Petrotimor Companhia de Petroleos S.A.R.L. v Commonwealth of Australia

BETWEEN: PETROTIMOR COMPANHIA de PETROLEOS S.A.R.L.

JOINT AUTHORITY ESTABLISHED PURSUANT TO THE TREATY OF 11 DECEMBER 1989 BETWEEN AUSTRALIA AND INDONESIA

(CONOCOPHILLIPS (91 - 12) PTY LIMITED (FORMERLY KNOWN AS PHILLIPS PETROLEUM (91-12) PTY LIMITED)

CONOCOPHILLIPS JPDA PTY LIMITED (FORMERLY KNOWN AS PHILLIPS PETROLEUM COMPANY ZOC PTY LIMITED)

INDEX BEAUMONT J: Introduction The relief sought by Petrotimor and Oceanic in their application The basis of the claims for relief alleged by Petrotimor and Oceanic (1) Claims against the Commonwealth (a) Expropriation by executive action (b) Rights under Concession Agreement continue in force (c) Misuse of Confidential Business Information (2) Claims against the Joint Authority (a) Interference with contractual relations (b) Constructive trust (c) Respect for acquired rights (d) Misuse of Confidential Business Information (e) Legitimate expectations in decision-making (3) Claims against the Phillips companies (a) Interference with Contractual Relations (b) Constructive trust (c) Misuse of Confidential Business Information The separate question - Phillips' contention of lack of jurisdiction or of non-justiciability The agreed facts East Timor and Portugal Australia's claims of sovereign rights in respect of the continental shelf The Timor Sea area The grant of mining and petroleum rights in the Timor Sea area by Western Australia and the Northern Territory before 1967 and in 1968 - 1969 Australia's claims to sovereign rights in the Timor Sea area Events in East Timor East Timor and Indonesia The Timor Gap Treaty Proceedings before the International Court of Justice The end of Indonesian sovereignty over East Timor Timor Sea negotiations The Commonwealth's Executive Certificate The Commonwealth's affidavit evidence The Australian offshore legal regime The respondents' contentions in support of their application for a stay, or summary disposal, of the proceeding Conclusion on whether the applicants' claim for compensation for expropriation of their concession rights should be summarily disposed of Does the Court lack jurisdiction to entertain this claim? Assuming (contrary to my view) that jurisdiction exists, does the Court feel obliged to exercise it? Conclusion on the compensation claim Conclusion on whether the applicants' (alternative) claim for a declaration that entry by the Commonwealth into the Timor Gap Treaty had no effect on the applicants' pre-existing rights should be summarily disposed of Conclusion on whether the applicants' claim for a declaration that the Timor Gap Treaty was void or invalid because it contradicted public international law norms, ought to be summarily disposed of Conclusion on whether the applicants' claim for a declaration of the invalidity of permits granted by the Joint Authority in the Concession Area, should be summarily dismissed Conclusion on whether the applicants' claims that the provisions of the MLA Act are either invalid or, if not, do not affect their Concession rights, ought to be summarily disposed of Conclusion on whether the applicants' claims against all respondents for breach of confidence should be summarily disposed of Conclusion on whether the claim against the Joint Authority for interference with contractual relations, for a declaration of constructive trust, for compensation for expropriation, and for a declaration that the Authority's decision to grant a production sharing contract, ought to be summarily dismissed Conclusion on whether the claims against the Phillips companies for alleged interference with contractual relations, and for a declaration of constructive trust, ought to be summarily disposed of Appendix 1 The offshore legislative history The enactment of the P(SL) Act in 1967 The amendment of the P(SL) Act in 1973 The enactment of the SSL Act in 1973 The amendment of the SSL and P(SL) Acts in 1980 Amendment of the P(SL) Act by Part 8 of the Consequential Provisions Act Amendment of the SSL Act and the P(SL) Act by the MLA Act Appendix 2 The principal authorities relied on by the respondents Analysis of the English cases Cook v Sprigg [1899] AC 572 Hesperides Hotels Ltd v Muftizade [1979] AC 508 Buttes Gas and Oil Co v Hammer [1982] AC 888 R v Bow Street Metropolitan Stipendiary Magistrate; Ex parte Pinochet Ugarte [2000] 1 AC 61 R v Bow Street Metropolitan Stipendiary Magistrate; Ex parte Pinochet Ugarte (No. 3) [2000] 1 AC 147 Kuwait Airways Corporation v Iraqi Airways Co (Nos. 4 and 5) [2002] 2 WLR 1353 Analysis of the Australian cases Potter v Broken Hill Proprietary Co Ltd (1906) 3 CLR 479 Attorney-General (United Kingdom) v Heinemann Publishers Australia Pty Ltd (1988) 165 CLR 30 Queensland v Commonwealth (1989) 167 CLR 232 Mabo v Queensland (No. 2) (1992) 175 CLR 1 Horta v Commonwealth (1994) 181 CLR 183 Attorney-General (Cth) v Tse Chu-Fai (1998) 193 CLR 128 Minister for Arts, Heritage and Environment v Peko-Wallsend Ltd (1987) 15 FCR 274 Re Ditfort; Ex parte Deputy Commissioner of Taxation (1988) 19 FCR 347 Dagi v Broken Hill Proprietary Co Ltd (No. 2) [1997] 1 VR 428

REASONS FOR JUDGMENT (ON SEPARATE QUESTION) BEAUMONT J:

Introduction 81 The separate question now before the Full Court arises out of the respondents' motion for a stay, or summary disposal, of the applicants' claims in the principal proceedings. It raises for determination a number of important, but notoriously difficult, issues arising at the intersection of international law and Australian municipal law, issues which are even further complicated by the "baroque complexities" of federal jurisdiction in this country. 82 The argument before us centred on questions of law; there was no dispute about the primary facts, or about the history of events, which were agreed by the parties. In essence, the present question is whether the claims made by the applicants for final relief here are not justiciable, or not enforceable, by virtue of the application of the private international law rule of judicial abstention, or restraint, in the area of foreign relations. 83 Sir Anthony Mason has observed ("The High Court as Gatekeeper" (2000) 24 MULR 787)): "[J]usticiability … a substantive rather than a procedural gateway … is a controversial and difficult concept … because - like, its close relations, 'political questions', judicial power and judicial process (method) - so far it has not been susceptible to definition … [so] it is not possible to identify a precise relationship between these concepts, though my preference would be to equate justiciability in its primary sense with judicial power, at least in the context of the Australian Constitution." 84 As Sir Anthony then noted, part of the problem is that the term "non-justiciable" is commonly used in a number of senses. In its primary sense, the term signifies that an issue is "not appropriate or fit" for judicial determination. Non-justiciability, in its administrative law sense, signifying that a matter is "not capable of, or susceptible to, judicial review", as well as non-justiciability in the sense of there being "no jurisdiction to entertain an issue or to grant appropriate relief", raise other considerations (at 788). 85 As will be seen, there is, however, much force in Geoffrey Lindell's view: "Much remains to be done in identifying the proper use of justiciability in limiting judicial review and the precise factors that help to explain why some issues do not lend themselves to judicial adjudication. The criteria suggested by [Sir Anthony] Mason will not be sufficient by themselves if the concept of justiciability is to be much more than a discretionary and subjective tool by which a court may abstain from deciding difficult issues in cases where it is otherwise properly seised of jurisdiction at the instance of a competent litigant." (The Oxford Companion to the High Court of Australia (2001) at 392.) 86 Context is thus important, and in order to understand the context of the separate question, it is necessary to explain the nature of the claims made by the applicants in the principal proceedings, and the basis propounded by the applicants for those claims. 87 In the principal proceedings, Petrotimor Companhia de Petroleos S.A.R.L. ("Petrotimor") and Oceanic Exploration Company ("Oceanic"), as applicants for the final relief to be described below, have sued the Commonwealth of Australia ("the Commonwealth") (the first respondent), the Joint Authority Established Pursuant to the Treaty of 11 December 1989 between Australia and Indonesia ("the Joint Authority") (the second respondent), ConocoPhillips (91-12) Pty Limited (formerly known as Phillips Petroleum (91-12) Pty Limited, ConocoPhillips JPDA Pty Limited (formerly known as Phillips Petroleum Company ZOC Pty Limited) and Phillips Petroleum Timor Sea Pty Limited (hereafter, collectively, "the Phillips companies" or "Phillips") (the third, fourth and fifth respondents respectively). The Joint Authority has elected to take no part in this aspect of the proceedings; for present purposes, nothing turns on this. The "Timor Gap" is a technical term used to describe, not any physical feature, but rather, as will be explained below, the situation arising when seabed delimitation treaties entered into between Australia and Indonesia in 1971 and 1972 left an "undelimited gap" in relation to the seabed between Australia and the then Portuguese Timor.

The relief sought by Petrotimor and Oceanic in their application 88 By their amended Application dated 8 April 2002 ("the Application"), Petrotimor (a Portuguese company) and Oceanic (a United States corporation), as applicants, claim the following final relief: (1) A declaration that they are entitled to payment by the Commonwealth of such sum as will make good the losses suffered by them from the expropriation of their rights under a Concession Agreement between the Government of Portugal and Petrotimor dated 11 December 1974 ("the Concession Agreement"). (2) Alternatively to (1), a declaration that the Commonwealth's entry into the Treaty between Australia and the Republic of Indonesia on the Zone of Cooperation in an area between East Timor and Northern Australia dated 11 December 1989 ("the Timor Gap Treaty") was outside the executive power of the Commonwealth, such that the Treaty is void. (3) Alternatively to (1), a declaration that: (a) the Petroleum (Australia-Indonesia Zone of Cooperation) Act 1990 (Cth) ("the Zone of Cooperation Act") is invalid to the extent that it is inconsistent with the continued existence under Australian law of the rights of the applicants under the Concession Agreement;

(b) the Maritime Legislation Amendment Act 1994 (Cth) ("the MLA Act") is invalid to the extent that it is inconsistent with the continued existence under Australian law of the rights of the applicants under the Concession Agreement; and

(c) the rights of the applicants under the Concession Agreement continue in force under Australian law.

(5) Alternatively to (1), a declaration that all decisions by the Joint Authority concerning the issue of Production Sharing Contracts in respect of the area described in the Timor Gap Treaty as "Area A" ("Area A") are invalid and of no effect. (Area A is described below.)

(6) Alternatively to (1), an order that the respondents (other than the Commonwealth) hold any interests in respect of exploration rights or exploitation rights, or the proceeds of any exploration or exploitation activities, in respect of hydrocarbon resources located in or derived from the areas contained within Area A in respect of which the applicants held rights under the Concession Agreement, on trust for the applicants.

The basis of the claims for relief alleged by Petrotimor and Oceanic 89 The applicants' Statement of Claim relevantly alleges: · On 31 January 1974, the Government of Portugal issued Decree No 25/74 ("the Decree"), Art 1 of which authorised the Portuguese Minister for Overseas to enter into a Concession Agreement with a corporation to be constituted by Oceanic. Petrotimor was established, in accordance with Art 2 of the Decree and Art 5 of the Concession Agreement, as a subsidiary of Oceanic. The Decree was to have the force of law outside Portugal.

· The Government of Portugal subsequently entered into the Concession Agreement (dated 11 December 1974) with Petrotimor ("the Concession Agreement") (see above), which entitled Petrotimor to exercise the rights of prospecting, investigating, developing and exploiting hydrocarbons on a part of the continental shelf (as defined in Art 2) between Portuguese Timor and Australia ("the Concession Area", which is shown on Map 1 annexed to these reasons).

· At the time when the Concession Agreement entered into force, Portugal claimed (on behalf of Portuguese Timor) in accordance with the law of Portugal and international law, sovereign rights to exploit the resources of its continental shelf, including the Concession Area, in accordance with Art 6 of the 1958 Geneva Convention on the Continental Shelf ("the 1958 Convention"). (As will be seen, Art 6(1), which provides for the location of the international boundary of the continental shelf, is relied upon. It provides that in the absence of agreement, and unless another boundary line is justified by special circumstances, where the same continental shelf is adjacent to the territories of States whose coasts are opposite each other, the boundary is the median line.)

· The Concession Agreement granted Petrotimor property rights under the law of Portugal and under international law. Oceanic was entitled to the property of Petrotimor arising from the Concession Agreement.

· As a consequence of the Concession Agreement, on or about 1 July 1975, the applicants established an office in Portuguese Timor for the purposes of exploration.

· At various times between 1969 and 1974, Oceanic, and thereafter the applicants, conducted various exploration and prospecting activities in relation to the Concession Area. In the course of such exploration, money was expended and confidential information was discovered ("the Confidential Business Information").

· In December 1975, Indonesia invaded Portuguese Timor. In the period from August to December 1975, and thereafter, continued performance of the obligations contained in the Concession Agreement was prevented as a result of the invasion, and civil unrest preceding the invasion. In 1976, Indonesia purported to integrate the territory of Portuguese Timor into the Republic of Indonesia (known as "East Timor" after 17 July 1976).

· Performance of the Concession Agreement was suspended, on the grounds of force majeure, by mutual agreement between Portugal and Petrotimor and Oceanic, by exchange of letters dated 5 January 1976 and 14 April 1976, and remained suspended until at least November 1999.

(1) Claims against the Commonwealth o At all relevant times, Australia has asserted sovereign rights over the continental shelf of Australia. o At the date of entry into force of the Concession Agreement on 11 December 1974, the continental shelf of Australia was defined under the Seas and Submerged Lands Act 1973 (Cth) ("the SSL Act"). The SSL Act provided (by s 11), that the sovereign rights of Australia in respect of exploration and exploitation of the continental shelf are vested in the Commonwealth. As at 11 December 1974, s 3(1) of the SSL Act provided that "continental shelf" had the same meaning as that provided in the 1958 Convention. At all material times, Australia and Portugal were parties to the 1958 Convention. o As at 11 December 1974, under s 12 of the SSL Act, the Governor-General had the power to make a Proclamation declaring the limits of the continental shelf. As at 11 December 1974, the Governor-General had not, and has not subsequently, made any such Proclamation. Accordingly, the "continental shelf" rights vested in the Commonwealth under s 11 of the SSL Act were rights in respect of the "continental shelf" defined in accordance with the 1958 Convention. o For its purposes, that Convention defined (by Art 1) the "continental shelf" to mean the seabed and subsoil of the submarine areas adjacent to the coast, but outside the area of the territorial sea, to a depth of 200 metres, or beyond that limit, to where the depth of the superadjacent waters admits of the exploitation of the natural resources of the said areas. o The Convention provided (by Art 6) that where (as in the case of Australia and East Timor) the same continental shelf is adjacent to the territories of two or more States whose coasts are opposite each other, the boundary of the continental shelf shall be determined by their agreement, or if not, and unless another boundary is justified by special circumstances, the boundary is the median line, every point of which is equidistant from the nearest points of the baselines from which the breadth of the territorial sea of each State is measured. o Since the boundary has never been determined by agreement, as at 11 December 1974, the boundary was under the Convention, and by force of the SSL Act, for the purposes of Australian law, the median line. o The Concession Area lies wholly outside the limit of Australia's continental shelf. o The Concession Agreement entitled Petrotimor to rights, including exclusive rights to prospect and develop any natural hydrocarbons within the Concession Area. o The law of Australia, in so far as it defined the limits of Australia's continental shelf, remained as stated above at all material times until 18 February 1991 or, alternatively, until 1 August 1994. o Australian law recognised in 1974, and continues to recognise, property rights acquired under foreign law.

(a) Expropriation by executive action o On 11 December 1989, the Commonwealth and the Government of Indonesia entered into the Timor Gap Treaty, which came into force on 9 February 1991. o The Timor Gap Treaty purported to govern the allocation of rights to prospect for, and recover, petroleum in an area designated as the "Zone of Cooperation". o The Zone of Cooperation comprised three areas, designated A, B and C. Areas A and B comprised substantially the same area as the Concession Area. o Article 3 of the Timor Gap Treaty provided for the grant of rights to exploit natural resources in the seabed in Area A to be undertaken by a Ministerial Council, comprising representatives of Australia and Indonesia, and the Joint Authority. o The execution and/or entry into force of the Timor Gap Treaty by the Commonwealth constituted a claim of sovereign rights in respect of the Concession Area by Australia which was inconsistent with the continuing recognition, by Australian law, of the rights of Petrotimor under the Concession Agreement. o The execution and/or entry into force of the Timor Gap Treaty by the Commonwealth constituted an expropriation of the rights of Petrotimor. o The Commonwealth is under an obligation to pay prompt, adequate and effective compensation to Petrotimor for the expropriation of its property rights.

