FRENCH CJ, GUMMOW, HAYNE AND CRENNAN JJ. The appellant ("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.
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") instituted against it in 2009 by the respondent ("the ACCC").
A judge of the Federal Court (Jacobson J) dismissed a motion by Garuda that the proceeding be stayed or dismissed. The Full Court (Lander, Greenwood and Rares JJ) granted Garuda leave to appeal but dismissed the appeal.
For the reasons which follow the appeal by Garuda to this Court should be dismissed.
The common law
In the Restatement Third of the Foreign Relations Law of the United States, adopted in 1986, it is said with reference to the rule of absolute immunity and the development of a more restrictive view of immunity:
"Until the twentieth century, sovereign immunity from the jurisdiction of foreign courts seemed to have no exceptions. However, as governments increasingly engaged in state‑trading and various commercial activities, it was urged that the immunity of states engaged in such activities was not required by international law, and that it was undesirable: immunity deprived private parties that dealt with a state of their judicial remedies, and gave states an unfair advantage in competition with private commercial enterprise."
To this it may be added that in Playa Larga (Owners of cargo lately laden on board) v I Congreso del Partido (Owners) 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:
"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."
The scheme of the Act
The Act was preceded in 1984 by a comprehensive Report ("the Report") by The Law Reform Commission ("the LRC"). 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 Appendix 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.
Part II of the Act (ss 9‑22) 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. 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.
Section 9 provides:
"Except as provided by or under this Act, a foreign State is immune from the jurisdiction of the courts of Australia in a proceeding."
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. 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.
The conferral of immunity by s 9 is expressly subject to other provisions made by the Act. The critical provision is s 11(1):
"A foreign State is not immune in a proceeding in so far as the proceeding concerns a commercial transaction." (emphasis added)
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.
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). 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".
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"
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.
It was said in the joint reasons in Lipohar v The Queen that:
"'Jurisdiction' may be used (i) to describe the amenability of a defendant to the court's writ and the geographical reach of that writ, or (ii) rather differently, to identify the subject matter of those actions entertained by a particular court, or, finally (iii) to locate a particular territorial or 'law area' or 'law district'."
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 norm of conduct, or it be an appellate process of a particular kind, such as that identified in s 73 of the Constitution. Because, as Katz J pointed out in Khatri v Price, any Australian court is a court of limited jurisdiction in this sense, it has been said that the court must be satisfied that its jurisdiction has been properly invoked. So, in Cockle v Isaksen this Court entertained argument by an intervener challenging the competency of an appeal in circumstances where both parties accepted that the appeal was competent.
However, in s 9 and elsewhere in the Act the term "jurisdiction" is used not to identify the subject matter of a proceeding, but the amenability of a defendant to the process of Australian courts. The notion expressed by the term "immunity" is that the Australian courts are not to implead the foreign State, that is to say, will not by their process make the foreign State against its will a party to a legal proceeding. Thus, the immunity may be understood as a freedom from liability to the imposition of duties by the process of Australian courts.
In the Report, under the heading "Foreign State Immunity not Immunity from Substantive Law", the LRC emphasised that in this frame of discourse the term "immunity from jurisdiction" is not concerned with the authority enjoyed by courts with respect to particular subject matters and parties. Rather, the term reflects the common law antecedents explained by Dixon J in Chow Hung Ching v The King. His Honour referred to the authority of the executive branch to bind the nation in the conduct of affairs with other nations and then referred to the "recognition and effect" which the common law gave to "the immunity or privilege from local jurisdictions and laws" which is accorded by the executive to the sovereigns of friendly foreign nations. The term "privilege" better conveys the notion that the special position so enjoyed with respect to curial process is not absolute but may be waived by the party entitled to the privilege. Section 10 of the Act provides that a foreign State is not immune in a proceeding to which it has submitted to the jurisdiction in accordance with that section; s 22 extends the operation of s 10 to entities such as Garuda.
