commercial purposes rather than for the governmental purpose of running the embassy. Admittedly, that decision was subsequently overturned by the House of Lords on the basis that, under the SIA, it was incumbent on the judgment creditor to prove that all of the moneys standing to the credit of the account were earmarked by the foreign state solely for being drawn upon to settle liabilities incurred in commercial transactions (subject only to de minimis exceptions). But the House of Lords did not demur to the proposition that moneys drawn to pay for the supply of goods and services to the mission would otherwise be used for commercial purposes.
It is different under the purpose-based approach which applies under Pt IV of the Immunities Act. In determining whether property is held by a foreign state for a commercial purpose, it is necessary to bear in mind the individual circumstances of the foreign state. What may properly be regarded as a commercial purpose in the context of one foreign state's circumstances may well be considered a governmental purpose in the context of another state's circumstances. That point was made by Steele J in Carrato v United States of America in relation to the Canadian approach to the commercial activity exception to immunity from jurisdiction (which requires the court to consider both the nature of the act and also its purpose). As Steele J said: "acts that some persons might normally consider to be commercial are not so when they are done in the performance of a sovereign act of State". An activity can also be multi-faceted and so, for the purposes of the commercial activity test of immunity from jurisdiction, "it is necessary to consider which aspect of that activity is most relevant to the proceedings". Parity of reasoning dictates that the same is true of purpose.
In Canada, where the assessment of whether a transaction comes within the commercial transaction exception to immunity depends on purpose as well as the nature of the transaction, it is considered that, if a sovereign state employs a state-owned corporation to regulate or control a market, the question of immunity will turn on "whether the particular activities by the government shareholder/creator are ordinary aspects of its role". Likewise, under Pt IV of the Immunities Act, where immunity from execution turns on whether property is used for a commercial purpose, the question of immunity will depend on whether the activities for which the property is used are ordinary aspects of the governmental functions of the sovereign state.
The bank accounts of Nauru
The Court of Appeal held that all of the bank accounts which had been garnisheed were exempt from execution because they were either used for governmental purposes or not used but set aside for a non-commercial purpose, and therefore not used substantially for commercial purposes. In many cases, Firebird does not now dispute that conclusion. Firebird does contend, however, that there are seven classes of accounts in relation to which the Court of Appeal was in error. Those accounts are described in the Notice of Appeal as: (1) the Airline Leasing Accounts, (2) the Phosphate Compensation Account, (3) the Fuel Accounts, (4) the Utilities Account, (5) the Loan Account, (6) the Residual Accounts, and (7) the Term Deposit. It is convenient to take them in turn.
The Airline Leasing Accounts
There are three Airline Leasing Accounts. They were described in the s 41 certificate as follows:
"[Account number] 034702 422780 (Yaren Aircraft Leasing Co)
The funds in this account were used by [the Nauru] Government to provide government loans to Nauru Airlines for the procurement and maintenance of its aircraft. The government loans were provided on a non interest/non-profit basis and have been repaid.
...
[Account number] 034002 858233 (Pacific Aircraft Leasing Company)
The funds in this account are used for the same purpose as the Yaren Aircraft Leasing Co Account ...
[Account number] 034002 858356 - Yaren Aircraft Leasing Co
This account is used for the same purpose as [Account 034702 422780]."
Mr Adeang gave oral evidence in chief that Nauru provided air services for Nauru through its wholly owned government corporation, Nauru Airlines, because no other operator was interested in providing air services to a country of only 10,000 people. He said that Nauru did not make money out of the airline, although ideally Nauru would like that to happen. He also said that "what moneys we do make we turn to the provision of the air services to make it a sustainable venture". In cross‑examination, Mr Adeang added that the airline did not confine its activities to Nauru. It also engaged in chartering, had in the past entered into commercial contracts described as Norfolk Air and Heavy Lift contracts, and, at least as far as its charter business was concerned, was operating in a competitive market place.
The Court of Appeal concluded that the funds in the Airline Leasing Accounts were not in use for a commercial purpose. Bathurst CJ began with the observation that "commercial purposes" are not defined. In fact, as will be recalled, "commercial purpose" is defined in s 3(5) of the Immunities Act as including "a trading, a business, a professional and an industrial purpose". His Honour nevertheless reasoned, based on what was said by the Supreme Court of Canada in Kuwait Airways Corp v Iraq and the Superior Court of Justice of Ontario in Bombardier Inc v AS Estonian Air, which concerned whether the Republic of Estonia's ownership of shares in AS Estonian Air was a "commercial activity", that the fact that money is expended or proposed to be expended on "what might be described as commercial transactions" is not necessarily determinative of its use for commercial purposes. Hence, as his Honour said, where funds are to be used for the purpose of government administration, performance of a government's civic duties and functions to its citizens or the advancement of the community, "the fact that that object is achieved by entering into commercial transactions [does not mean] that the funds are used for commercial purposes".