(b) Rights under Concession Agreement continue in force o Alternatively, the execution and/or entry into force of the Timor Gap Treaty by the Commonwealth constituted an assertion of sovereign rights in respect of an area, including the Concession Area, but subject to pre-existing property rights in that area. o Following the entry into force of the Timor Gap Treaty, the rights of the applicants continue to be recognised by Australian law. o Alternatively, at the time of its entry into force, the Timor Gap Treaty was illegal under international law because it breached the prohibition of the recognition of acquisition of territory by force, or because it breached the right of the people of East Timor to self-determination in respect of its natural resources. o In the further alternative, at the time of its entry into force, the Timor Gap Treaty was void because, at the time of its conclusion, it conflicted with a peremptory norm of international law within the meaning of Art 53 of the Vienna Convention on the Law of Treaties 1969, namely, the prohibition on the recognition of the acquisition of territory by force other than in accordance with the Charter of the United Nations, or, alternatively, the obligation to respect the right of self-determination with respect to exploitation of natural resources. o The Commonwealth does not have constitutional power, under s 61 of the Constitution, to enter treaties that are illegal or void under international law. The purported exercise of executive power by the Commonwealth was, therefore, ultra vires and of no effect. o The rights of the applicants under the Concession Agreement continue to be recognised by Australian law following entry into the Timor Gap Treaty. o Further, on 7 June 1990, the Commonwealth enacted the Zone of Cooperation Act, which came into force on 18 February 1991. Sections 7 and 8 of this Act prohibit prospecting for, and recovery of, "petroleum" in Area A (of the Zone of Cooperation) except with the consent of the Joint Authority. o Sections 7 and 8 of this Act purported to prohibit activities which would have constituted the exercise by Petrotimor of its rights under the Concession Agreement, and, thereby, effected an acquisition of the property of Petrotimor and Oceanic within the meaning of s 51(xxxi) of the Constitution. o The Zone of Cooperation Act is a law "with respect to the acquisition of property" otherwise than on "just terms" within the meaning of s 51(xxxi) and is invalid. Therefore, the rights under the Production Sharing Contracts purportedly entered into by the Joint Authority with the Phillips companies, in respect of parts of the Zone of Cooperation falling within the Concession Area ("the Production Sharing Contracts"), have not been validly granted under Australian law. o Further, the SSL Act was amended by the MLA Act, which commenced on 1 August 1994. o Section 6 of the MLA Act amended s 3 of the SSL Act, so that the expression "continental shelf" was defined as having the same meaning as in par 1 of Art 76 of the 1982 United Nations Convention on the Law of the Sea ("the 1982 Convention"). o Article 76 of the 1982 Convention (see below) sets out a different regime for determining the continental shelf of the coastal State, whereby the coastal State determines the shelf within specified parameters. o Article 83 of the 1982 Convention (see below) provides for a dispute resolution mechanism in relation to countries with opposite coasts. o The relevant articles of the 1982 Convention are incorporated into Australian domestic law by the MLA Act. o Properly construed, Art 76(1) of the 1982 Convention does not fix the limits of Australia's continental shelf in the area between Australia and East Timor; rather, by Arts 76(10) and 83, the matter is referred to the dispute-settling procedures set out in the 1982 Convention. o Article 76(1) provides: "1. The continental shelf of a coastal State comprises the sea-bed and subsoil of the submarine areas that extend beyond its territorial sea throughout the natural prolongation of its land territory to the outer edge of the continental margin, or to a distance of 200 nautical miles from the baselines from which the breadth of the territorial sea is measured where the outer edge of the continental margin does not extend up to that distance." o The MLA Act did not result in the Concession Area being incorporated within Australia's continental shelf for the purposes of Australian law. o Alternatively, if the MLA Act did result in the Concession Area being incorporated within Australia's continental shelf for the purposes of Australian law, to the extent that such incorporation was inconsistent with the continuing recognition of the applicants' rights under the Concession Agreement; such incorporation constituted an acquisition of property within the meaning of s 51(xxxi) of the Constitution; the MLA Act was a law with respect to the acquisition of property otherwise than on just terms; and, to that extent, the MLA Act was invalid. o The rights of the applicants under the Concession Agreement have not been validly extinguished, and continue to be recognised by Australian law.

(c) Misuse of Confidential Business Information o Further, the employees and representatives of Petrotimor were forced to flee Dili in extraordinary circumstances in August 1975. The documents recording the Confidential Business Information were left by necessity in Dili. The Confidential Business Information was confidential to the applicants and the Portuguese Government under the Concession Agreement. o The Commonwealth and the Joint Authority came into possession of the Confidential Business Information, by means presently unknown, at some time between December 1974 and December 1989. o The Production Sharing Contracts, issued by the joint Authority and currently held by the Phillips companies, are issued in respect of an area ("Bayu-Undan") identified by Petrotimor and described in the Confidential Business Information as holding significant potential to be rich in hydrocarbon resources. A Production Sharing Contract was issued by the Joint Authority in respect of an area ("Greater Sunrise"), also identified by Petrotimor and described in the Confidential Business Information as holding significant potential to be rich in hydrocarbon resources. At the time of entry into force of the Production Sharing Contracts, the potential of Bayu-Undan and Greater Sunrise was not a matter of public knowledge. o It should, therefore, be inferred that the location of the areas in respect of which the Phillips companies were granted Production Sharing Contracts, was a result of the use of the Confidential Business Information by each of the respondents in circumstances where the Commonwealth knew, or ought to have known, that the information was of a confidential nature. o The Commonwealth has benefited unjustly from the misuse of the Confidential Business Information in that, through the identification of the two areas, it has and shall be able to generate substantial revenues.

(a) Interference with contractual relations q The Joint Authority was established as an international institution by Art 7 of the Timor Gap Treaty. q Since 1991, the Joint Authority has issued Production Sharing Contracts to corporations, including the Phillips companies, in respect of Area A. These contracts are inconsistent with the rights granted to Petrotimor under the Concession Agreement in that they purport to allow the holders of rights under the Production Sharing Contracts to exercise, to the exclusion of all others, the right to explore and exploit hydrocarbon resources within the part of Area A to which the contract applies. q The applicants have informed the Commonwealth of its rights under the Concession Agreement (on 28 July 1975, 21 May 1982 and 21 January 1986); and have also informed the Joint Authority (on 17 September 1991). q At the time the Joint Authority issued the Production Sharing Contracts, the Authority had actual knowledge of the Concession Agreement, including the nature and extent of the rights granted to Petrotimor. q At the time the Joint Authority issued the Production Sharing Contracts, it had actual or constructive knowledge that the applicants maintained their entitlement to the enjoyment of the rights granted under the Concession Agreement, and that the Concession Agreement was suspended, for reasons of force majeure, by agreement between Petrotimor and the Government of Portugal. q The granting of the Production Sharing Contracts amounted to a wrongful, deliberate and direct (or, alternatively, indirect) interference with the performance of the Concession Agreement by the Joint Authority.

(b) Constructive trust q Further, or alternatively, the Joint Authority issued the Production Sharing Contracts in respect of a part of the Concession Area with actual or constructive knowledge of the existence of the rights of the applicants pursuant to the Concession Agreement, and with actual or constructive knowledge that such entry would have the effect of preventing the applicants from exercising their rights under the Concession Agreement. q The Joint Authority, therefore, holds the benefit of the Production Sharing Contracts on trust for the applicants.

(c) Respect for acquired rights q Further, or alternatively, the Joint Authority acquired, pursuant to the Timor Gap Treaty and the Zone of Cooperation Act, powers and/or rights in respect of the Concession Area subject to the property rights held by the applicants under the Concession Agreement. q The applicants held property rights in respect of the Concession Area under the law of Portugal. They acquired such rights in good faith, in a manner not inconsistent with Australian law. q The Joint Authority is an international institution subject to the operation of customary international law. q Customary international law prohibits a State, or other international person, from dealing with or expropriating private rights acquired in good faith other than by making prompt, adequate and effective compensation. This customary international law obligation forms part of the common law of Australia. q Therefore, the Joint Authority is under an obligation to make prompt, adequate and effective compensation to the applicants.

(d) Misuse of Confidential Business Information q It should be inferred that the Joint Authority came into possession of the Confidential Business Information in circumstances in which it knew or ought to have known that it was confidential. It benefited unjustly from the use of the information.

(e) Legitimate expectations in decision-making q The applicants had a legitimate expectation that the Joint Authority would exercise its functions in a manner consistent with Petrotimor's rights under the Concession Agreement; or, further, or alternatively, that it would take into account customary international law obligations to respect the private rights acquired by the applicants. q The applicants were entitled to be heard by the Joint Authority when it made a decision contrary to their legitimate expectations. Given that the applicants were not given this opportunity, the decision contravened the rules of natural justice and was void and of no effect.

(3) Claims against the Phillips companies 90 The applicants make the following claims against the Phillips companies:

(a) Interference with Contractual Relations v Each of the Phillips companies had actual or constructive knowledge of the Concession Agreement at the time of entry into the Production Sharing Contracts in respect of Area A. Therefore, the entry into those contracts amounted to wrongful direct, or indirect, interference with the property rights of the applicants and of the Government of Portugal.

(b) Constructive trust v Further, or alternatively, the Phillips companies entered into the Production Sharing Contracts with actual or constructive knowledge of the Concession Agreement and of the fact that the performance of the Production Sharing Contracts would have the effect of preventing the applicants from exercising their rights under the Concession Agreement. v Accordingly, the Phillips companies hold the benefit of the Production Sharing Contracts on trust for the applicants.

(c) Misuse of Confidential Business Information v It should be inferred that the Phillips companies came into possession of the Confidential Business Information in circumstances in which they knew, or ought to have known, that it was confidential. They have benefited unjustly from the use of the information.

The separate question - Phillips' contention of lack of jurisdiction or of non-justiciability 91 The respondents have not filed defences, but the Phillips companies (with the support of the Commonwealth) contend, by way of objection to jurisdiction, that the Court has no jurisdiction to entertain this proceeding, or, if it does have jurisdiction, it must decline to exercise it. By their Notice of Motion dated 20 December 2001 (as subsequently amended), the Phillips companies seek: 1. A declaration that the claims made in the Application:

(a) require for their determination the adjudication of "acts of state";

(b) require for their determination the adjudication on the validity, meaning and effect of the transactions of foreign sovereign states;

(c) by reason of (a) or (b) are not justiciable or enforceable; and

(d) additionally, or alternatively, by reason of (c) do not give rise to a matter within the jurisdiction of the Court.

2. An order consequent upon order 1 that the Application be set aside, dismissed or permanently stayed.

92 It has been ordered, by consent, that the question, whether the relief sought by Phillips on their motion ought to be granted, be determined as a separate question. Pursuant to s 20(1A) of the Court's statute, the Chief Justice has directed that the separate question be determined by a Full Court.

The agreed facts 93 For the purposes of the adjudication of the separate question, by their Statement of Agreed Facts, the parties have agreed the background facts:

East Timor and Portugal · From at least 1941, Australia recognised that Portugal exercised sovereignty over Portuguese Timor. · By United Nations ("UN") resolution 1514(XV) of 14 December 1960, the United Nations General Assembly declared the rights of non-self-governing territories to independence. · By UN resolution 1541(XV) of 15 December 1960, the General Assembly declared Portuguese Timor to be a non-self-governing territory within chapter XI of the United Nations Charter. · In October 1961, the Government of Australia informed the Government of Portugal that it would treat all Portuguese colonies as non-self-governing territories subject to UN supervision. · In April 1974, the Portuguese Government was overthrown in a military coup; and Constitutional Law 7-74 was enacted on 25 July 1974, acknowledging the applicability to Portugal's colonies (including Portuguese Timor) of the UN Charter provisions regarding non-self-governing territories.

Australia's claims of sovereign rights in respect of the continental shelf · In 1953, Australia claimed that it has sovereign rights over the continental shelf contiguous to any part of the coasts of Australia by a Proclamation published in the Commonwealth of Australia Gazette on 11 September 1953. · The Proclamation recited: "WHEREAS International Law recognizes that there appertain to a coastal state or territory sovereign rights over the sea-bed and subsoil of the continental shelf contiguous to its coasts for the purpose of exploring and exploiting the natural resources of that sea-bed and subsoil: And whereas it is desirable to declare that Australia has those sovereign rights over the sea-bed and subsoil of the continental shelf contiguous to any part of its coasts and of the continental shelf contiguous to any part of the coasts of certain territories under its authority." The Proclamation went on to declare - "…that Australia has sovereign rights over the sea-bed and subsoil of - (a) the continental shelf contiguous to any part of its coasts; …" and to further declare - "… that nothing in this Proclamation affects - (a) the character as high seas of waters outside the limits of territorial waters; or (b) the status of the sea-bed and subsoil that lie beneath territorial waters." · On 18 January 1963, Portugal ratified the 1958 Convention. On 14 May 1963, Australia ratified it. · On 16 November 1994, the 1982 Convention entered into force generally, including Australia. The SSL Act was amended in 1994 by the MLA Act,when the 1982 Convention came into force, picking up, as a schedule to the Act, the 1982 Convention, including Part VI (Arts 76 - 85) dealing with the continental shelf. · Section 12 of the SSL Act provides that the Governor-General may, by proclamation, declare (not inconsistently with the 1982 Convention Art 76) the limits of the whole or part of the continental shelf of Australia. Article 76 (as previously noted) contains a definition of "continental shelf" (Art 76(1)). Article 76(2) provides that the shelf shall not extend beyond certain specified limits. By Art 76(10), the provisions of Art 76 "are without prejudice to the question of delimitation of the continental shelf between States with opposite or adjacent coasts". · No proclamation has been made under s 12 of the SSL Act. · Although the Minister is empowered to do so, no charts have been issued showing the limits of the continental shelf of Australia pursuant to s 13 of the SSL Act.

The Timor Sea area · Between Australia and Timor there is a formation known as the "Timor Trough", which is as depicted by Map 1 and Map 2 annexed to these reasons. · At all material times, the opinion of the Australian Government has been that the Timor Trough is a major break in the configuration of the seabed so that there are two distinct continental shelves between Australia and Timor. As a result, the Australian Government has not accepted that a seabed delimitation, on the basis of a "median line" between the coasts of Australia and East Timor, is appropriate.

The grant of mining and petroleum rights in the Timor Sea area by Western Australia and the Northern Territory before 1967 and in 1968 - 1969 · Prior to the enactment of the Petroleum (Submerged Lands) Act 1967 (Cth) ("the P(SL) Act"), petroleum exploration permits covering areas of seabed extending beyond the median line between Australia and Portuguese Timor (now East Timor) (as shown on Map 1) were purportedly issued and dealt with under the Petroleum (Prospecting and Mining) Ordinance 1954 (NT) and the Petroleum Act 1936 (WA). · Following the enactment of the P(SL) Act, in 1968 and 1969 the designated authorities for Western Australia and the Northern Territory purported to issue permits under that Act, covering areas extending beyond the median line between Australia and Portuguese Timor. · The areas covered by petroleum permits purportedly issued under the P(SL) Act, so far as they related to the Timor Sea area, are shown on Map 1.