It has been said that while the immunity of the domestic sovereign was "based on the historic principle that no court has power to command the King", that of a foreign sovereign is founded, as a matter of favour and of comity between nations, on an implied consent "to a relaxation of the complete jurisdiction which each [sovereign] naturally enjoys within his own territory". Nevertheless, some analogy is provided by the character in English common law of Crown immunity in respect of actions in contract and tort. Did the immunity not only deny adjudication of claims against the Crown but go further and deny the very existence of the contract or commission of the wrong? The issue was resolved by acceptance by the common law that a contract had been made and broken and a wrongful act committed, but the immunity rendered imperfect the rights thereby engendered in the plaintiff.
Section 38 of the Act confers a power, upon application, to set aside a judgment, order or process, as follows:
"Where, on the application of a foreign State or a separate entity of a foreign State, a court is satisfied that a judgment, order or process of the court made or issued in a proceeding with respect to the foreign State or entity is inconsistent with an immunity conferred by or under this Act, the court shall set aside the judgment, order or process so far as it is so inconsistent."
Further, special provision is made by s 27 for the entry of default judgments. A judgment in default of appearance shall not be entered against a foreign State or against a "separate entity" of a foreign State unless the court is satisfied that, in the proceeding, the foreign State or separate entity is not immune.
If the foreign State or separate entity has appeared and waived any immunity, or has asserted its immunity, the issue of immunity will have either disappeared or fallen for adjudication. If there is no appearance, then it will be for the court to be satisfied under s 27 as to the absence of immunity before entry of any default judgment which is sought. It is not a correct construction of the Act that even without an application under s 38 to set aside service, or an application under s 27 for a default judgment, the court must of its own motion satisfy itself that the defendant could not establish immunity.
The proceeding by the ACCC
It is convenient to say something more respecting the elements of the claim pleaded by the ACCC in that proceeding. The ACCC alleged that Garuda was a body corporate incorporated pursuant to the laws of Indonesia which carried on business in Australia, provided air freight services to and from Australia, was registered as a foreign company pursuant to Pt 5B.2 of the Corporations Act 2001 (Cth), and was both a trading corporation and a foreign corporation within the meaning of s 4 of the TPA.
The substance of the case pleaded was that Garuda and other airlines entered into anti‑competitive arrangements or understandings (between themselves) to impose surcharges on commercial freight services to Australia; pursuant to those anti‑competitive arrangements or understandings, Garuda and other airlines imposed such surcharges on commercial freight services to Australia from Indonesia and Hong Kong; and the anti‑competitive conduct of Garuda was intended to be implemented, and was in fact implemented, by way of prices charged in contracts entered into by Garuda with its customers.
The ACCC relied upon s 86 of the TPA and s 39B(1A)(c) of the Judiciary Act 1903 (Cth) for the conferral of jurisdiction on the Federal Court. The ACCC claimed relief in respect of alleged price fixing, market sharing and other anti‑competitive conduct between October 2001 and September 2006 in contravention of s 45 of the TPA, read with s 45A. The remedies sought were injunctive relief under s 80 of the TPA, declaratory relief under s 21 of the Federal Court of Australia Act 1976 (Cth), and pecuniary penalties pursuant to s 76 of the TPA.
Modern regulatory laws have created various contraventions which are not dealt with by criminal process. The recovery of pecuniary penalties was a remedy well established in federal law when the Act was introduced. In addition to the provision made in s 76 of the TPA, provision for recovery of penalties for breaches of awards was made by s 119 of the Conciliation and Arbitration Act 1904 (Cth), and civil penalties had been imposed under the customs legislation since the enactment of the Customs Act 1901 (Cth), although there was controversy as to their proper characterisation.