On that basis, Bathurst CJ concluded that, although Nauru Airlines engages in some commercial activities including flights on a charter basis, the funds in the Airline Leasing Accounts were not used for commercial purposes, because:
"[T]he primary purpose of the investment in Nauru was to provide aircraft services to what would otherwise have been an isolated community. In these circumstances it does not seem to me that the moneys in the bank account [are] used for purposes which, whether by loans or other investment, could be said to be for commercial purposes."
With respect, that conclusion was correct. As Bathurst CJ deduced, funding Nauru Airlines was part of Nauru's ordinary governmental functions of providing an otherwise isolated Nauruan community with aircraft services. The fact that the airline, as opposed to Nauru, may have engaged in commercial activities was beside the point. The purpose of the loans was not to generate profits but to ensure that the people of Nauru were provided with air transportation.
The Phosphate Compensation Account
There was only one Phosphate Compensation Account, which was described in the s 41 certificate as follows:
"[Account number] 034001 110549 - Rehabilitation Funds A
The funds in this account are derived from [Nauru] Government royalties received from the sale of phosphate mined on [Nauru]. The funds in this accounts [sic] are used for the purposes of:
(a) paying compensation to landowners for the leasing of land to conduct the phosphate mining operations; and
(b) environmental rehabilitation programs to restore land used for phosphate mining on [Nauru] and payment of salaries of those government employees involved in the rehabilitation programs."
Mr Adeang was not cross-examined on that aspect of the certificate.
As Bathurst CJ observed, bank account statements which were in evidence showed that from 25 August 2014 no withdrawals or deposits had been made from or into the account, other than interest. But that was hardly significant given that the accounts were frozen by order of the court for the bulk of that period. Bathurst CJ reasoned, however, that although the use of funds to conduct phosphate mining operations on Nauru might be conceived of as substantially for commercial purposes, the funds in this account were not used to facilitate phosphate mining but rather as part of a government policy to compensate landowners on whose land mining operations were conducted.
In his Honour's view, that objective, combined with the fact that the programme was carried out by government employees rather than a commercial entity, was a sufficient basis to conclude that the account was not used for commercial purposes but rather for sovereign purposes consistent with the current government policy of Nauru.
With respect, there is no reason to doubt that conclusion either. In the absence of cross-examination or other contrary evidence, it was open to find that the compensation of landowners for damage done to their lands by phosphate mining operations from which Nauru derived royalties was well within the ordinary governmental functions of Nauru; and, therefore, that funds used for that purpose were used for a substantially governmental as opposed to commercial purpose.
The Fuel Accounts
There were two Fuel Accounts, which were described in the s 41 certificate as follows:
"[Account number] 034702 355848 (USD Ron Treasury Account)
The funds in this accounts [sic] are derived predominately from the issuing of fishing licences by [the Nauru] Fisheries and Marine Authority, a department of [the Nauru] Government. The fishing licences are paid for by licensees in USD. The funds are used by [the Nauru] Government to purchase fuel to supply to the population of [Nauru] and business[es] located on [Nauru]. The main customers for the fuel are the Nauru Utilit[ies] Corporation, a government ow[n]ed corporation, which operates the sole power plant on the island and Nauru Airlines, [Nauru's] national airline which is also a government ow[n]ed corporation and Transfield Services, the contractor who operates the Regional Processing Centres. The revenue derived by the government from the sale of the fuel does not cover the cost of the purchase of the fuel by the government.
...
[Account number] 034002 858305 (Japan NPGA)
The funds in this account are derived from funds provided by the Japanese Government by way of foreign aid and used by [Nauru] for the purpose of providing budget support to the [Nauru] Treasury in order to purchase fuel."
It may be noted that, in contradistinction to the airline operations, which were carried on by a wholly owned corporation of the Nauru Government, the evidence was that the fuel transactions were undertaken by the Nauru Government itself. In cross‑examination, Mr Adeang said that the government purchased all of the fuel on the island and sold it at a commercial price calculated to cover the costs of providing the fuel. Nauru's customers included the Nauru Utilities Corporation, Nauru Airlines, and a number of petrol stations on the island, which bought fuel from the Nauru Government at a price which the Nauru Government calculated to cover its costs of purchasing and distributing the fuel.