Australia's claims to sovereign rights in the Timor Sea area · On 24 October 1970, the Official Bulletin of (Portuguese) Timor gave notice of an application by Oceanic for a permit to explore for oil and other minerals in a defined area on the continental platform of Timor. · On 30 October 1970, the then Australian Minister for External Affairs made this Statement in the House of Representatives: "I make four points[on 'the principles on which Australia has acted in relation to granting petroleum exploration permits on the continental shelf between the northern coast of Australia and Indonesian Timor']. First, Australia based its 1967 legislation for regulating the exploration and exploitation of the petroleum resources on the continental shelf squarely on the International Geneva Convention of 1958, to which Australia is a party. So are 40-odd other states, including the United States, the Soviet Union, the United Kingdom, France, Canada, New Zealand, Malaysia and Thailand. To follow the [C]onvention was strictly in accordance with Australian constitutional law. There are some distinctive features of detail in the Australian legislation, for instance the so-called picture-frame lines which delimit for domestic purposes the areas within which the respective states and territories should exercise agreed administrative functions. But the principles, based as they are on the Convention itself, are common to many other countries, and in accordance with international practice. Second, the 1958 Convention embodies the two conceptions on which the law of the continental shelf is founded. It expressly states what has been called the expanding rim doctrine - that is, that the shelf extends to the 200-metres depth line, and beyond it to the limit of exploitability. From this, it is crystal clear that there is nothing in the law as it stands to restrict exploration permits to the 200-metres depth line. Many other countries besides Australia - including the United States, Canada and New Zealand - have granted such permits. The International Court of Justice has emphasised in a recent North Sea case [see my "Comment" below] that what is known as the morphological concept is also inherent in the Convention. Indeed it is the foundation of the doctrine which the lawyers later took over and developed. The morphological concept is that the continental shelf is the natural prolongation under the sea of the land mass of the coastal state, out to the lower edge of the margin, where it slopes down to and merges in, the deep ocean-floor or abyssal plain. These two concepts are in no way inconsistent. They both point to the outer edge of the margin as the limit of the coastal state's rights. [Comment: The Minister was referring to the North Sea Continental Shelf Cases ([1969] ICJ Rep 3). Germany was a party to the proceedings, but was not bound by the 1958 Convention. It was held, in essence, that the "equidistance" method of determining boundaries was not a rule of general or customary international law; and that, in the course of negotiations, one of the factors to be taken into account was, so far as known or readily ascertainable, the physical and geological structure, and natural resources, of the shelf area.] Third, the rights claimed by Australia in the Timor Sea area are based unmistakably on the morphological structure of the sea bed. The essential feature of the sea bed beneath the Timor Sea is a huge steep cleft or declivity called the Timor Trough, extending in an east-west direction, considerably near[er] to the coast of Timor than to the northern coast of Australia. It is more than 550 nautical miles long and on the average 40 miles wide, and the sea bed slopes down on opposite sides to a depth of over 10,000 feet. The Timor Trough thus breaks the continental shelf between Australia and Timor, so that there are two distinct shelves, and not one and the same shelf, separating the two opposite coasts. The fall-back median line between the 2 coasts, provided for in the Convention in the absence of agreement would not apply for there is no common area to delimit. This Australian view is of course well known to Indonesia. There has in fact been a recent exchange of views, still incomplete, between Indonesian and Australian officials. Fourth, the sea bed proposals made last May by the President of the United States are based on the two concepts of the continental shelf that I have mentioned ... . Whatever eventual legal arrangements will emerge for the sea bed, the present law will not be changed except by agreement, and without adequate safeguards for existing investment there is little or no likelihood of agreement. I therefore do not accept the view that titles which Australia has granted in the Timor Sea are open to question." · On 2 November 1970, the Portuguese Government sent to the Australian Government a diplomatic note stating: "a) The Portuguese Government was made aware that the Australian Government had granted concessions in the Timor Sea, in specific areas that it believes are included in areas over which the island of Timor has rights; b) Thus, there seems to be a difference of opinion between Portugal and Australia regarding the criteria applicable to the division of the continental platform between Timor and Australia. As the Portuguese Government intends to grant concessions in the above mentioned areas, the competent departments believe it is highly advisable to urgently hold meetings regarding this matter with the Australian Government, in order to reach an eventual agreement between the two parties." · Discussions took place between the Ambassador of Portugal and Australian officials in April and May 1971. The Portuguese Ambassador was informed by Australian diplomatic note, dated 25 May 1971, of the terms of the Statement made by the Australian Minister for External Affairs, dated 30 October 1970. The note went on to say: "Since in the Timor Sea the seabed area specified in the Petroleum (Submerged Lands) Act, 1967, falls short of the outer limit of the continental margin, it follows from the view stated [by the Minister] that that area forms part, though not the whole, of the continental shelf that appertains to Australia. It follows also that no question of negotiating a common boundary will arise where an area of the ocean floor, great or small in extent, lies between the two shelves that prolong under the sea the land territory of two opposite states. In such circumstances, it is a matter for each state to delimit its own continental shelf. Nevertheless, if the Portuguese Government, having considered the views of the Australian Government, should wish to discuss the matter further, the Australian Government for its part would be agreeable." · At a further discussion between the Ambassador of Portugal and Australian officials on 4 June 1971, the Ambassador stated that no · On 18 May 1971, the Government of Australia and the Government of Indonesia entered into an Agreement establishing certain seabed boundaries. The Agreement recited a - "… desir[e] particularly to co-operate in delimiting by agreement the boundaries of certain areas of seabed in which the two countries respectively exercise sovereign rights for the exploration and exploitation of the natural resources." It was agreed (Art 1) that in the Arafura Sea eastwards of Longitude 133˚ 23΄ East, the boundary between the area of seabed that is adjacent to and appertains to the Commonwealth of Australia and the area that is adjacent to and appertains to the Republic of Indonesia shall be the straight lines shown on a chart annexed to the Agreement. It was further noted (Art 2) that the two Governments had not provided in the Agreement for the delimitation of the respective areas of adjacent seabed westward of Longitude 133˚ 23΄ East (i.e. the Timor Gap), and had left this question for discussion at further talks to be held at a mutually convenient date. For the purpose of the Agreement, "seabed" included the subsoil thereof, except where the context otherwise required (Art 5). The co-ordinates of the points specified in the Agreement were geographical co-ordinates, and the actual location of the points and of the lines joining them was to be determined by a method to be agreed upon by the competent authorities of the two Governments (Art 6). Articles 7 and 8 of the Agreement provided: "ARTICLE 7 If any single accumulation of liquid hydrocarbons or natural gas, or if any other mineral deposit beneath the seabed, extends across any of the lines that are specified in Articles 1, 3 and 4 of this Agreement, and the part of such accumulation or deposit that is situated on one side of the line is recoverable in fluid form wholly or in part from the other side of the line, the two Governments will seek to reach agreement on the manner in which the accumulation or deposit shall be most effectively exploited and on the equitable sharing of the benefits arising from such exploitation. ARTICLE 8 Any dispute between the two Governments arising out of the interpretation or implementation of this Agreement shall be settled peacefully by consultation or negotiation." · On 9 October 1972, the Government of Australia and the Government of Indonesia entered into a Supplementary Agreement, which recited that in the 1971 Agreement the two Governments had left for later discussion the question of the delimitation of the Timor Gap areas and that, as good neighbours and in a spirit of co-operation and friendship, the two Governments had resolved to settle permanently the limits of these areas within which the respective Governments were to exercise sovereign rights with respect to the exploration of the seabed and the exploitation of its natural resources.

It was agreed that in the area south of Roti and Timor Islands, the boundary between the area of seabed that is adjacent to and appertains to the Commonwealth of Australia and the area of seabed that is adjacent to and appertains to the Republic of Indonesia were to be the straight lines, shown on a chart annexed to the Agreement.

Articles 5, 6, 7 and 9 were, relevantly, in the same terms as Arts 5, 6, 7 and 8 of the 1971 Agreement.

Article 8 provided: "ARTICLE 8 1. Where the Government of the Commonwealth of Australia has granted an exploration permit for petroleum or a production licence for petroleum under the Petroleum (Submerged Lands) Acts of the Commonwealth of Australia over a part of the seabed over which that Government ceases to exercise sovereign rights by virtue of this Agreement, and that permit or licence is in force immediately prior to the entry into force of this Agreement, the Government of the Republic of Indonesia or its authorised agent shall, upon application by the registered holder of the permit or licence, or where there is more than one registered holder, by the registered holders acting jointly, be willing to offer and to negotiate a production sharing contract under Indonesian law to explore for and to produce oil and natural gas in respect of the same part of the seabed on terms that are not less favourable than those provided under Indonesian law in existing production sharing contracts in other parts of the seabed under Indonesian jurisdiction. 2. An application for negotiation in accordance with paragraph 1 … must be made by the registered holder or holders within nine months after the entry into force of this Agreement. If no application is made within this period, or if an offer made in accordance with paragraph 1 of this Article is, after negotiation, not accepted by the permittee or licensee, the Government of the Republic of Indonesia shall have no further obligation to the registered holder or holders of a permit or licence to which paragraph 1 of this Article applies. 3. For the purpose of this Article, 'registered holder' means a company that was a registered holder of an exploration permit for petroleum or a production licence for petroleum, as the case may be, under the Petroleum (Submerged Lands) Acts of the Commonwealth of Australia immediately prior to the entry into force of this Agreement."

· The Agreements of 18 May 1971 and 9 October 1972 (which entered into force on 8 November 1973), established seabed boundaries between Australia and Indonesia in the areas of the Timor and Arafura seas. The 1972 Agreement established a boundary in the area off West Timor located as depicted on Map 1 and Map 2.

· The seabed boundaries established by the Agreements between Australia and Indonesia left a gap, or opening, of approximately 130 nautical miles, situated between Australia and Portuguese Timor (the Timor Gap), indicated on the Chart annexed to the 1972 Agreement (Map 3).

· Between 1971 and 1973, further discussions took place between the Governments of Australia and Portugal concerning the possibility of commencing negotiations to delimit a seabed boundary in the area of the Timor Sea. On 5 March 1973, a diplomatic note was delivered by the Australian Government to the Ambassador of Portugal, recalling Australia's diplomatic note dated 25 May 1971, seeking to negotiate in late March 1973.

· During 1974, the Australian Government became aware that the Portuguese Government had granted an oil exploration concession to Petrotimor, a subsidiary of Oceanic, in respect of parts of the area of the Timor Gap over which Australia claimed to have sovereign rights and in respect of which it had issued permits in relation to petroleum operations involving exploration and exploitation.

By Decree No. 25/74, issued by the Inspector-General of Mines on behalf of the Government of Portugal on 31 January 1974 ("the Decree", see above) it was recited (by an English translation) that Oceanic had applied to the Government for a concession for prospecting, exploration, development and production of natural hydrocarbons on a part of the continental shelf of the province of Timor. By the Decree, the Minister for Overseas Territories was authorised to enter on behalf of the State and representing the province of Timor, a concession contract with the Portuguese corporation to be constituted by Oceanic. The Concession included, within the area defined in Art 2, the rights of prospecting and, with title of exclusiveness, that of exploration, development and production within the terms and conditions of the contract, of natural hydrocarbon deposits which may exist in a liquid or gaseous state, as well as of all substances associated with and produced jointly with them (Art 1). The initial concession area was of 60,070 square kilometres and included part of the continental shelf of the province of Timor. However, it was provided that the limits of the area "may undergo adjustments resulting from eventual international agreements, in such case the correlated, contractual obligations will be adjusted proportionately" (Art 2).

· On 25 March 1974, Australia made an oral protest to the Portuguese Ambassador, stating that Australia regarded the areas the subject of the Concession to be within Australian jurisdiction.

· On 18 April 1974, the Embassy of Portugal delivered to the Australian Department of Foreign Affairs a diplomatic note which stated:

"1) As the Department is aware, the Portuguese Government understand that, in accordance with Articles 1 and 6 of the Convention on the Continental Shelf, of the 29th April, 1958, of which both Australia and Portugal are Parts, there is one 'continental shelf' between Australia and Portuguese Timor, the medium line between the respective coast lines being therefore the boundary separating the seabeds of each country. However, the Australian Government, upholding a different doctrine on the subject, have granted several concessions for exploration by private companies of areas beyond that line. The Portuguese Government, according to the above mentioned interpretation of the Convention of 1958, granted recently a concession for prospection on their side of the medium line; 2) The Portuguese Government, conscious that there were differences of opinion between themselves and the Australian Government on the subject, introduced in the concession deed special clauses aimed at safeguarding the principles that they believe should apply in international relations. Thus, according to those clauses, the boundaries of the concession may undergo adjustments as a result of the implementation of eventual international agreements. On the other hand, the right to prospect, search and develop is granted for an initial period of 18 months, renewable for successive periods of 12 months until the question of the boundaries of the Continental Shelf between Portuguese Timor and Australia is settled. During the time of those renewals, the lessee company shall only effect 1,500 kms. of seismic digital profiles and a complete magnetic prospection of the area of the concession; 3) Whilst regretting the fact of the Australian Prime Minister having made public declarations on the subject, the Portuguese Government maintain their willingness to enter into negotiations with the Australian Government for the establishment of a boundary on the seabed between Portuguese Timor and Australia. However, since a conference on the Law of the Sea is scheduled to take place in Caracas, in June next, the Portuguese Government are of the opinion that immediate negotiations would be ill-timed and would therefore prefer to await the results of that Conference." · A further diplomatic note from the Australian Government to the Government of Portugal was delivered on 29 November 1974. Reiterating that "the Australian Government is unable to agree that there is one continental shelf between Australia and Portuguese Timor", it concluded:

"The Australian Government takes note of paragraph 3 of the Portuguese Note. The Australian Government again expresses its desire that any differences that may have recently emerged should be settled amicably. In the circumstances, however, the Australian Government must ask the Portuguese Government not to permit any activities in the areas that would infringe the sovereign rights of Australia as referred to in this Note. The Australian Government must ask in particular that the Portuguese Government not permit any activities, relating in any way to exploration or exploitation of the sea-bed or subsoil in the areas covered by the established Australian permits referred to in this Note."

Events in East Timor · By Constitutional Law 7-75 of 17 July 1975, Portugal indicated that it would establish a provisional government and constitute a popular assembly to determine the eventual status of Portuguese Timor. · Around August 1975, civil war broke out in Portuguese Timor. · On 7 December 1975, military forces of Indonesia occupied East Timor.

East Timor and Indonesia · On 17 July 1976, Indonesia Law No. 7 of 1976 came into force, purportedly incorporating East Timor into the Republic of Indonesia. · On 20 January 1978, the then Minister for Foreign Affairs made a statement announcing the Australian Government's recognition that East Timor was de facto part of Indonesia. · In 1979, negotiations commenced between Australia and Indonesia on the question of a possible delimitation of the seabed boundary between Australia and East Timor. The Australian Government took the view that these negotiations would imply de jure recognition of Indonesia's incorporation of East Timor. · On 22 August 1985, the then Prime Minister answered a question in the House of Representatives indicating that Australia recognised de jure Indonesia's incorporation of East Timor. · Australia continued to recognise Indonesian sovereignty over East Timor until 25 October 1999.

The Timor Gap Treaty · Between 1985 and October 1988, the Government of Portugal protested to Australia about the negotiations between Australia and Indonesia, claiming that it was the administering power of East Timor. · On 11 December 1989, the Governments of Australia and Indonesia signed the Timor Gap Treaty. The text of the Timor Gap Treaty formed the Schedule to the Zone of Cooperation Act (see Appendix 1 to these reasons for the legislative history). · The Government of Portugal published a statement on 14 December 1989, indicating its protest at Australia's entry into the Timor Gap Treaty. · The Government of Australia responded to Portugal's protest by way of a diplomatic note to Portugal dated 24 January 1990, denying that Australia had acted in violation of international law.

Proceedings before the International Court of Justice · In 1991, the validity of the Timor Gap Treaty was sought to be challenged by Portugal in the International Court of Justice ("the ICJ"). Portugal claimed that the Treaty had violated the rights of the people of East Timor to self-determination and, also, Portugal's asserted rights as the administering power of East Timor. However, the ICJ found (Portugal v Australia [1995] ICJ Rep 90, 30 June 1995) that it could not decide the merits of the case brought by Portugal without first ruling on the lawfulness of Indonesia's entry into and continuing presence in East Timor; and since Indonesia was not a party to the proceedings and did not recognise the jurisdiction of the ICJ, the Court refused to make a ruling on the matters of substance.

The end of Indonesian sovereignty over East Timor · On 20 October 1999, the Indonesian People's Consultative Assembly adopted a decree which recognised that the integration of East Timor into the Republic of Indonesia was no longer in force. · On 25 October 1999, the President of Indonesia notified the Secretary-General of the United Nations of the revocation of the 1978 decree integrating East Timor into Indonesia. · By UN Security Council Resolution 1272 of 25 October 1999, the United Nations Transitional Administration in East Timor ("UNTAET") assumed responsibility for administration in East Timor for an initial period from that date until 31 January 2001. · As a result of UN Security Council Resolution 1272, on 26 October 1999 the Minister for Foreign Affairs announced the cessation of Australia's recognition of Indonesian sovereignty over East Timor. · On 10 February 2000, there was an exchange of notes between Australia and UNTAET, whereby, until the date of independence of East Timor, UNTAET assumed all rights and obligations of Indonesia under the Timor Gap Treaty. · By UN Security Council Resolution 1338 of 31 January 2001, the mandate of UNTAET was extended to 31 January 2002. · By a statement of its President on 31 October 2001, the UN Security Council endorsed a proposal to declare East Timor's independence on 20 May 2002. · By UN Security Council Resolution 1392 of 31 January 2002, the mandate of UNTAET was extended to 20 May 2002. (It may be noted also, that since the hearing of the separate question, by UN Security Council Resolution 1410 (On the Situation in East Timor) (17 May 2002), the UN Security Council commended the people of East Timor for establishing independence by peaceful and democratic means and applauded the work of UNTAET. Noting, however, the fragility of East Timor's newly won independence and the Secretary-General's assessment of difficulties that had a negative effect on the effectiveness of East Timor's judicial system, the Security Council decided to establish the UN Mission of Support in East Timor ("UNMISET"), as a successor mission to the UNTAET. The UNMISET will assist core administrative structures critical to the "viability and political stability of East Timor", including providing interim law enforcement and public security. The Government of Australia has, on 20 May 2002, since recognised East Timor as sovereign.)

Timor Sea negotiations · The first round of negotiations between Australia and UNTAET and East Timorese representatives concerning a treaty to replace the Timor Gap Treaty took place on 9-11 October 2001. · On 5 July 2001, Australia and UNTAET signed a Memorandum of Understanding (entitled the "Timor Sea Arrangement"). There are ongoing negotiations between Australia, UNTAET and East Timorese representatives on converting the Timor Sea Arrangement into a Treaty. · The Memorandum of Understanding ("MOU") recited the following: "CONSCIOUS of the importance of promoting East Timor's economic development; AWARE of the need to maintain security of investment for existing and planned petroleum activities in an area of seabed between Australia and East Timor; RECOGNISING the benefits that will flow to both Australia and East Timor by providing a continuing basis for petroleum activities in an area of seabed between Australia and East Timor to proceed as planned; EMPHASISING the importance of developing petroleum resources in a way that minimizes damage to the natural environment, that is economically sustainable, promotes further investment and contributes to the long-term development of Australia and East Timor; CONVINCED that the development of the resources in accordance with this Arrangement will provide a firm foundation for continuing and strengthening the friendly relations between Australia and East Timor; TAKING INTO ACCOUNT the United Nations Convention on the Law of the Sea, which provides in Article 83 that the delimitation of the continental shelf between states with opposite or adjacent coasts shall be effected by agreement on the basis of international law in order to achieve an equitable solution; TAKING FURTHER INTO ACCOUNT, in the absence of delimitation, the further obligation for states to make every effort, in a spirit of understanding and cooperation, to enter into provisional arrangements of a practical nature which do not prejudice a final determination of the seabed delimitation; NOTING the desirability of Australia and East Timor entering into a Treaty providing for the continued development of the petroleum resources in an area of seabed between Australia and East Timor."