The injunction sought against Garuda was in the following terms:
"An injunction restraining the respondent for a period of seven years from the date of the order from making, arriving at, or giving effect to, any contract, arrangement or understanding with any of its competitors for the supply of air freight services, containing provisions which have the effect of fixing, controlling or maintaining the price or any part of the price at which it or any of them will supply those services in competition with each other unless:
2.1 the said contract, arrangement or understanding does not involve or relate to the supply of air freight services to or from Australia;
2.2 the said contract, arrangement or understanding is necessary for the purpose of interlining between two or more carriers in the course of supplying air freight services; or
2.3 the respondent is specifically authorised to do so under section 88 [of the TPA]."
The motion filed by Garuda on 5 November 2009 sought an order that the proceeding be dismissed or stayed. On the appeal to this Court, Garuda seeks an order that service be set aside pursuant to s 38 of the Act. Section 38 would authorise that course if this Court were satisfied that the Federal Court process was inconsistent with an immunity conferred by or under the Act.
The issue on the appeal
Reference already has been made to the provisions of Pt II of the Act and to the general conferral of immunity upon a foreign State from the jurisdiction of Australian courts in a "proceeding". This term does not include "prosecution for an offence" (s 3(1)). In ordinary parlance "prosecution" identifies the instigation and conduct of a curial proceeding which commences with an accusation of a crime and involves the trial of that accusation concluding with a conviction or acquittal, and may include a committal proceeding. The committal is a sui generis procedure but one closely related to the exercise of judicial power. There is no indication that in s 3(1) "prosecution" is used in a non‑technical sense.
It was not in the interests of Garuda to submit that the proceeding by the ACCC, at least in so far as pecuniary penalties were sought under s 76 of the TPA, was a "prosecution", and thus not within the scope of the immunity provisions of the Act, and the ACCC did not submit that it was engaged in a prosecution of Garuda.
Jacobson J held that, in the absence of sufficient evidence, Garuda was not a "separate entity" within the meaning of the Act. The Full Court disagreed and decided that Garuda was a "separate entity". However, the Full Court held that the proceeding fell within the exclusion provision in s 11, as it concerned a "commercial transaction". It is that holding which Garuda challenges in this Court. There is no notice of contention by the ACCC, and it argued the appeal on the footing that Garuda was a "separate entity".
The precise issue, as identified correctly by counsel for the ACCC in this Court, looks first to the application to foreign corporations of the substantive norms of conduct required by Pt IV of the TPA, secondly to the provisions conferring jurisdiction on the Federal Court to entertain the proceeding by the ACCC for contravention of those norms by a foreign corporation, and then asks to what extent the exercise of this jurisdiction is qualified with respect to that foreign corporation by engagement of the immunity provisions of the Act.
Foreign authorities
Before the Full Court there was extensive citation of decisions from other jurisdictions with legislation comparable to the Act. These included the decision of the Supreme Court of the United States in Saudi Arabia v Nelson, and that of the Supreme Court of Canada in Kuwait Airways Corporation v Republic of Iraq. In this Court reference also was made to the decision of the Supreme Court of the United Kingdom in NML Capital Ltd v Republic of Argentina. However, it appeared to be common ground that there was limited assistance to be derived from those decisions. The legislation in the United States, the United Kingdom and Canada is differently expressed and has been applied in different circumstances.
Two further points should, however, be made. The first is that both Kuwait Airways and NML Capital concerned the recognition in the forum of judgments obtained elsewhere against a foreign State. No consideration is given in these reasons to any issues concerning the interaction between the Act and the Foreign Judgments Act 1991 (Cth).
Secondly, in the United States, issues of foreign state immunity have, on occasion, become entangled with other doctrines. One is the "political question doctrine" which derives from the constitutional requirement in Art III of a "Case" or "Controversy" and denies justiciability to the review of the foreign policy of the "political branches" of government. Another is the "act of State doctrine" developed from the dictum of Fuller CJ in Underhill v Hernandez that "the courts of one country will not sit in judgment on the acts of the government of another done within its own territory".