Other things being equal, that might have made a difference. As defined, a "commercial purpose" includes both a "trading purpose" and a "business purpose"; and, based on some of Mr Adeang's evidence, it might be said that the Nauru Government was in the business of trading in petrol. To some extent at least, its activities were analogous to those of various Australian State-owned power corporations which used to, and in some cases still do, conduct the generation, distribution and sale of electricity as a monopoly supplier of electricity within the State. And it could hardly be doubted that such a State-owned power corporation carries on a business of trading in electricity, even if it does so ultimately on a not-for-profit basis of charging no more than is required to cover its costs and provide for necessary capital reinvestment.
As has been seen, however, in this area of the law it is necessary to bear in mind that what may properly be regarded as a commercial purpose in the context of one foreign state's circumstances may well be considered a governmental function in the context of another. And, as appears from Mr Adeang's evidence, and would seem likely in any event, the circumstances which apply in Nauru are in relevant respects very different from any Australian State. Governments of less developed countries are often involved in fuel subsidisation programmes. Critically, as the evidence established, Nauru is an island country of only 10,000 people, which no established or other oil company is prepared to service, and which therefore is dependent on its government to make the arrangements necessary to provide it with petroleum. Without the government's involvement, there would be no petroleum on Nauru and therefore no way of sustaining the nation's aviation and road transport, agriculture and basic electric power generation requirements.
In those circumstances, Bathurst CJ was correct to conclude that Nauru's activities in buying and selling petroleum were governmental activities and thus that the Fuel Accounts were for governmental functions as opposed to commercial purposes.
It might have been different if there had been any evidence of availability of petroleum supplies from other sources. For example, if there had been evidence of willingness on the part of oil companies to supply fuel in Nauru and of them being kept out of the market by the state-owned monopoly, one might suppose that Nauru's fuel supply activities would properly be viewed as commercial activities and that funds for those activities would properly be characterised as funds for commercial purposes. But there was no suggestion of that kind, and still less any evidence.
The Utilities Account
The Utilities Account was described in the s 41 certificate as follows:
"[Account number] 034002 858276 - RON Utilities Authority
The funds in this account are derived from revenue received from the [Nauru] Utilities Corporation, a government corporation [which is] used by [the Nauru] Government for the purpose of supplying electricity and water to the population of Nauru."
When cross-examined, Mr Adeang said that "the Government", by which in this case he evidently meant the Nauru Utilities Corporation, supplied electricity and water and charged for it, but that it did not necessarily cover its costs. Mr Adeang was not asked about the form in which the Nauru Government used funds in the account for the purposes of supplying electricity and water but, in the absence of evidence to the contrary, it should be inferred that it did so either by making loans to or by subscribing further capital in the Nauru Utilities Corporation.
Bathurst CJ stated that, for the same reasons as applied to the Fuel Accounts, he considered that the Utilities Account was not used for commercial purposes. With respect, that conclusion is correct. There is, however, a further reason in support of that conclusion. In contrast to the position which applied to fuel, where the Nauru Government was directly involved in the buying and selling of petrol, in the case of the Utilities Account the evidence was that the Nauru Government's only function was as shareholder or otherwise owner of the Nauru Utilities Corporation. It follows that, whether or not it could be said that the Nauru Utilities Corporation was carrying on business or trade, the position in relation to the Utilities Account was on all fours with the position in relation to the Airline Leasing Accounts.
In short, so far as can be told from the evidence, the only purpose for which the funds in the Utilities Account were used was to fund the Nauru Utilities Corporation, either by way of loan or by injection of capital. The purpose of the loans was not to generate profits but to ensure that the people of Nauru were provided with utilities. And, given the nature of Nauru and its system of government, the infusing of a state-owned not-for-profit utilities corporation with funds sufficient to provide power and water to the Nauruan people may properly be regarded as a governmental function as opposed to a commercial activity.
The Loan Account
The Loan Account was described in the s 41 certificate as follows:
"[Account number] 034002 124483 (CIE - Nauru GEF Small GRA)
The funds in this account are derived from [Nauru] Government revenue and foreign state donors (predominantly Taiwan) and used by the [Nauru] Department of Commerce, Industry and Environment and used by the [Nauru] Government for the purpose of providing government loans to small business to assist in setting up businesses."
Mr Adeang deposed in his evidence in chief that Nauru did not make a profit out of the small business loans and that they were not a commercial venture:
"It ... provides small micro-loans ... for those aspiring businessmen in the provision of growing backyard ... food crops, barbecue stalls [and other] small micro‑businesses. We receive funds from ... Taiwan in particular but other aid donors as they arise."
Bathurst CJ concluded that, having regard to the particular circumstances of Nauru, the funds for the business loans did not have a commercial purpose. They were paid in pursuit of a governmental purpose of strengthening the economy.