· Articles 2, 3, 4, 9, 23 and Annex B of the MOU provide: "Article 2: Without Prejudice (a) This Arrangement gives effect to international law as reflected in … [the 1982 Convention] which under Article 83 requires states with opposite or adjacent coasts to make every effort to enter into provisional arrangements of a practical nature pending agreement on the final delimitation of the continental shelf between them in a manner consistent with international law. This Arrangement is intended to adhere to such obligation. (b) Nothing contained in this Arrangement and no acts taking place while this Arrangement is in force shall be interpreted as prejudicing or affecting East Timor's or Australia's position on or rights relating to a seabed delimitation or their respective seabed entitlements. Article 3: Joint Petroleum Development Area (a) The Joint Petroleum Development Area (JPDA) is established. It is the area in the Timor Sea contained within the lines described in Annex A. (b) East Timor and Australia shall jointly control, manage and facilitate the exploration, development and exploitation of the petroleum resources of the JPDA for the benefit of the peoples of East Timor and Australia. (c) Petroleum activities conducted in the JPDA shall be carried out pursuant to a contract between the Designated Authority and a limited liability corporation or entity with limited liability or a licence or permit issued to such a corporation or entity with limited liability. (d) East Timor and Australia shall make it an offence for any person to conduct petroleum activities in the JPDA otherwise than in accordance with this Arrangement. Article 4: Sharing of Petroleum Production (a) East Timor and Australia shall have title to all petroleum produced in the JPDA. Of the petroleum produced in the JPDA, 90% shall belong to East Timor and 10% shall belong to Australia. (b) To the extent that fees referred to in Article 6(b)(vi) and other income are inadequate to cover the expenditure of the Designated Authority in relation to this Arrangement, that expenditure will be borne in the same proportion as set out in paragraph (a). … Article 9: Unitisation (a) Any reservoir of petroleum that extends across the boundary of the JPDA shall be treated as a single entity for management and development purposes. (b) East Timor and Australia shall work expeditiously and in good faith to reach agreement on the manner in which the deposit will be most effectively exploited and on the equitable sharing of the benefits arising from such exploitation. … Article 23: Settlement of Disputes (a) Any dispute concerning the interpretation or application of this Arrangement shall, as far as possible, be settled by consultation or negotiation. (b) Any dispute which is not settled in the manner set out in paragraph (a) and any unresolved matter relating to the operation of this Arrangement under Article 6(d)(ii) shall, at the request of either East Timor or Australia, be submitted to an arbitral tribunal in accordance with the procedure set out in Annex B. … Annex B under Article 23 of this Arrangement Dispute Resolution Procedure (a) An arbitral tribunal to which a dispute is submitted pursuant to Article 23(b), shall consist of three persons appointed as follows: i. East Timor and Australia shall each appoint one arbitrator; ii. The arbitrators appointed by East Timor and Australia shall, within sixty (60) days of the appointment of the second of them, by agreement, select a third arbitrator who shall be a citizen, or permanent resident of a third country which has diplomatic relations with both East Timor and Australia; iii. East Timor and Australia shall, within sixty (60) days of the selection of the third arbitrator, approve the selection of that arbitrator who shall act as Chairman of the Tribunal …."

The Commonwealth's Executive Certificate 94 Australia claims, in respect of the Timor Gap, that its continental shelf extends to the middle of the Timor Trough, on the basis that this is the natural prolongation of its land territory to the outer edge of the continental margin, and an Executive Certificate has now issued, dated 16 April 2002:

"I, Daryl Robert Williams, Attorney-General of the Commonwealth of Australia, hereby certify on behalf of the Executive Government of Australia - 1. The 1971 and 1972 seabed delimitation treaties between Australia and Indonesia left an undelimited gap in relation to the seabed between Australia and the then Portuguese Timor, known as the Timor Gap. Australia claims that its continental shelf in the Timor Gap extends along the natural prolongation of its land territory to the outer edge of the continental margin, being the middle of the Timor Trough. 2. Australia has made this claim in relation to its continental shelf in the Timor Gap since at least 30 October 1970. 3. Australia has not recognised any claims by another State or other entity to sovereign rights over this area of the Australian continental shelf. Australia has not recognised any rights over this area of the continental shelf granted by another State or other entity that has claimed sovereign rights in this area. 4. There has been no delimitation of Australia's seabed boundary in the Timor Gap with any State or other entity."

The Commonwealth's affidavit evidence 95 The Commonwealth sought, over the applicant's objection, to adduce further evidence in the form of affidavits sworn by two of its officers: 96 By his affidavit sworn 11 March 2002, John William Hartwell, Head of Division, Petroleum and International Energy Division of the Department of Industry, Tourism and Resources, says: "55. I have been advised that the proceedings before this Court raise issues which require the Court to make findings on the validity of the acts of a foreign government, namely Portugal, relating to the grant of a concession to prospect for petroleum in an area of the seabed which is the subject of disputed claims to sovereign rights. Claims to sovereign rights over the continental shelf is a matter for determination between States. Any adjudication by the Court may prejudice Australia's position in the ongoing negotiations with UNTAET/East Timor and has the capacity to embarrass the Australian Government in those negotiations. 56. It is possible that the seabed boundary between Australia and an independent East Timor may be the subject of negotiations in the future. Any adjudication by the Court may also prejudice Australia's position in any future negotiations. 57. If, in the future, Indonesia were to raise the issue of the location of the points where the Australian-Indonesian seabed boundary meets the side boundaries of the Zone of Cooperation, any adjudication by the Court in these proceedings may prejudice Australia's position on the location of these points. The present location of these points reflects the provisions of the 1972 seabed delimitation agreement between Australia and Indonesia." 97 By his affidavit sworn 12 March 2002, David James Ritchie, Deputy Secretary, Department of Foreign Affairs and Trade, says: "27. I have been advised that the proceedings before this Court raise issues which require the Court to make findings on the validity of the acts of a foreign government, namely, Indonesia, relating to events surrounding the alleged acquisition of the applicant's alleged confidential business information, as a result of Indonesia's occupation of East Timor in 1975. In my opinion, any potential findings an Australian Court may make about the activities of Indonesia in relation to the alleged confidential business information and Indonesia's occupation of East Timor in 1975, may be a cause of concern to the Government of Indonesia and a potential source of difficulty in relations between the Governments of Australia and Indonesia. I have been advised that Indonesia is not a party to these proceedings." 98 The applicants object to the admission of this evidence as bad in form and irrelevant in substance. In my view, the evidence is admissible, but only upon a limited basis, namely as expressions of personal expert opinions by persons with appropriate experience and qualifications in the area the subject of their opinions. However, as noted, a formal Executive Certificate speaking on some matters in the area has also been tendered by the Commonwealth. The weight to be accorded that Certificate raises questions of law to be addressed later, but whatever weight is appropriate, that Certificate must, alone, speak for the official Government position. It must follow, in my view, that the personal opinions of these officers on matters going beyond the information provided by the Executive Certificate, should carry little weight in our determination.

The Australian offshore legal regime 99 In order to understand the parties' respective arguments, some of the provisions of the SSL Act and the P(SL) Act have previously been noticed, and a summary of the relevant legislative history may be found in Appendix 1 to these reasons. It will, however, be convenient at this point to explain relevant aspects of Australia's offshore legal regime. 100 In considering the "notoriously difficult" concept of "sovereignty" in relation to the territorial sea, Gleeson CJ, Gaudron, Gummow and Hayne JJ have recently observed (Commonwealth v Yarmirr (2001) 184 ALR 113 at [59], [60]), that, as was recognised in New South Wales v Commonwealth (the Seas and Submerged Lands Case) (1975) 135 CLR 337, the acquisition of sovereignty over the territorial sea can be understood as occurring "by operation of international law" because Great Britain was (then) the internationally recognised nation holding sovereignty over the adjoining land mass. But from the point of view of municipal law, this acquisition can also be understood as a claim made in the exercise of the prerogative. 101 Their Honours proceeded to explain the many changes in the offshore legal regime (at [63]): "At Federation, the territorial sea off the coast of Australia, recognised by international law, extended three nautical miles from low-water mark. In international law, waters on the landward side of the baseline of the territorial sea form part of Australia's internal waters. For much of the twentieth century it was thought that the states had some sovereign or proprietary rights in respect of the territorial sea - the area from low-water mark to three nautical miles out to sea. In the Seas and Submerged Lands Case ... it was held, however, that the boundaries of the former colonies ended at low-water mark and that the colonies had no sovereign or proprietary rights in respect of the territorial sea. Thereafter, the Commonwealth and states arrived at the offshore constitutional settlement…." 102 Their Honours added (at [67] - [68]): "At or after Federation, Australia came to take its place in international affairs and its links with the British Empire changed and dissolved. Those changes did not affect the nature of the sovereignty that was exercised over the territorial sea. From time to time, colonial parliaments, and later the Federal Parliament, passed laws regulating various activities in that area. It is not necessary to notice the content of those laws beyond noticing that some laws, like the Petroleum (Submerged Lands) Act 1967 (Cth), provide for the granting of very extensive rights in relation to areas of the sea or sea-bed. The enactment of laws regulating activities in the area constituted the assertion of the right to regulate what was done there…. The Seas and Submerged Lands Act asserted sovereignty over the territorial sea and the bed and subsoil of the territorial sea and sovereign rights in respect of the continental shelf for the purpose of exploring it and exploiting its natural resources. The former of these assertions was not different in any presently material respect from the sovereignty which was asserted in 1824. The fact that it reflected settled principles of international law found in the Convention on the Territorial Sea and the Contiguous Zone neither adds to nor detracts from that proposition." (References omitted) 103 In the Seas and Submerged Lands Case, it was held by the whole Court (Barwick CJ, McTiernan, Gibbs, Stephen, Mason, Jacobs and Murphy JJ) that the provisions of the SSL Act with respect to the continental shelf were within the legislative power of the Commonwealth under s 51(xxix) of the Constitution. Given the degree of reliance placed by the applicants upon the provisions of the SSL Act, especially ss 11 and 12, it will be convenient to refer here more fully to the reasoning in the High Court, bearing in mind that the applicants' Concession was granted in December 1974. 104 Noting (at 361) that the Act "authorizes the implementation of the Conventions in material respects" (emphasis added), Barwick CJ said (at 364): "The Act selects the organ of government, namely the Executive, to exercise ... the sovereign rights over the continental shelf which the Convention[ ] make[s] available. It also empowers the Executive to implement [it] in certain respects, ... [s] 12." (Emphasis added) 105 McTiernan J said (at 375): "The seas and submerged lands are not within Australia's land territory or its inland waters. The Act presumes that a belt of sea adjacent to the coast of Australia and Tasmania is a territorial sea for the purposes of the international Convention on the Territorial Sea and Contiguous Zone and that the seabed and subsoil of submarine areas adjacent to the coast, but outside the area of the territorial sea of Australia, is a continental shelf for the purposes of the international Convention on the Continental Shelf.