In Spectrum Stores Inc v Citgo Petroleum Corp, the Court of Appeals for the Fifth Circuit, in affirming the decision of the District Court, held that it was "the political question" and "act of state" doctrines which denied the justiciability of a claim by gasoline retailers of price fixing, in contravention of the Sherman Act and the Clayton Act, by United States firms working in concert with OPEC member nations. On a motion for summary dismissal, the District Court had declined to consider the application of the Foreign Sovereign Immunities Act of 1976 ("FSIA"). The Court of Appeals observed:
"We note that a 'commercial activity' exception to this sovereign activity may obtain with respect to application of the FSIA when, for example, a foreign sovereign enters into 'a joint venture contract with oil companies for the exploration, production, and sale on the world market of oil and gas,' thus acting 'not as a regulator of a market, but in the manner of a private player within it.' However, we agree with the Ninth Circuit that, under current precedents, '[t]he act of state doctrine is not diluted by the commercial activity exception which limits the doctrine of sovereign immunity.' Neither the Supreme Court nor any circuit have adopted a commercial activity exception to the act of state doctrine, and we decline to do so today."
Conclusions
The term "commercial transaction" as it appears in s 11(1) is defined in s 11(3) as meaning:
"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."
The express statement in s 11(3) "without limiting the generality of the foregoing" precludes resort to the ejusdem generis principle to limit the generality of the preceding words in the definition of "commercial transaction". In Leon Fink Holdings Pty Ltd v Australian Film Commission, Mason J said of the statute under consideration there:
"In this case the words 'without limiting the generality of the foregoing' evince an intention that the general power should be given a construction that accords with the width of the language in which it is expressed and that this construction is not to be restricted by reference to the more specific character of that which follows. The clause therefore operates to negative the restrictive implication which might otherwise have been derived from the presence of the specific power to lend contained in par (a)."
Section 11(1) denies the immunity in a proceeding, otherwise conferred on an entity such as Garuda by s 9 and s 22, by stating that there is no immunity "in so far as" this proceeding "concerns" what is "a commercial transaction". The term "concerns" is not further explicated by the text of the Act.
Garuda accepts that the proceeding may involve an investigation "at an evidentiary level" into contracts for carriage of freight by Garuda, from which to infer purpose or likely anti‑competitive effect, or the giving effect to the impugned arrangement or understanding within the meaning of the provisions of the TPA. However, Garuda submits that it is critical for the operation of s 11(1) of the Act that the ACCC does not plead the terms of any such contract, nor seek any remedy by way of variation, rescission, compensation or otherwise with respect to any of the contracts for the carriage of freight by Garuda. Further, it is said to be critical that no party to any such contract, or person claiming to have suffered loss by reason thereof, joins in the proceeding.
In sum, the submission for Garuda is that the proceeding does not seek to vindicate any "private law right" in respect of any freight contract and that, absent this, s 11(1) of the Act does not apply to deny immunity. This postulated dichotomy between private and public law as controlling the meaning of "concerned" in s 11(1) should not be accepted.
The definition of "commercial transaction" fixes upon entry and engagement by the foreign State. It does not have any limiting terms which would restrict the immunity conferred by s 9 and s 22 to a proceeding instituted against the foreign State by a party to the commercial transaction in question. Further, it should be emphasised that the definition does not require that the activity be of a nature which the common law of Australia would characterise as contractual. The arrangements and understandings into which the ACCC alleges Garuda entered were dealings of a commercial, trading and business character, respecting the conduct of commercial airline freight services to Australia. The definition of a "commercial transaction" is satisfied.
The Federal Court proceeding "concerned" a commercial transaction, within the meaning of s 11(1), in an immediate sense. This is apparent from the relief sought. The ACCC seeks declarations that the arrangements and understandings contravene Australian law, pecuniary penalties, and injunctive relief against the giving of effect to the arrangements and understandings.
Orders
The appeal should be dismissed with costs.