With respect, there is no reason to doubt that conclusion either. The payments appear to have been essentially in the nature of social or economic advancement payments or allowances, for the purposes of advancing the recipients in business in a manner which is perceived to be for the improvement of Nauru generally. To draw a parallel with the Australian context, they present as no different in principle from sums which the Commonwealth Government may set aside to pay as Newstart allowance or one or other business incentive allowances which are available to promote and advance particular Australian industries.
The Residual Accounts
There are four Residual Accounts, described in the s 41 certificate as follows:
"[Account number] 034002 858364 (BusinessOne Account)
This account is used as the primary operating account for [Nauru]. Funds from the accounts are transferred into this account as required and then those funds are used by [the Nauru] Government to pay for:
(a) the salaries of 1,200 public servants employed by [the Nauru] Government; and
(b) services, equipment and supplies provided by the departments of [the Nauru] Government.
...
[Account number] 034001 189410 (Nauru Fisheries Saving)
The funds in this account are derived from [Nauru] Government revenue and used by [the Nauru] Government to fund the operations of the Nauru Fisheries and Marine Resources Authority, a governmental department.
...
[Account number] 034002 858268 - RON Fuel Account
The funds in this account are derived from payments received from customers purchasing fuel from the [Nauru] Government. The funds in this account are used by [the Nauru] Government predominantly for the purpose of providing Government Services.
...
[Account number] 034002 858073 - RON Treasury Account
The funds in this account are derived from [Nauru] Government revenue and are used by the [Nauru] Government for the provision of Government Services and the payment of salaries of [Nauru] Government employees."
Bathurst CJ concluded that the funds in the Nauru Fisheries Saving account were used to fund the operations of the Nauru Fisheries and Marine Resources Authority and that there was no evidence to suggest that the Authority, which was a Nauru government department, was engaged substantially in a commercial venture; and that the same applied to the RON Fuel Account and the RON Treasury Account. His Honour further observed with respect to the BusinessOne Account that it appeared to be a clear example of funds being used by a sovereign state to perform its sovereign duty to its citizens, and that although a fee was paid for some government services, that did not lead to the loss of immunity.
There is no reason to doubt that reasoning or those conclusions. On the evidence, each of those accounts presents as a clear example of funds which were held for governmental non-commercial purposes.
The Term Deposit
The Term Deposit (also known as "the Trust Account") was described in the s 41 certificate as follows:
"[Account Number 034001 305071] Trust Account
The funds in this account are derived from [Nauru] Government Revenue and are held by [the Nauru] Government treasury as cash reserves to provide future Government Services."
Mr Adeang was not cross-examined on this account.
Bathurst CJ noted that, in contrast to the other accounts, the moneys in the Term Deposit were not in use and, accordingly, that it was necessary for the court to be satisfied that the funds had been set aside for a non-commercial purpose within the meaning of s 32(3)(b) of the Immunities Act. But, as his Honour said, there was no reason not to accept the correctness of the statement in the s 41 certificate that the funds were held as cash reserves to provide future government services and in that sense had been set aside so that the Nauru Government could perform its functions as they arise. Thus, in the absence of any evidence that the Nauru Government carried on any commercial activities with the cash reserves in the Term Deposit, it was to be concluded that the government services for which the funds were set aside were not commercial.
Counsel for Firebird attacked that part of his Honour's reasoning as in effect reversing the onus of proof. It was submitted that, because it appeared that the funds in the Term Deposit were not in use, it was incumbent on Nauru to adduce evidence sufficient to establish that the money was set aside otherwise than for commercial purposes within the meaning of s 32(3)(b); and that, by referring to the absence of evidence that the Nauru Government carried on any commercial activities with those moneys, Bathurst CJ had approached the provision as if it were incumbent on Firebird to prove that the moneys were set aside for commercial purposes.
That submission should be rejected. As has been seen, Bathurst CJ based his conclusion as to the nature of the funds in the Term Deposit on the evidence from the s 41 certificate that the funds were held ready for government purposes and in that sense were set aside for non-commercial purposes. Significantly, as was earlier noticed, Mr Adeang was not cross-examined on that evidence. In those circumstances, it was both logical and appropriate for Bathurst CJ to reason that, in the absence of any evidence that contradicted the certificate, it could be concluded that the funds were set aside in the way explained in the certificate. There was no reversal of the onus of proof in that approach. Nauru adduced evidence sufficient to establish that the funds were set aside in the relevant sense and, as Bathurst CJ said, in the absence of evidence to contradict the evidence adduced by Nauru, there was no reason not to accept Nauru's evidence.
Conclusion and order
For these reasons, we agree with the orders proposed by French CJ and Kiefel J.