Australia is a state in the eye of international law and being a coastal state and a party to each of these Conventions it was its right and duty to legislate so as to receive these articles into Australian municipal law. The Parliament did this by embodying in the Act under consideration, a schedule setting out verbatim the articles of the former Convention and a schedule setting out verbatim the articles of the latter Convention. Each schedule is part of the Act and of the enactment: Craies on Statute Law, 7th ed. (1971), pp. 224-225. The Act implements the stipulations in the Convention on the Territorial Sea as to the limits thereof (ss. 7-9), and the stipulations in the Convention on the Continental Shelf as to the limits thereof." (Emphasis added) 106 However, his Honour proceeded to limit the apparent generality of these observations (at 377): "The object of each section [i.e. ss 6, 10 and 11] is, in my opinion, to give legal efficacy to the rules of the Convention to which it relates. In effect each section authorizes the Executive Government of the Commonwealth to administer the rules, to fulfil the duties of Australia as a coastal state under the rules, and to exercise the rights given by the rules to a coastal state. Section 11 in particular authorizes the Executive Government of the Commonwealth to exercise the sovereign rights of Australia, in its capacity as a coastal state, which are mentioned in the Convention on the Continental Shelf. The rules and the duties and rights of Australia under the rules are external affairs from Australia's standpoint. The Parliament has legislated in this Act to incorporate them verbatim in the Act, and the Act makes no addition to or omission from them. The rules of international law are matters that concern the Crown and fall within its prerogative in relation to foreign affairs. This prerogative could not be used in any way that would conflict with the articles of either of these international Conventions if validly carried into effect by this Act." (Emphasis added) 107 As will be seen, the apparent width of some of these observations, suggesting that the SSL Act incorporated the whole of the Convention, was not accepted by a majority of the Court, who were of the opinion that only the meaning of "continental shelf" was picked up by the Act. 108 Gibbs J said (at 387): "When s. 11 refers to 'the sovereign rights of Australia as a coastal State in respect of the continental shelf of Australia', it does not anywhere indicate that those rights are to be limited by reference to the Convention on the Continental Shelf. The section in effect assumes that Australia has sovereign rights in respect of the continental shelf and vests those rights in, and makes them exercisable by, the Crown in right of the Commonwealth." (Emphasis added) 109 Gibbs J went on to say (at 387) that the Act will be valid if, when passed, the Crown in right of the Commonwealth already had sovereign rights over the continental shelf. 110 His Honour said (at 388) that an assertion of sovereign rights over the continental shelf, pursuant to international treaty or unilaterally, is an exercise of a Crown prerogative available to the Crown in right of the Commonwealth, and as an act of state, cannot be challenged, controlled or interfered with by the courts of that state; and the acquisition of new sovereign rights over the continental shelf "might be effected by executive act, but might validly be authorised, ratified or given recognition by legislation." 111 Gibbs J added (at 415): "The rules of international law now established by the Convention on the Continental Shelf are of recent origin. In the judgment of the International Court in the North Sea Continental Shelf Cases [[1969] ICJ Rep 3 at par 47], it was said that the 'Truman Proclamation', issued by the Government of the United States on 28th September 1945, 'soon came to be regarded as the starting point of the positive law on the subject, and the chief doctrine it enunciated, namely that of the coastal State as having an original, natural and exclusive (in short a vested) right to the continental shelf off its shores, came to prevail over all others, being now reflected in Article 2 of the 1958 Geneva Convention on the Continental Shelf ... . Claims similar to those made in the Truman Proclamation were made by the Commonwealth Government in a proclamation dated 10th September 1953 …." 112 In concluding that Division 2 of Part II of the Act, dealing with the continental shelf, was valid, Gibbs J observed (at 416): "In truth, when the Act was passed, the States had not asserted and did not have the rights to the continental shelf which the Convention now accords to coastal states. Those rights, if theoretically inherent in the sovereignty of coastal states, were in fact the result of the operation of a new legal principle. When those rights were recognized by international law the Commonwealth was the international person entitled to assert them, and it did so. The assertion by the Commonwealth of those rights in no way interfered with any existing right of any State." 113 Stephen J expressed a similar opinion (at 457 - 458), as did Mason J (at 472; 476); and Murphy J (at 505). Jacobs J did also (at 498), having earlier stated (at 496) - "The Act discloses no intention to acquire the territorial seas and the rights in the continental shelf as territory of the Commonwealth. Nor does the Act purport to make the Conventions part of the law of the Commonwealth or to implement treaty obligations in the manner dealt with in R. v. Burgess; Ex parte Henry ... ." (Emphasis added) 114 In R v Burgess; Ex parte Henry (1936) 55 CLR 608, the statute authorised the making of regulations "for the purpose of carrying out and giving effect to" the convention in question (at 609). In the present context, it is clear, as McTiernan J said, that the Schedule setting out the Convention is "part of" the SSL Act. This is the common law rule and now the position by statutory provision: D. Pearce and R. Geddes Statutory Interpretation in Australia 5th ed (2001) at 17, 125; Acts Interpretation Act 1901 (Cth) s 13(2). It is also plain that the SSL Act incorporated, by reference, the Convention's definition of "continental shelf" (see Pearce and Geddes at 32 - 33). Yet the question remains whether the statute has, on its true construction, picked up the whole, or any other part of the Convention and made that part of the law of Australia. 115 Observing (at 474) in the Seas and Submerged Lands Case that one of the effects of the Act is an "assert[ion], at international level, [of] Australia's rights over … the continental shelf …", Mason J said (at 475): "As the International Court of Justice stated in the North Sea Continental Shelf Cases and as Barwick C.J. observed in Bonser v. La Macchia, the continental shelf is considered to be, for the purpose of the exercise of sovereign rights by the coastal state, 'a natural prolongation of its land territory'." (References omitted) 116 Murphy J said (at 501 - 502): "The legal doctrine of the continental shelf was not mooted until 1945 (see Abu Dhabi Case), although the expression 'continental shelf' was first used by a geographer in 1898. It is that part of the continental mass temporarily (measured in geological time) overlapped by the oceans. The first important formulation of it as a legal concept was in the Truman Proclamation of 28th September 1945 (see C.H.M. Waldock 'The Legal Claims to the Continental Shelf', Problems of Public and Private International Law, vol. 36 (1950), p. 115.)" (References omitted) 117 In Yarmirr (at [67], in the passage previously cited), Gleeson CJ, Gaudron, Gummow and Hayne JJ referred, in connection with the P(SL) Act, to Commonwealth v Western Mining Corporation Resources Ltd (1998) 194 CLR 1 ("WMC"). There, in the context of the grant of a permit under the P(SL) Act, a question arose as to the operation of s 51(xxxi) of the Constitution upon the enactment of the several Zone of Cooperation Acts in the consideration of a claim for compensation under s 24(3) of the Petroleum (Australia-Indonesia Zone of Cooperation) (Consequential Provisions) Act 1990 (Cth) ("the Consequential Provisions Act"). Section 24(2) provides that the Commonwealth is liable to pay compensation where the operation of Zone of Cooperation legislation would result in the acquisition of property otherwise than on just terms. Section 24(3) provides that where the Commonwealth and the person whose property was thus acquired do not agree on the amount of the compensation, the person may institute proceedings in this Court for the recovery from the Commonwealth of such reasonable amount of compensation as this Court determines. 118 In WMC it was held by a majority (Brennan CJ, Gaudron, McHugh and Gummow JJ, Toohey and Kirby JJ dissenting) that the amendments made by the Consequential Provisions Act to the Zone of Cooperation legislation did not fall within s 51(xxxi) of the Constitution or s 24 as an "acquisition" of "property" within Area A. Although WMC's claim was brought under s 24 in respect of a permit granted under the P(SL) Act, and not, as here, on some broader, non-municipal, basis, reference should be made to the majority's reasoning for their conclusion. 119 Brennan CJ said (at [3]): "At the time when the permit was issued, Australia and the Republic of Indonesia each claimed sovereign rights to explore and to exploit the natural resources of a portion of the continental shelf which overlapped the permit area. But, for the purposes of determining these proceedings by the municipal law of Australia, Australia must be taken to have possessed those sovereign rights at the time when the permit was issued. The Seas and Submerged Lands Act 1973 (Cth) declared and enacted [s 11] that - 'the sovereign rights of Australia as a coastal State in respect of the continental shelf of Australia, for the purpose of exploring it and exploiting its natural resources, are vested in and exercisable by the Crown in right of the Commonwealth.' Accordingly, these proceedings must be determined on the footing that Australia had those sovereign rights over that part of the continental shelf which became the permit area." (References omitted) (Emphasis added) 120 Referring to the Timor Gap Treaty, Brennan CJ said (at [5]): "The Treaty does not purport to settle the competing claims of Australia and the Republic of Indonesia to sovereign rights to explore and exploit the resources of the continental shelf within the Zone of Cooperation." 121 Brennan CJ noted (at [6]) that s 7 of the Zone of Cooperation Act prohibited prospecting for petroleum in Area A except with the approval of the Joint Authority, thus "effectively abrogat[ing] the right conferred upon the permittee by s 28 of the P(SL) Act ... ." 122 Having noted the "clear" distinction drawn by Mason J in the Seas and Submerged Lands Case between the Commonwealth's proprietary interest in the territorial sea and seabed on the one hand, and the Commonwealth's legislative power and jurisdiction over them on the other, Brennan CJ went on to say (at [22]): "The P(SL) Act is a law passed in exercise of the legislative powers of the Commonwealth and a person who seeks and obtains the grant of a permit or licence under that Act cannot deny the authority of the Commonwealth to make the grant, but that is not to say that the Commonwealth has any proprietary interest in the continental shelf or the seas above it." (Emphasis added) 123 Brennan CJ continued (at [23]): "Although, by our municipal law the Commonwealth has the power to legislate in respect of the exploration of and the exploitation of the resources of the continental shelf, it has no property in the continental shelf at common law." (Emphasis added) 124 Brennan CJ concluded (at [24]) that the statutory modification or extinguishment of a permit, or an interest therein, was not an acquisition of property by the Commonwealth, since the Commonwealth "was under no liability reciprocal to the permit or interest and acquires no benefit [thereby]". 125 Gaudron J held (at [84]) that the Commonwealth did not at any stage create any estate or interest within Area A. Rather, it simply conferred a right to explore for petroleum, buttressing that right by making it an offence for anyone else to do it (by s 19 of the P(SL) Act). There was, thus, no estate or interest which was, or even could be, enhanced by modification of the Permit. 126 Gaudron J said (at [85]): "The Commonwealth's entry into the Treaty was an exercise of its sovereign rights, rights which were in no way diminished by the grant of the Permit and in no way enhanced by its modification. To the extent that the Treaty was implemented by statute, that was an exercise by the Commonwealth of its constitutional power to legislate with respect to external affairs, again a power that was in no way diminished by the grant of the Permit and in no way enhanced by its modification." (Emphasis added) 127 Accordingly, her Honour held, the Consequential Provisions Act simply modified a statutory right which had no basis in the general law and which was inherently susceptible to that course, and thus did not effect an "acquisition of property". 128 In describing the inconsistent assertions of sovereignty over the Timor Gap, McHugh J (with reference to Oceanic's concession) said (at [94] - [95]): "Both Australia and the Republic of Indonesia assert exclusive sovereign rights over the Timor Gap. Australia claims that the continental shelf adjacent to Australia comes to an end at the Timor Trough, a trench in the seabed at distances varying from 30 to 60 nautical miles from the coast of Timor. By contrast, Indonesia claims that the area over which Australia can assert authority under international law does not extend nearly so far. Indonesia claims that there is a continuous continental shelf between Australia and Timor with the result that, under the Convention on the Continental Shelf (the Geneva Convention), Australia's sovereign rights extend only to the median line between the Australian and Timorese coasts. On this view, Indonesia has sovereign rights from the Timorese coast to the median line. In exercise of its claimed sovereign rights, Australia has granted petroleum exploration permits in the Timor Gap since 1964. Before the annexation of East Timor by Indonesia in July 1976, Portugal also purported to exercise sovereign rights in the Timor Gap by granting oil exploration permits. One permit, granted to an American corporation in 1974, extended to the median line between Timor and Australia." (References omitted) (Emphasis added) 129 McHugh J went on to say (at [145] - [146]): "The rights of WMC were created by the P(SL) Act, a federal statute enacted under the power conferred by s 51(xxix) of the Constitution. That being so, the rights were always liable to be amended, revoked or extinguished by legislation enacted under that same power. In the case of property rights created by federal law under a head of s 51 power, in circumstances where no specific property right previously existed under a State enactment or the general law, the Parliament retains the authority under that head of power to extinguish the right even if a consequence of that extinguishment is to vest some benefit in the Commonwealth or some other person. Section 51(xxxi) does not withdraw from the Parliament the power to repeal or amend laws that it has created in those circumstances. Accordingly, the Commonwealth succeeds in its broad submission on defeasibility. In my view, the Commonwealth also succeeds in its narrow submission on defeasibility. Independently of the Parliament's traditional right to repeal or amend statutory rights that it has created, exploration permits granted under the P(SL) Act were by the terms of that legislation inherently subject to variation by subsequent amendment." (Emphasis added) 130 Of the continental shelf, Gummow J said (at [160]): "Section 6 of the Seas and Submerged Lands Act declared and enacted that 'the sovereignty in respect of the territorial sea, and in respect of the airspace over it and in respect of its bed and subsoil, is vested in and exercisable by the Crown in right of the Commonwealth'. Section 15B(1) of the Acts Interpretation Act 1901 (Cth) provides, subject to the appearance of the contrary intention, that, with respect to legislation passed before or after the enactment of s 15B, the provisions thereof shall be taken to have effect in relation to the 'coastal sea' of Australia as if it were part of Australia and references to Australia or to the Commonwealth included the 'costal sea' of Australia. The term 'coastal sea' is defined in s 15B(4) so as to include the seabed and subsoil beneath the territorial sea of Australia and the airspace over it but is not defined so as to include the continental shelf beyond the territorial sea. Section 15B reflects the assertion of sovereignty in s 6 of the Seas and Submerged Lands Act. In New South Wales v The Commonwealth, Jacobs J said of the word 'sovereignty' that it 'expresses a concept notoriously difficult of definition'. However, it is apparent that the sovereignty spoken of in s 6 with respect to the territorial sea is to be distinguished from and is a stronger term than the term 'sovereign rights' used in s 11 with respect to the continental shelf." (References omitted) (Emphasis added) 131 His Honour proceeded (at [161]): "... It is important for the present case to bear in mind that the subject of the Permit was the conduct of activities within the continental shelf but outside the area of the territorial sea. It was in the bed and subsoil of the territorial sea that sovereignty was vested in the Commonwealth by s 6 of the Seas and Submerged Lands Act." 132 Of the Timor Gap, Gummow J said (at [162]): "The Permit comprised more than 200 blocks situated in the locality of a geomorphological area known as the Timor Gap. This was and remains a subject of disputed sovereign rights between Australia and Indonesia. Australia claims that it is entitled at international law to exercise sovereign rights in relation to the continental shelf of Australia extending to the Timor Trough. This is a deep trench in the seabed between 30 and 60 nautical miles from the coast of the island of Timor. On this view, Australian sovereignty extends significantly past the median line between Timor and Australia. Indonesia claims that it is entitled to exercise sovereign rights at least to the median line." (Emphasis added) 133 Of the Zone of Cooperation, his Honour said (at [171]): "Section 6 of the Cooperation Act provides that the Joint Authority established by the Treaty is an international organisation to which there applies the International Organisations (Privileges and Immunities) Act 1963 (Cth). Section 7 states: 'A person must not prospect for petroleum in Area A of the Zone of Cooperation except with the approval of the Joint Authority. Penalty: Imprisonment for 5 years.' Section 5 of the Consequential Provisions Act inserted in the Crimes at Sea Act 1979 (Cth) a new s 9A. This provides that 'the criminal laws in force in the Northern Territory apply to any act done in Area A of the Zone of Cooperation that touches, concerns, is connected with or arises out of the exploration for, or exploitation of, petroleum resources as if the act had been done in the Northern Territory'. However, s 9A does not apply, among other things, to 'an act done by a national of Indonesia who is not also a national of Australia' or 'an act done by a permanent resident of Indonesia who is not a national of Australia'." 134 In his Honour's opinion (at [179]): "Such property rights as were involved were not, given their nature, susceptible of ... acquisition [as 'property']. In particular, ... the P(SL) Act, under which the Permit was granted and continued in suspended existence, had not created any statutory rights which were susceptible of acquisition as a consequence of the changes made by the Cooperation Act." (Emphasis added) 135 Gummow J concluded (at [203]): "The result was that, from the moment of its grant in 1977, the Permit suffered from the 'congenital infirmity' that its scope and incidents were subject to the P(SL) Act in the form it might from time to time thereafter assume. Any proprietary rights which were created in respect of the Permit were liable to defeasance. By reason of their nature, upon such defeasance of those rights there would be no acquisition of property to which s 51(xxxi) applied." (References omitted) (Emphasis added)

The respondents' contentions in support of their application for a stay, or summary disposal, of the proceeding 136 The Commonwealth, with an argument essentially adopted by Phillips, contends: · In order to determine the applicants' claims, the Court would be required to determine inter alia the following issues (the "primary issues"): q whether or not Decree No. 25/74 claimed to be issued by the Government of Portugal on 31 January 1974 was valid;

q whether or not the Concession Agreement said to be entered into pursuant to Decree No. 25/74 on 11 December 1974 between the Government of Portugal and Petrotimor was valid; q whether or not the Concession Agreement conferred rights on Petrotimor under international law or Portuguese law;

q whether or not, under international law, Portugal was entitled to exercise sovereign rights to exploit the resources of the Concession Area;

q whether or not, under Portuguese law, Portugal was entitled to claim sovereign rights to exploit the resources of the Concession Area;

q whether or not Indonesian Law No. 7 of 1976, which purported to integrate the territory of Portuguese Timor into the Republic of Indonesia, was valid;

q whether or not the acquisition in the Indonesian province of East Timor of any alleged Confidential Business Information was lawful;

q whether or not the claims made by the Australian Government as to the extent of Australia's continental shelf, which claims are premised upon there being two continental shelves between Australia and East Timor, are determinative for Australian courts;

q whether or not various administrative actions performed by a body formed under international law, the Joint Authority, were lawful; and

q whether or not customary international law prohibits a State or other international person, such as the Joint Authority, from dealing with or expropriating private rights acquired in good faith other than by making compensation that is prompt, adequate and effective.

· In order to determine these issues, the Court would also be required to determine, as an essential part of its reasoning, other issues of international law ("the underlying issues"), including: q the ambit of Portugal's sovereign rights under international law in respect of the Concession Area; q the ambit of Australia's competing sovereign rights under international law in respect of the Concession Area; and q the legality under international law of the acquisition of East Timor by Indonesia. · In addition, in order to determine the applicants' claims made in the alternative, the Court would be required to determine, inter alia, whether or not the Timor Gap Treaty was illegal or void under international law. · The justiciability of each of these issues must be considered separately. Even if the Court held that one or more of the primaryissues were justiciable (which the Commonwealth contends that they are not (see below)), the Court would be unable to decide those issues without determining in the process the underlying issues which are also non-justiciable.

· Although the existence of potential embarrassment or prejudice to Australia's international relations is not necessary to establish that an issue is not justiciable, there are the following potential hazards: q Australia is currently negotiating a treaty with East Timor concerning, inter alia, the respective rights of each nation in relation to the exploitation of natural hydrocarbon resources in the Timor Gap area. It is possible that, in the future, Australia and East Timor will undertake negotiations about the location of the continental shelf boundary in the Timor Gap. q Any pronouncement by Australia's domestic courts on these issues would have the potential to embarrass and prejudice the conduct by the Australian Government of Australia's foreign relations.

q In addition, many of the issues raise questions of the validity of foreign acts of state, in particular acts of Portugal and acts of Indonesia. Any pronouncements on the issues concerning those acts of state would have the potential to prejudice Australia's foreign relations with those nations. · The Separate Question is phrased so as to raise the question whether the principles going to non-justiciability or non-enforceability of claims also go to the jurisdiction of the Court. · The Court has jurisdiction only in respect of "matters", and in the context of the separation of powers in the Constitution, this means that the Court is limited to "justiciable controversies" or, put another way, "matters capable of judicial determination".

· The applicants' claims rely upon an assertion that they have rights derived from Portuguese law and international law which, notwithstanding their direct inconsistency with Australia's claims to sovereign rights, should be given effect to by Australian courts. This necessarily brings the Court into the realm of determining the validity of competing international law claims the resolution of which must take place on the international plane, and not by a domestic court. To this extent, the non-justiciability of the applicants' claims goes to the jurisdiction of the Court. · In the same way, the applicants' claims also depend upon the validity of foreign acts of state, many if not all of which involve claims based upon political or international standards that are not determinable by domestic courts in Australia (the validity of Portuguese acts, the validity of Indonesian acts). For the same reasons, the Court has no jurisdiction to hear and determine these claims.

· However, in the end, the question of jurisdiction is not critical to the outcome of the result. Whether the non-justiciability or non-enforceability of the issues raised in these proceedings is seen as going to jurisdiction, or as being a substantive principle of law depriving relief, the result is that the proceedings should be stopped forthwith.

137 In support of their contentions, the respondents relied on many of the authorities in this area, including cases from comparative jurisprudence. These authorities are considered in Appendix 2 to these reasons. As will be seen, in my view, each of the cases relied upon by the respondents may be distinguished, for present purposes, at least on their facts. As Lord Phillips MR, Waller and Carnwath LJJ have recently explained (R v Secretary of State for Foreign and Commonwealth Affairs and Secretary of State for the Home Department; Ex parte Abbasi [2002] EWCA Civ 1598 at [47]): "[T]he issue of justiciability [in the area of foreign relations] depends, not on general principle, but on subject matter and suitability in the particular case." 138 It will be necessary to consider each of the applicants' claims in turn.

Conclusion on whether the applicants' claim for compensation for expropriation of their concession rights should be summarily disposed of 139 The applicants' first claim ("the concession compensation claim") is for a declaration that the applicants are entitled to payment by the Commonwealth of such sums as will make good the losses suffered by them from the expropriation of their rights under the Concession Agreement. 140 As the appended analysis of the authorities cited indicates, the concepts and principles in this area are indeed difficult and, in many respects, controversial. Accordingly, it is proposed (as Geoffrey Lindell suggests) to proceed by addressing three distinct questions: (1) Does this Court lack jurisdiction to entertain this claim? (2) Does the Court feel obliged to exercise its jurisdiction, or to determine for itself all or part of the issues or questions which arise in the exercise of its jurisdiction? (3) Is it unnecessary for the Court to determine the question or issue raised because the application of the relevant principles of law do not depend upon the determination of the same question or issue? 141 In a non-federal context (see e.g. Buck v Attorney-General [1965] Ch 745 per Diplock LJ at 769 - 770) this would ordinarily involve an inquiry as to (a) the subject matter of the issue; (b) the persons (parties) between whom the issue is joined; and (c) the kind of relief sought; or any combination of these factors. 142 However, in a federal context, additional questions may also arise, or at least overlap with these lines of inquiry. The original jurisdiction of this Court includes (with an exception presently immaterial) jurisdiction in any matter arising under any laws made by the Parliament (Judiciary Act 1903 (Cth) s 39B(1A)(c)). As a matter of characterisation then, can it be said that a claim (as here) for compensation for damage alleged to have been suffered by the "expropriation" of the applicants' Concession rights by Australia, effected by Australia's entry into the Timor Gap Treaty with Indonesia, is a "matter arising under" a Commonwealth statute? 143 Brennan CJ, Dawson and Toohey JJ observed in Croome v Tasmania (1997) 191 CLR 119 (at 125) that the relevant "matter" is not the proceeding but the subject of the controversy which is amenable to judicial determination in the proceedings; and such a controversy has particular characteristics, since there can be no "matter" unless there is some immediate right, duty or liability to be established by the determination of the Court. 144 Moreover, without the right to bring a curial proceeding, there can be no "matter" unless the existence of the right, duty or liability is established. 145 It is sufficient to claim to have a legal remedy in the court to enforce the right (etc.); but, in order to make the controversy justiciable - "... there must be a remedy enforceable in a court of justice, ... enforceable in the court in which the proceedings are commenced and ... the person claiming the remedy must have sufficient interest in enforcing the right [etc] ... ." 146 (Per Gleeson CJ and McHugh J in Abebe v Commonwealth (1999) 197 CLR 510 at 527 - 528). 147 And, as Gummow and Hayne JJ said in Re Wakim; Ex parte McNally (1999) 198 CLR 511 (at [139]), in seeking to identify a "matter" "[t]he central task is to identify the justiciable controversy. In civil proceedings that will ordinarily require close attention to the pleadings ... and to the factual basis of [the] claim". 148 Further, a matter will "aris[e] under" a Commonwealth statute, if it is a claim for common law or equitable relief in respect of, or over, a right or property which owes its existence to federal law (see, e.g. LNC Industries Ltd v BMW (Australia) Ltd (1983) 151 CLR 575; Cowen and Zines Federal Jurisdiction in Australia 3rd ed (2002) at 66 - 68). If, for instance, a contract or a trust is in respect of a right or property which is the creation of federal law, the claim "arises under" that law, since the subject matter of the contract or trust exists as a result of the federal law (LNC Industries at 581). 149 Turning then to analyse the character of the present claim, as has been noted, the applicants' statement of claim propounds their compensation claim, in the context of the facts agreed, upon the following (emphasised) basis: · The applicants' rights under the Concession Agreement were property rights of a kind recognised by the rules of Australian private international law. In my view, whatever abstract ("of a kind") force this contention may have is immaterial; unless the claim is anchored in a specific context and in a particular location, it does not progress the proceedings. I will return to this aspect later when considering aspects of public policy, but it would be a curious outcome if our law recognised these concession rights, given the refusal of our legal system to recognise WMC's statutory rights, arising as they did under a permit granted by a Commonwealth statute. · By the provisions of the SSL Act, the Parliament expressly provided that sovereign rights in respect of the "continental shelf" were vested in the Crown in right of the Commonwealth; and "continental shelf" was defined by that Act to have "the same meaning as in the [1958] Convention". This statement may be accepted. · For domestic law purposes, to the extent that "continental shelf", so defined, differed from the area claimed by Australia in its international dealings, the former "necessarily prevailed". As mentioned, it may be accepted (a) that the 1958 Convention is part of the Act; and (b) that the Convention's definition of "continental shelf" is incorporated into the Act. Yet the question remains whether, otherwise, the Act made the provisions of the 1958 Convention, especially those directed at the process of locating a boundary, part of Australian domestic law. In my opinion, as a majority of Justices held in the Seas and Submerged Lands Case, it did not (see also, in analogous contexts Dietrich v The Queen (1992) 177 CLR 292; Minister for Immigration and Ethic Affairs v Teoh (1995) 183 CLR 273; Minogue v Human Rights and Equal Opportunity Commission (1999) 84 FCR 438 at 447 - 448; Minogue v Williams (2000) 60 ALD 366 at 372 - 373; D. Pearce and R. Geddes Statutory Interpretation in Australia 5th ed (2001) at 34). On an application for summary dismissal, as this is, a party claiming final relief must demonstrate, at least, an arguable case on the facts and the law (see J H Rayner (Mincing Lane) Ltd v Department of Trade & Industry [1990] 2 AC 418 per Lord Oliver at 522). Insofar as it is necessary for this purpose for the applicants to show, as essential to an arguable case, that the SSL Act picked up more than the 1958 Convention's definition of "continental shelf", the applicants have not, in my opinion, done so; and this is clear beyond argument. The significance of this conclusion will be further considered below. · On its proper construction, the 1958 Convention, consistently with the P(SL) Act, placed the boundary between Australia and Portuguese Timor along the "median" line between their coasts. I cannot, as mentioned, accept this contention. In my opinion, it is one thing to say that the Act incorporated the 1958 Convention's meaning of "continental shelf"; it is quite another to say that, by virtue of the operation of the Convention and the Act, the relevant boundary was located along a particular line.

As James Crawford ("Execution of Judgments and Foreign Sovereign Immunity" (1981) 75 AJIL 820 at 856) has noted, there are certain transactions which public international law, as an autonomous system of law, (ordinarily) purports to govern as between the parties. In that sense, in those cases, international law is "the proper law" of the transaction; so that questions of the validity or termination of a treaty, or the location of an international boundary, are matters that international law "integrally governs". These ("self-executing") contexts can be contrasted with the ("non self-executing") cases where (ordinarily) international law merely sets standards of (minimum) performance for municipal law systems, e.g. in areas of human rights, where international law "operates not integrally but at one remove".

In my view, notwithstanding the picking up of the meaning of the term "continental shelf", it is not arguable that the SSL Act, when read as a whole, operates in the way now contended for by the applicants. This is shown by the majority decision in the Seas and Submerged Lands Case and is illustrated by the ambulatory character of the provisions of s 3(3) and s 3(5), in particular.

That is to say, although s 11 vests in the Commonwealth the sovereign rights in respect of Australia's continental shelf, and whilst by s 12 the Governor-General may declare, "not inconsistently with the [1958] Convention ... the limits of the whole or any part of the continental shelf of Australia", s 3(3) and (5) provide for the municipal context, and domestic limits, of any such Proclamation: "3(1) ... ... (3) In this Act, including [s] 11, a reference to the continental shelf of Australia is a reference to that shelf so far as it extends from time to time. ... (5) Where a Proclamation is in force under [s] 12, the continental shelf of Australia shall, for all purposes of this Act, be taken to extend to the limits declared by that Proclamation." (Emphasis added) When ss 11 and 12 are read, as they must be, in conjunction with s 3(3) and (5), it is, I think, not arguable that the SSL Act alone (i.e. in the absence of a Proclamation) locates the relevant international boundary at the median line. Nor, indeed, did the 1958 Convention itself purport to do so. It will be remembered that, although Art 6, absent agreement, stipulated for the median line, it only did so "unless another boundary line is justified by special circumstances". That is to say, neither Art 6, nor the SSL Act, fixes the median line as the relevant international boundary here. It follows, in my view, that this allegation by the applicants is not arguable. Again, the significance of this conclusion in relation to the applicants' claim for compensation will also be considered further below. · Accordingly, as at December 1974 (when the applicants' Concession was granted), the Concession Area lay outside the area which, for domestic law purposes, was to be treated as subject to Australia's sovereign rights. As stated earlier, I cannot accept that this contention is arguable. · The entry by the Commonwealth into the Timor Gap Treaty on the Zone of Cooperation extinguished the applicants' Concession rights for the purposes of Australian municipal law (and correspondingly enhanced the Commonwealth's rights) because it was "an unambiguous assertion of sovereign rights" inconsistent with the continuation of the applicants' rights (assuming the Treaty's validity and efficacy); and the applicants are entitled to be compensated for their expropriation. In my opinion, this is not arguable. For one thing, it is inconsistent with the decision and majority reasoning in WMC in rejecting WMC's claim in that same location. For another, as the authorities referred to in Appendix 2 make clear (e.g. Cook v Sprigg [1899] AC 572 at 578 - 579; Winfat Enterprise (HK) Co Ltd v Attorney-General of Hong Kong [1985] AC 733 at 746; Mabo v Queensland (No. 2) (1992) 175 CLR 1 at 55), treaties do not create rights enforceable in municipal courts. Moreover, no arguable basis appears for the substantive cause of action now sued upon. At common law in England the Crown is not entitled by virtue of the royal prerogative to take possession of a subject's property for reasons of state without paying compensation (see Halsbury's Laws of England (1996) Vol 8(2) 4th ed (Reissue) Constitutional Law and Human Rights at 249 - 250 (6) and the cases there cited; see also Attorney-General v Nissan [1970] AC 179 and Burmah Oil Company (Burma Trading) Ltd v Lord Advocate [1965] AC 75, considered in Appendix 2). Here, of course, the applicants are foreign corporations. In my opinion, the exercise here, by s 61 of the Constitution, of any prerogative power could not confer any entitlement to compensation upon a foreigner. (The position of the "friendly resident alien" does not arise; (cf. Johnstone v Pedlar [1921] 2 AC 262 at 276; Re Minister for Immigration and Multicultural Affairs; Ex parte Meng Kok Te [2002] HCA 48 at [28], [81], [114], [120], [125 ff]). Further, as WMC decided, no claim is available at all in reliance upon s 51(xxxi) of the Constitution. 150 It will be convenient next to address specifically the three questions previously mentioned in respect of the applicants' claim for compensation, that is: (1) Does the Court lack jurisdiction? (2) If not, does the Court feel obliged to exercise it? (3) Is it unnecessary for the Court to determine the issue?

Does the Court lack jurisdiction to entertain this claim? 151 As mentioned, the first issue here is whether there is a "matter" arising under a Commonwealth law. That is to say, is there some immediate right, duty or liability sought to be established by the determination of the Court at the instance of a person having sufficient interest (i.e. a "justiciable controversy"), being a claim for common law or equitable relief in respect of, or over, a right or property which owes its existence to a federal law? 152 The claim for compensation by WMC was plainly such a "matter", being a claim squarely arising under the Consequential Provisions legislation. But the present claim is not, of course, propounded on that basis. The most that can be said here of any connection between this claim and federal law is the reliance placed by the applicants upon the incorporation in the SSL Act of the meaning of "continental shelf" in the 1958 Convention's dictionary. But, as has been said, that incorporation cannot, alone, give rise to a statutory claim for compensation. 153 It is true that the applicants rely also upon the Commonwealth's entry into the Timor Gap Treaty as the platform for their claim for compensation. However, as mentioned, no immediate liability to the applicants can accrue thereby. As the Full Federal Court (Sackville, North and Kenny JJ) said in Minogue v Human Rights and Equal Opportunity Commission (1999) 84 FCR 438 (at 447): "The provisions of an international treaty do not form part of Australian law merely because Australia is a party to the treaty and has ratified it. In consequence, the ICCPR does not of itself operate to give rights to or impose duties on members of the Australian community: see, for example Dietrich v The Queen (1992) 177 CLR 292, at 305-306, 321, 348, 359-360; Victoria v Commonwealth (1996) 187 CLR 416, at 480-482; and Sinanovic v The Queen (1998) ... 154 ALR 702, at 707. Although the HREOC Actwas enacted to secure the fulfilment of Australia's obligations under the ICCPR, the Act does not make the provisions of the ICCPRdirectly enforceable in Australian courts. Nor have the provisions of the ICCPRupon which the appellant relies been given the force of law in Australia by any other statute. It is because the ICCPRdoes not give rise to rights or obligations enforceable under Australian law that it cannot give rise to a 'matter' which constitutes a 'justiciable controversy': see Re East; Ex parte Quoc Phu Nguyen (1998) 159 ALR 108 (H Ct) at 113. That is, the ICCPRcannot support the making of an order or declaration of the kind which the appellant seeks." 154 (See also Re East; Ex parte Nguyen (1998) 196 CLR 354 at 366; Thorpe v Commonwealth (No 3) (1997) 144 ALR 677, per Kirby J at 693; Brodie v Singleton Shire Council (2001) 206 CLR 512 per Gaudron, McHugh and Gummow JJ at [92].) 155 It must follow, in my view, in the absence of a matter arising under a federal law, that this Court lacks jurisdiction to entertain the applicants' claim for compensation. 156 Although strictly unnecessary to do so, in deference to the scope of the parties' arguments, I will proceed to consider the other aspects of this claim.

Assuming (contrary to my view) that jurisdiction exists, does the Court feel obliged to exercise it? 157 As the analysis of the authorities in Appendix 2 indicates, the term "act of state" is not a term of art and has been used in a variety of senses (see Halsbury's Laws of England (2000) Vol 18(2) Foreign Relation Law, par 613(1); Halsbury's Laws of Australia (1993) Vol 14 Foreign Relations at 392, 041); and the "non-justiciability" principle is, likewise, fact-specific. Neither rule, in my opinion, lends itself to ready application in a new fact-situation. Since the authorities considered in Appendix 2 depended very much upon their own particular facts, it is preferable, I think, to approach the applicants' compensation claim on the broader basis of the principle of "enforcement", rather than the "justiciability" principle, which, it will be recalled, is the respondents' alternative contention here. 158 In my opinion, the respondents' argument based on "enforcement" grounds, should be accepted, essentially for two reasons: 159 First, as noted in Appendix 2, as was held by the majority in Attorney-General (United Kingdom) v Heinemann Publishers Australia Pty Ltd (1988) 165 CLR 30 ("Spycatcher"), it is a rule of private international law that our courts should refuse to enforce "foreign governmental interests" (see also P. Nygh and M. Davies Conflict of Laws in Australia 7th ed (2000) at 336). In Attorney-General of New Zealand v Ortiz [1984] AC 1, Lord Denning MR said (at 21): "The [English] courts ... will not allow [a foreign State] to go beyond the bounds [of the foreign State's own frontiers]. [English courts] will not enforce any of its laws which purport to exercise sovereignty beyond the limits of [the foreign State's] authority." 160 In my view, as a matter of substance, if not also of form, the applicants' claim for compensation seeks to vindicate a proprietary, or perhaps quasi-proprietary, right purportedly granted by Portugal in the exercise of a claim made by Portugal to sovereign rights over an area, the continental shelf, beyond Portuguese territorial limits. In Spycatcher, the majority of the High Court (at 42) held that, in this kind of context, the term "governmental interests" suggest those which arise from "the exercise of certain powers peculiar to government". In my opinion, the making of the Portuguese Decree, and the grant of the Concession, may be so characterised. It must follow, in principle, that this Court should refuse to enforce the Concession, or any right derived from it, including the present claim to be compensated for its expropriation. 161 Further, in my view, as Brennan J explained in Spycatcher (at 49) in the passage cited in Appendix 2, this Court should in any event invoke considerations of "public policy", as a reason for refusing to enforce this claim. Nygh and Davies (op. cit. at 346) have observed: "As a general principle the rules of our legal system are intended to apply to situations that have a sufficient local content to make it desirable ... that our law will regulate it." 162 As has been said, the operation of Australian law has already resulted in the dismissal of a similar claim for compensation by an Australian company, WMC, notwithstanding that WMC was the holder of a Commonwealth statutory permit to explore in the same area. In those circumstances, in my view, it must follow that it would be contrary to Australia's domestic and external interests to uphold a claim by a Portuguese company to explore in that area, Australia having at all material times, claimed sovereign rights over the area for itself. This latter aspect of Australian "public policy" is, of course, plainly evidenced, not only in the Attorney's certificate, but also in the legislative history noted in Appendix 1 and in the ongoing international arrangements made by this country with Indonesia and East Timor and in the diplomatic stance Australia has taken with Portugal in this area.

Conclusion on the compensation claim 163 On this claim, in my opinion, the applicants have failed to demonstrate that they have an arguable case. It must follow that this part of the proceeding should be summarily dismissed.

Conclusion on whether the applicants' (alternative) claim for a declaration that entry by the Commonwealth into the Timor Gap Treaty had no effect on the applicants' pre-existing rights should be summarily disposed of 164 As has been said, in my opinion, this Court should, at the least, refuse to enforce any such rights. In any event, for the reasons given, this issue does not "arise under" any federal law. 165 It must follow that this part of the proceeding should also be summarily dismissed.

Conclusion on whether the applicants' claim for a declaration that the Timor Gap Treaty was void or invalid because it contradicted public international law norms, ought to be summarily disposed of 166 In my opinion, the position here is indistinguishable, in principle, from the approach taken by the High Court in Horta v Commonwealth (1994) 181 CLR 183 (see Appendix 2). It will be recalled that the plaintiffs there sought declarations of invalidity of both the Treaty and the statutes; and that the High Court, having first considered, but rejected, the statutory constitutional challenge, held that it was thus not necessary to consider the Commonwealth's contention that the Treaty challenge was not justiciable. For completeness, I should add, in any event, for reasons already given, that there is no substance in the applicants' contention (S/C par 64) that there is no power available under s 61 of the Constitution "to enter into treaties that are illegal or void under international law". 167 The applicants' claim for declaratory relief here ought also to be summarily dismissed.

Conclusion on whether the applicants' claim for a declaration of the invalidity of permits granted by the Joint Authority in the Concession Area, should be summarily dismissed 168 This claim, based upon a challenge to the validity of the Zone of Cooperation legislation, proceeds upon a footing which is impermissible, at the least because of the decision in WMC that the applicants' Concession rights may be characterised as "property" which was "acquired" within the meaning of s 51(xxxi) of the Constitution. It must follow that this aspect of the proceedings should, again, be summarily disposed of.

Conclusion on whether the applicants' claims that the provisions of the MLA Act are either invalid or, if not, do not affect their Concession rights, ought to be summarily disposed of 169 In principle, these claims are indistinguishable from the earlier claims already dealt with. For the same reasons, they should also be summarily dismissed.

Conclusion on whether the applicants' claims against all respondents for breach of confidence should be summarily disposed of 170 These are claims brought under the general law; that is, no statute is involved. Even if there may be said to be a "matter" here (in the sense of a "justiciable controversy"), it is, in my view, clear beyond argument that any such controversy does not itself "arise" under any federal law. 171 Given my earlier conclusions that, even if this Court had jurisdiction, it should, for policy reasons, refuse to exercise it, what is the source, if any, of the Court's jurisdiction to entertain the free-standing claims for breach of confidence? 172 Two possible sources should be considered: 173 First, the Court's "accrued" jurisdiction, which is not lost merely because the federal claim is decided on the merits against the person raising it. But "there can be no accrued jurisdiction unless there are federal issues which [the] Court has jurisdiction to entertain" (Carlton & United Breweries Ltd v Castlemaine Tooheys Ltd (1986) 161 CLR 543 at 553; Leslie Zines "Federal, Associated and Accrued Jurisdiction" in B. Opeskin and F. Wheeler (eds) The Australian Federal Judicial System (2000) at 294). Since, as I think, as a matter of substance, none of the claims made by the applicants previously considered raises a federal issue that is within this Court's jurisdiction to enforce, does it follow that the Court cannot have an "accrued" jurisdiction to entertain the breach of confidence claim? Further, in any event, is there, in these several claims, any "common substratum of facts" so as to justify their characterisation as a "single controversy" and thus one federal matter; or, may it be said, on the contrary, that the breach of confidence claims arise out of circumstances which are removed from those relied upon to propound the claims for compensation for expropriation of the Concession rights? (See Zines, e.g., op. cit. at 290 - 294; Re Wakim; Ex parte McNally (1999) 198 CLR 511 per Gummow and Hayne JJ at [139] - [142]). 174 The other possible source of jurisdiction is the Court's "associated" jurisdiction, provided by s 32(1) of the Federal Court of Australia Act 1976 (Cth), its statute, conferring jurisdiction in respect of matters, not otherwise within its jurisdiction, that are "associated with matters in which the jurisdiction of the Court is invoked". 175 Should the reasoning in Carlton & United in the case of "accrued" jurisdiction apply here also, as providing a proper and appropriate analogy in principle? In other words, is there implicit, if not explicit, in the provisions of s 32(1) a requirement that federal jurisdiction is otherwise properly invoked? As I am of the view that none of the applicants' claims previously considered even arguably raises a federal issue to be entertained, can any question of "associating" another "non-federal" issue arise? 176 Since it appears that these questions were not specifically addressed on the hearing before us, the parties should, in the circumstances, have leave to address these questions by further written submissions.

Conclusion on whether the claim against the Joint Authority for interference with contractual relations, for a declaration of constructive trust, for compensation for expropriation, and for a declaration that the Authority's decision to grant a production sharing contract, ought to be summarily dismissed 177 Essential to each of these claims is the applicants' contention that this Court has jurisdiction to enforce their claimed rights under the Concession Agreement. Since I am of the contrary view, beyond any reasonable argument, these claims ought now be dismissed for this reason at least.

Conclusion on whether the claims against the Phillips companies for alleged interference with contractual relations, and for a declaration of constructive trust, ought to be summarily disposed of 178 Again, since it is essential to these claims that the applicants can demonstrate that this Court has jurisdiction to enforce their alleged rights under the Concession Agreement, these claims ought to be summarily dismissed.

The enactment of the P(SL) Act in 1967 179 In the Second Reading Speech on this Bill (Parliamentary debates, House of Representatives, 26 October 1967, pp 2367 ff), after referring to the 1953 proclamation "for the international record", declaring the existence of Australia's sovereign rights over the seabed and the subsoil of Australia's continental shelf for the purpose of exploring it and exploiting its natural resources, the Attorney-General noted (at 2375) Australia's participation in the 1958 Convention, and referred (at 2376) to - "... the development of rules of international law relating to the continental shelf in its strict legal sense, that is to say, to the submarine lands beyond the limits of territorial waters. International law recognised, long before the formulation of this Convention, that a coastal country possesses full sovereign rights over natural resources within the limits of territorial waters, which of course start at low water mark." 180 The Minister noted (at 2376 - 2377) that the States had proceeded initially to grant petroleum exploration permits over areas adjacent to their coasts, both within and beyond territorial waters, outside the three mile limit, for "enormous" areas of the continental shelf, a position the Commonwealth considered "unsatisfactory". Although the Commonwealth maintained that it had constitutional authority to give effect to the 1958 Convention, and that this gave it some rights outside the three mile limit, there was uncertainty about the position (vis-ŕ-vis the States), at least within the three mile limit. Accordingly, the Commonwealth and the States had moved, over a period, towards a joint legislative scheme, accepting that exploration permits granted under the legislation existing up to that time should be honoured. 181 The Minister said (at 2379): "One other difficulty has been with the convention and the reference to the sea-bed. This is the convention on the continental shelf and on subsoil adjacent to the coast but outside the area of the territorial sea, to a depth of 200 metres, or beyond that limit, to where the depth of the super-jacent waters admits of the exploitation of the natural resources of the said submarine areas. The outer limit is determined as the point where it is possible with your capacity to go to exploit resources. This capacity will increase with technical advancement and thus the limits advance outwards. The outer limit today may not be the outer limit tomorrow. This presents the draftsmen of an Act such as this with a problem. The Bill was drafted on the basis of application to 'areas'. The device adopted was to draw the series of 'picture frames' ... . The legislation makes it clear, and this is recognised by notations on the maps themselves, that the legislation will apply only to so much of the submerged lands within a particular frame as has the character either of territorial seabed or of continental shelf within the meaning of the convention with its varying limits. In all cases where Australian territory is opposite or adjacent to the territory of another country, regard has been had, and will be had, to the relevant principles relating to delimitation of a country's continental shelf. This would apply as between Australia and Portuguese Timor and Australia and Indonesia." 182 (It will be recalled that the definition of "continental shelf" in Art 1 of the 1958 Convention referred, relevantly, to "the seabed and subsoil of the submarine areas adjacent to the coast but outside the area of the territorial sea, to a depth of 200 metres or, beyond that limit, to where the depth of the superjacent waters admits of the exploitation of [their] natural resources ..."; and that by Art 6(1), where the same continental shelf is adjacent to the territories of two or more States whose coasts are opposite each other, the boundary, in the absence of agreement, and unless otherwise "justified by special circumstances", is the "median line, every point of which is equidistant from the nearest points of the baselines from which the breadth of the territorial sea of each State is measured".) 183 In its preamble, the P(SL) Act recited that Australia was a party to the 1958 Convention (which was set out in a Schedule to the Act); and that the Commonwealth and the States had decided that they should co-operate in this area. 184 Part III of the P(SL) Act (ss 14 - 149) provided for mining for petroleum in "an adjacent area" - defined (s 5) to mean an area specified in the Second Schedule to the Act as being adjacent to a State or Territory. That Schedule, in specifying several such areas, provided: "The adjacent area in respect of a State or Territory is the area the boundary of which is described in this Schedule in relation to that State or Territory, to the extent only that that area includes - (a) areas of territorial waters; and (b) areas of superjacent waters of the continental shelf." 185 Provision was made by s 28 for the grant of a permit to explore for petroleum within an "adjacent area". To so explore without a permit was prohibited: s 19.

The amendment of the P(SL) Act in 1973 186 Section 156A, inserted into the P(SL) Act in 1973, referred (as an "International Sea-bed Agreement") to (a) the Agreement between Australia and Indonesia establishing certain seabed boundaries, signed on 18 May 1971; and (b) the supplementary Agreement between Australia and Indonesia establishing boundaries in the area of the Timor and Arafura Seas, signed on 9 October 1972; the purpose of the reference being to provide in s 156A(2) that, when necessary, the position of a point or line was to be determined in accordance with that Agreement.

The enactment of the SSL Act in 1973 187 By its long title, the SSL Act is, relevantly, described as an Act relating to "... Sovereign Rights in respect of the Continental Shelf and relating also to the Recovery of Minerals, other than Petroleum, ... from the Continental Shelf." 188 In its preamble, the SSL Act recited, inter alia, that Australia is a coastal state having "sovereign rights in respect of the continental shelf (that is to say, the seabed and subsoil of certain submarine areas adjacent to its coast but outside the area of the territorial sea) for the purpose of exploring it and exploiting its natural resources"; and that Australia was a party to the 1958 Convention, set out in a Schedule to the Act. 189 The Act defined "continental shelf" as having the same meaning as in the 1958 Convention (s 3(1)). 190 Part II of the Act (ss 5 - 16) made provision for "Sovereignty and Sovereign Rights". Division 2 of Part II (ss 11 - 13) made provision for "The Continental Shelf". 191 By s 11, it was "declared and enacted that the sovereign rights of Australia as a coastal state in respect of the continental shelf of Australia, for the purpose of exploring it and exploiting its natural resources, are vested in and exercisable by the Crown in right of the Commonwealth". (By s 3(3), a reference to "continental shelf" in the Act, including s 11, is a reference to that continental shelf "so far as it extends from time to time".) 192 By s 12, the Governor-General may, from time to time by Proclamation, "declare, not inconsistently with the Convention ... or any relevant international agreement to which Australia is a party, the limits of the whole or any part of the continental shelf of Australia". (By s 3(5), "where a Proclamation is in force under section 12, the continental shelf ... shall, for all purposes of th[e] Act, be taken to extend to the limits declared by that Proclamation". To date, no Proclamation has been made.) 193 Division 3 of Part II (ss 14 - 16) provides for "Savings". 194 Section 16 provides that the preceding provisions of Part II - (a) do not limit or exclude the operation of any law of the Commonwealth in force before or after the SSL Act [Comment: e.g. the P(SL) Act]; and (b) do not limit or exclude the operation of any State law in force before or after the Act, "except in so far as the law is expressed to vest or make exercisable any sovereignty or sovereign rights otherwise than as provided by the preceding provisions ... ".

The amendment of the SSL and P(SL) Acts in 1980 195 The SSL Act was then amended to save other laws by adding 16(2) to provide (s 16(2)(b)) that a law of a State or of the Northern Territory shall not be taken to be within the words of exception in s 16(1)(b) by reason that the law makes provision with respect to, or touching and concerning, any seabed or subsoil referred to in Division 2, or the living or non-living resources thereof, if the law is otherwise within powers with respect to particular matters that are conferred on the legislature of the State or of the Northern Territory by the Coastal Waters (State Powers) Act 1980 (Cth). 196 The P(SL) Act was also then amended to give effect to a new scheme agreed between the Commonwealth and the States (in lieu of their 1967 agreement) recited in the preamble as follows: "(a) legislation of the Parliament of the Commonwealth in respect of the exploration for and the exploitation of the petroleum resources of submerged lands should be limited to the resources of lands beneath waters that are beyond the outer limits of the territorial sea adjacent to the States and the Northern Territory (being outer limits based, unless and until otherwise agreed, on the breadth of that sea being three nautical miles), and that the States and the Northern Territory should share, in the manner provided in this Act, in the administration of that legislation; (b) legislation of the Parliament of each State should apply in respect of the exploration for and the exploitation of the petroleum resources of such part of the submerged lands in an area adjacent to the State as is on the landward side of the waters referred to in paragraph (a); (b) legislation of the Legislative Assembly of the Northern Territory should apply in respect of the exploration for and the exploitation of the petroleum resources of such part of the submerged lands in an area adjacent to the Northern Territory as is on the landward side of the waters referred to in paragraph (a); and (c) the Commonwealth, the States and the Northern Territory should endeavour to maintain, as far as practicable, common principles, rules and practices in the regulation and control of the exploration for and the exploitation of the petroleum resources of all the submerged lands referred to above that are on the seaward side of the inner limits of the territorial sea of Australia." 197 Some provisions of the amending legislation should be specifically mentioned. 198 The previous definition of "adjacent area" (s 5(1)) was replaced. 199 Section 5A(1) now defines an "adjacent area" as an area in respect of a State or the Northern Territory as so much of the area (specifically) described in Schedule 2 as comprises waters of the sea that - (a) are not within the outer limits of Australia's territorial sea; and (b) are within the outer limits of the continental shelf. 200 If at any time, the breadth of Australia's territorial sea is determined or declared to be greater than three nautical miles, s 5A(1) continues to have effect as if the breadth of Australia's territorial sea had continued to be three nautical miles (s 5A(2)).

Amendment of the P(SL) Act by Part 8 of the Consequential Provisions Act 201 Subsection (1A) was inserted in s 5A, providing that "the adjacent area" in respect of Western Australia or the Northern Territory is so much of the area (specifically) described in Schedule 2 as comprises waters of the sea that (a) are not within the outer limits of Australia's territorial sea; and (b) are within the outer limits of the continental shelf; and (c) are not within Area A of the Zone of Cooperation. 202 Section 30A was inserted, dealing with the renewal of any permit where, as a result of the foregoing amendment of s 5A, removing Area A from the adjacent areas; and as a result of the operation of s 17(2), a block specified in the permit had ceased to exist. 203 By s 24 of the Consequential Provisions Act(considered, as mentioned, in the WMC Case) provision is made for compensation: where, but for s 24, the operation of the amendments made by Part 8 would result in the acquisition of property from a person otherwise than on just terms, the Commonwealth is liable to pay compensation of a reasonable amount (s 24(2)). In the absence of agreement, the person may institute proceedings in this Court for recovery of compensation (s 24(3)).

Amendment of the SSL Act and the P(SL) Act by the MLA Act 204 The MLA Act's long title is: "[a]n Act to amend the law relating to Australia's maritime zones under international law, and for related purposes". 205 By s 5 of the MLA Act, the Preamble to the SSL Act is amended by omitting the recital's reference to the 1958 Convention and by substituting a reference to Australia's rights and duties as a coastal state in relation to the Exclusive Economic Zone ("the EEZ") provided for in the 1982 Convention. 206 Section 6 of the MLA Act substitutes "paragraph 1 of Article 76 of the [1982] Convention" for the definition of "continental shelf" in s 3 of the SSL Act. 207 By Schedule 1 of the MLA Act, the definition in the P(SL) Act of the "continental shelf" by reference to the 1958 Convention is removed; there is substituted the 1982 Convention definition, as picked up in the amendments to the SSL Act noted above. 208 By s 11 of the MLA Act, s 12 of the SSL Act was amended by substituting for the 1958 Convention a reference to Article 76 of the 1982 Convention; and in Schedule 2 of the SSL Act, s 13 of the MLA Act substituted the 1982 Convention for the 1958 Convention. 209 Article 76 of the 1982 Convention provided: · (As previously noted) the continental shelf comprises the seabed and subsoil of the submarine areas that extend beyond the territorial sea throughout the natural prolongation of its land territory to the outer edge of the continental margin, or to a distance of 200 nautical miles from the baselines from which the breadth of the territorial sea is measured, where the outer edge of the continental margin does not extend up to this distance (par 1). · The continental shelf shall not extend beyond the limits provided by pars 4 - 6 (par 2). · The continental margin comprises the submerged prolongation of the land mass, and consists of the seabed and subsoil of the shelf, the slope and the rise. It does not include the deep ocean floor with its oceanic ridges or the subsoil thereof (par 3).) 210 However, the provisions of Art 76 are expressed to be "without prejudice" to the question of delimitation of the continental shelf between States with opposite coasts (par 10). That delimitation is dealt with by Art 83, providing that it shall be effected by agreement on the basis of international law, as referred to in Article 38 of the Statute of the International Court of Justice, in order to achieve an equitable solution. If no agreement can be reached within a reasonable time, the States concerned shall resort to the compulsory procedures entailing binding decisions provided for in Part XV. Under Section 2 of that Part, a dispute may be referred to one or other of a number of courts or tribunals, including the International Tribunal for the Law of the Sea, the International Court of Justice and a special arbitral tribunal constituted under Annex VIII. But, in March 2002, Australia excluded the setting of maritime boundaries from compulsory dispute resolution. 211 It should also be noted here that, as indicated by the Executive Certificate, throughout the negotiations for the 1982 Convention, Australia maintained a broad/wide continental margin stance, arguing for geomorphologically or geologically-blessed states' entitlement to a continental shelf area beyond the 200 nautical mile limit accepted for the EEZ (see Report of the Seventieth Conference of the International Law Association (2002) at 757).

The principal authorities relied on by the respondents

Cook v Sprigg [1899] AC 572 212 An action was brought in the Supreme Court of the Cape of Good Hope against the Colony's Prime Minister, sued in his official capacity under the Crown Liabilities Act 1888, permitting such a proceeding. Claiming that land and other rights and privileges had been granted to them by a paramount chief, Sigcau, before the Crown's annexation of the area, the plaintiffs sought a declaration of right; and damages for interference by the Crown with the exercise of their rights and privileges. Holding that there was a "complete answer" to any claim, Lord Halsbury LC said (at 578) that the taking of possession by the Crown, by cession or otherwise, was an act of State; as was treating Sigcau as an independent sovereign, something which the plaintiffs were compelled to do in deriving title from him: "... the transactions of independent States between each other are governed by other laws than those which municipal courts administer. ... [A] change of sovereignty ... ought not to affect private property, but no municipal tribunal has authority to enforce such an obligation." 213 Lord Halsbury's observations have been cited often in England and in Australia. However, the Privy Council was careful to distinguish the procedural aspects (holding that it was permissible to sue the Crown under the Proceedings Act) from the substantive question (holding (at 579) that the Crown could not be sued municipally at common law for privileges). There was no substantive claim based, as the applicants claim here, upon a statutory cause of action. Further, Lord Halsbury specifically noted (at 578) that it was not pleaded that there was "any bargain by the British Government that Sigcau's supposed concessions should be recognised". Moreover, in the present case, unlike in Cook, no "taking of possession" was involved.

Hesperides Hotels Ltd v Muftizade [1979] AC 508 214 In an application to set aside a writ for want of jurisdiction, the House of Lords held that the rule that English courts had no jurisdiction to entertain an action to recover damages for trespass to land situate abroad precluded the action for damages for trespass to hotels in Cyprus, notwithstanding that no question of title arose; that a claim for conspiracy to trespass in respect of the hotels was equally precluded, since the unlawfulness on which the conspiracy was based depended on proving the intention to effect a trespass on foreign land, a question on which an English court would not adjudicate; but that the rule did not apply to the chattel contents of the hotels, and since no local laws were relied on as justifying interference with them, the action could continue on the claim of conspiracy to trespass in resect of these chattels. 215 The House here applied the "controversial" "Moςambique" rule (British South Africa Company v The Companhia de Moςambique [1893] AC 602), which has recently been "reserved for further consideration" by the High Court of Australia (see below). In any event, the present case does not involve any question of trespass to foreign land.

Buttes Gas and Oil Co v Hammer [1982] AC 888 216 Buttes, a Californian oil company, claimed it had been defamed when it was accused by Occidental, another Californian oil company, of conspiring with the Ruler of Sharjah so as to deprive Occidental of its rights over a site in the Arabian Gulf. Occidental pleaded justification and also counter-claimed against Buttes for damages for fraudulent conspiracy, relying upon the same facts. A permanent stay of the proceeding was sought on the ground that the issues in the case embraced two conflicting oil concessions which neighbouring states in the Arabian Gulf had granted over their territorial and offshore waters; and that the foreign relations between the United Kingdom and Iran were also involved. 217 Considering, upon the basis of the facts alleged in the pleadings, "the general issue of justiciability", Lord Wilberforce noted that the application for the stay had been put in several ways. 218 First, it was contended that English courts will not try an action which would require them to pronounce, directly or indirectly, on rights in immovable property situate abroad. Addressing this "territorial" argument (i.e. a "non-justiciable" dispute as to the title to foreign land), Lord Wilberforce said (at 926 - 927): "[T]his is not just a question arising between private individuals as to the title to, or possession of, foreign land so as to come directly within the ["much criticised"] rule laid down in the Moςambique [1893] A.C. 602 and Hesperides [1979] A.C. 508 cases: …. The present case is more nearly within the category of boundary disputes between states. As to these it would be too broad a proposition to say that the mere emergence in an action here of a dispute as to the boundaries of states is sufficient to preclude the jurisdiction of the court. The main authorities cited by the respondents' counsel - Foster v. Globe Venture Syndicate Ltd. [1900] 1 Ch. 811; 82 L.T. 253 and Duff Development Co. Ltd v. Government of Kelantan [1924] A.C. 797 - though as I read them depending essentially upon recognition, are at least instances where the court has without difficulty decided questions depending upon the ascertainment of boundaries, and I would agree that there may be other cases where a question relating to foreign land, even to the title to foreign land, may either be capable of determination as a matter of fact (see per Lord Sumner in the Duff Development case, at p. 827 whom I do not understand as arguing for justiciability in all cases), or may arise incidentally or collaterally to some other question, and may be decided. I need only quote Lord Herschell L.C.'s words in the Moςambique case ... [at] 626: 'It is quite true that in the exercise of the undoubted jurisdiction of the courts it may become necessary incidentally to investigate and determine the title to foreign lands; …' words applied by Sir Robert Megarry V.-C. in the great case of the Banaban Islands, Tito v. Waddell (No. 2) [1977] Ch. 106, 262, 263, ('incidentally' or 'as a collateral incident')." (Emphasis added) 219 In Moςambique, Lord Herschell acknowledged (at 626) that "[w]hilst Courts of Equity have never claimed to act directly upon land situate abroad, they have purported to act upon the conscience of persons living [in Britain]". However, it was held (at 625) that there were "solid" reasons (of "inconveniences") why British courts have refused to adjudicate upon claims of title to foreign land in proceedings founded on an alleged invasion of the proprietary rights attached to it, and to award damages founded on that adjudication. But, as mentioned, in Renault v Zhang (2002) 187 ALR 1, Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ (at [76]) have now reserved the Moςambique rule "for further consideration in an appropriate case". 220 In any event, Lord Wilberforce went on to say (at 927): "But here the question of title to the location does not arise incidentally or collaterally: it is at the heart of the case. It is essential to Occidental's claim (both in its counterclaim and in its defence of justification) to establish that before the intervention of Buttes and Sharjah it had a right with some degree of legal validity over the seabed at the location - i.e. nine miles from Abu Musa (see the words in its counterclaim, … 'permanently deprived of their rights' to exploit the location). Occidental does not contend, it is true, that the action of Sharjah in extending its territorial waters so as to include the location was unlawful under Sharjah law: and in so far as this is so, the dispute avoids the area of municipal law, or of conflict of (private) law. But that very fact makes it, not more, but less justiciable by a municipal court - either, … as an a fortiori case to, or as an extension of, Hesperides ... or, as I would rather see it, as an issue in a different, and international dimension. This cannot be decided simply as an issue of fact upon evidence: it calls, on the contrary, for adjudication upon the validity, meaning and effect of transactions of sovereign states. While, therefore, I agree with the respondents that the Moςambique rule is not of itself decisive of this case, we have still to consider whether a wider principle of judicial abstention has to be applied." (Emphasis added) 221 Before exploring this, Lord Wilberforce noted that Buttes' second argument was that the justification defence and the conspiracy counter-claim were not justiciable in a municipal court because of the operation of the "act of state" doctrine. Upon noting some of the exceptions to that doctrine relied on by Occidental, and observing that the attack on Sharjah's decree was not upon its validity under the law of Sharjah, but upon its efficacy in international law, which "brings it at once into the area of international dispute", Lord Wilberforce said (at 931): "It is one thing to assert that effect will not be given to a foreign municipal law or executive act if it is contrary to public policy, or to international law … and quite another to claim that the courts may examine the validity, under international law, or some doctrine of public policy, of an act or acts operating in the area of transactions between states. The second argument seems to me to be no more valid. To attack the decree of 1969/70 extending Sharjah's territorial waters, i.e. its territory, upon the ground that the decree is extra-territorial seems to me to be circular or at least question begging." (Emphasis added) 222 However, his Lordship went on to articulate a "wider principle" (at 931): "However, though I reject these particular arguments relied on by way of exception to the rule derived from the authorities mentioned above, I do not regard the case against justiciability of the instant disputes as validated by the rule itself. If it is to be made good it must be upon some wider principle. So I think that the essential question is whether, apart from such particular rules as I have discussed, viz. those established by (a) the Moςambique ... and Hesperides ... cases and by (b) Luther's case [1921] 3 K.B. 532 and Princess Paley Olga v. Weisz [1929] 1 K.B. 718, there exists in English law a more general principle that the courts will not adjudicate upon the transactions of foreign sovereign states. Though I would prefer to avoid argument on terminology, it seems desirable to consider this principle, if existing, not as a variety of 'act of state' but one for judicial restraint or abstention." (Emphasis added) 223 Lord Wilberforce remarked (at 932) that such a principle, starting in English law in Duke of Brunswick v King of Hanover (1848) 2 HL Cas 1, where Lord Cottenham LC held (at 21) that "if it is a sovereign act, then, whether it be according to law or not according to [foreign] law, we cannot inquire into it", was adopted and generalised in the law of the United States of America, is effective and compelling in English courts, and is "not one of discretion, but is inherent in the very nature of the judicial process". (Emphasis added) 224 Lord Wilberforce observed that "the first trace" of this general principle is found in the early case of Blad v Bamfield (1674) 3 Swan 604, where Lord Nottingham granted a perpetual injunction to restrain proceedings at common law against a Dane for the seizure of property of English subjects in Iceland, the seizure having been sanctioned by the Danish authorities. It appears that the "equity" here was "comity of nations", which as Lawrence Collins has remarked in this context ("Foreign Relations and the Judiciary" (2000) 51 ICLQ 485 at 504), "[c]omity is a chameleon word". 225 After observing (at 933) that "the nature of the judgment, or inquiry or entertainment" must be "carefully analysed", Lord Wilberforce went on (at 933 - 936) to consider at some length the American "act of state" non-justiciability doctrine by reference to the decisions of the United States Supreme Court, including Underhill v Hernandez (1897) 168 US 250 in which (at 252) the reasoning in Duke of Brunswick was followed; Oetjen v Central Leather Co (1918) 246 US 297, 304; and Banco Nacional de Cuba v Sabbatino (1964) 376 US 398. 226 In also following the Duke of Brunswick in Hernandez, Fuller CJ said (at 252) that "courts of one country will not sit in judgment on the acts of the government of another done within its own territory". In Oetjen, the Hernandez principle was applied in a case involving title to property brought within the custody of a United States court. In Sabbatino, however, as Lord Wilberforce noted (at 934), it was held that international law does not require the application of the "act of state" doctrine, and the American courts had moved towards a "flexible" use of the doctrine "on a case to case basis". Yet, his Lordship observed, there was still "room for a principle", in suitable (American) cases, for "judicial restraint or abstention". 227 Lord Wilberforce further noted (at 934 - 936) that proceedings by Occidental against Buttes had been dismissed by the Fifth Circuit Court of Appeals (see Occidental of Umm al Qaywayn Inc v A Certain Cargo of Petroleum Laden Aboard the Tanker Dauntless Colocotronis (1978) 577 F 2d 1196) on the grounds (at 1204) that: "The issue of sovereignty is political not only for its impact on the executive branch, but also because judicial or manageable standards are lacking for its determination. To decide the ownership of the concession area it would be necessary to decide (1) the sovereignty of Abu Musa, (2) the proper territorial water limit and (3) the proper allocation of continental shelf. A judicial resolution of the dispute over Abu Musa between Iran and Sharjah is clearly impossible." (Emphasis added) 228 The reference in this passage to "judicial or manageable standards" picked up the American Court's earlier observations (at 1203): "In Baker v. Carr, 369 U.S. 186 ... (1962), the Supreme Court ... identified a number of basic characteristics or considerations relevant to the existence of a political question. The Court held that the inextricable presence of one or more of these factors will render the case nonjusticiable under the Article III 'case or controversy' requirement, and therefore, the Court would be without jurisdiction. In this most definitive pronouncement, the Court identified the following factors as relevant to the affirmative determination of the existence of a political question: (1) 'a textually demonstrable commitment of the issue to a coordinate political department' (2) 'a lack of judicially discoverable and manageable standards' (3) 'the impossibility of deciding without an initial policy determination of a kind clearly for nonjudicial discretion' (4) 'the impossibility of a court's undertaking independent resolution without expressing lack of the respect due coordinate branches of government' (5) 'an unusual need for unquestioning adherence to a political decision already made' (6) 'the potentiality of embarrassment from multifarious pronouncements by various departments on one question' 369 U.S. at 217, [per Brennan J]." 229 Acknowledging that the relationship between the executive and the judiciary in the United States "is neither identical with [the English] nor in itself constant", Lord Wilberforce said (at 936): "[T]he ultimate question what issues are capable, and what are incapable, of judicial determination must be answered in closely similar terms in whatever country they arise, depending, as they must, upon an appreciation of the nature and limits of the judicial function. This has clearly received the consideration of the United States courts. When the judicial approach to an identical problem between the same parties has been spelt out with such articulation in a country, one not only so closely akin to ours in legal approach, the fabric of whose legal doctrine in this area is so closely interwoven with ours, but that to which all the parties before us belong, spelt out moreover in convincing language and reasoning, we should be unwise not to take the benefit of it." (Emphasis added) 230 Lord Wilberforce thus appears to have embraced the American "political question" doctrine; and its subsequent history in the United States will be considered below. 231 Lord Wilberforce said (at 937) that the proceedings, if they were to go on: "… inevitably would involve determination of the following issues … : (1) Whether Occidental acquired in 1969 a vested right to explore the seabed at the location within 12 miles from the coast of Abu Musa. This involves consideration of the questions: (a) which state had sovereignty over Abu Musa, (b) what was the width of the territorial waters of Abu Musa, (c) what was the boundary of the continental shelf between (i) Sharjah and U.A.Q., (ii) Abu Musa and U.A.Q., (iii) Iran and both Emirates. These questions in turn involve consideration of the meaning and effect of the parallel declarations of 1964. ... (2) If Occidental did acquire any vested rights as above, how and why was it deprived of those rights? Directly, it was deprived of them by actions of sovereign states, viz. Sharjah, Iran, Her Majesty's Government and U.A.Q. Consideration of these involves examination of a series of inter-state transactions from 1969-73." (Emphasis added) 232 Echoing the observations of Brennan J in Baker v Carr 369 US 186, Lord Wilberforce concluded (at 938): "[These considerations] have only to be stated to compel the conclusion that these are not issues upon which a municipal court can pass. Leaving aside all possibility of embarrassment in our foreign relations … there are ... no judicial or manageable standards by which to judge these issues, … the court would be in a judicial no-man's land: the court would be asked to review transactions in which four sovereign states were involved, which they had brought to a precarious settlement, after diplomacy and the use of force, and to say that at least part of these were 'unlawful' under international law. I would just add, in answer to one of the respondents' arguments, that it is not to be assumed that these matters have now passed into history, so that they now can be examined with safe detachment." (Emphasis added) 233 Lord Wilberforce has, it seems, squarely based his reasoning for judicial abstention by adopting the American "political question" doctrine. Yet, this principle has since been strongly criticised in the United States itself (see, e.g., Rachel Barkow "More Supreme than Court? The Fall of the Political Question Doctrine and the Rise of Judicial Supremacy" (2002) 102 Columbia L. Rev 237 at 244 - 246). According to a distinguished American commentator, Charles Alan Wright Law of Federal Courts 5th ed (1994) (at 83) - "No branch of the law of justiciability is in such disarray as the doctrine of the 'political question'. ... Even those who accept the existence of the doctrine recognize that there is no workable definition of characteristics that distinguish political questions from justiciable questions, and that the category of political questions is 'more amenable to description by infinite itemization than by generalisation'." (Emphasis added) 234 Although Buttes is strongly relied upon by the respondents, its ratio decidendi does appear to be the absence of any judicial "standards", arising in large part because the British Government "regarded the matter as one to be solved by diplomacy or 'third-party settlement'" (at 930). By contrast, the applicants contend (assuming that the whole of the 1958 Convention is picked up by the SSL Act), that the application of Art 6(1) here, including the notion of "special circumstances", may be adjudicated upon by adopting orthodox judicial method, instancing as an analogy United Mexican States v Cabal (2001) 183 ALR 645 at [61] - [62], where the concept of "special circumstances" was considered in an extradition context. Be that as it may be, it is plain that Buttes' ratio is fact-specific, especially with respect to the attitude of the forum Government. 235 In any event, as will be seen, the House of Lords has now held that the principle is one of judicial restraint, not of judicial abstention. In other words, there is no absolute rule. 236 As has been said, the concept of "non-justiciability" is indeed a difficult one. Geoffrey Lindell has pointed out that the term is used in several distinct senses - (1) the court lacks jurisdiction; or (2) the court possesses jurisdiction, but does not feel obliged to exercise that jurisdiction, or to determine for itself all or part of the issues or questions which arise in the exercise of the jurisdiction; or (3) it is unnecessary for the court to determine the question or issue raised, because the application of the relevant principles of law do not depend on the determination of the same question or issue. In Buttes, the House was concerned with non-justiciability in sense (2) above, so that the case does not bear upon the more limited British "act of state" doctrine which, by virtue of s 61 of the Constitution, may operate to render the Crown in right of the Commonwealth immune from legal liability in some circumstances; but Buttes is not authority supporting the existence of a broad and underlying judicial discretion to decline the determination of issues merely because they are seen as inappropriate for judicial determination; for, Dixon J observed in Melbourne Corporation v Commonwealth (1947) 74 CLR 31 at 82, the relevant question is "not ... whether the considerations are political ... but whether they are compelling." (Geoffrey Lindell "The Justiciability of Political Questions" Australian Constitutional Perspectives H. Lee and G. Winterton (eds) (1992) at 183, 241 ff.)

R v Bow Street Metropolitan Stipendiary Magistrate; Ex parte Pinochet Ugarte [2000] 1 AC 61 237 Recently, in explaining the "Act of state: non-justiciability" principle, Lord Nicholls (with Lord Hoffmann's agreement) said (at 106 - 107): "The act of state doctrine is a common law principle of uncertain application which prevents the English court from examining the legality of certain acts performed in the exercise of sovereign authority within a foreign country or, occasionally, outside it. Nineteenth century dicta (for example, in Duke of Brunswick v. King of Hanover, 2 H.L.Cas. 1 and Underhill v Hernandez, 168 U.S. 250) suggested that it reflected a rule of international law. The modern view is that the principle is one of domestic law which reflects a recognition by the courts that certain questions of foreign affairs are not justiciable (Buttes Gas and Oil Co. v Hammer [1982] A.C. 888)and, particularly in the United States, that judicial intervention in foreign relations may trespass upon the province of the other two branches of government: Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398. The doctrine has sometimes been stated in sweepingly wide terms; for instance, in a celebrated passage by Fuller C.J. in Underhill v Hernandez, 168 U.S. 250, 252: 'Every sovereign state is bound to respect the independence of every other sovereign state, and the courts of one country will not sit in judgment on the acts of the government of another done within its own territory.' More recently the courts in the United States have confined the scope of the doctrine to instances where the outcome of the case requires the court to decide the legality of the sovereign acts of foreign states: Kirkpatrick & Co. Inc. v. Environmental Tectonics Corporation International, 110 S.Ct. 701." (Emphasis added) 238 Lord Lloyd remarked (at 102) that the principles in this area "frequently overlap, and are sometimes confused", but noted that in Sabbatino, Lord Wilberforce had "detected a more flexible use of the ['non-justiciability'] principle".

R v Bow Street Metropolitan Stipendiary Magistrate; Ex parte Pinochet Ugarte (No. 3) [2000] 1 AC 147 239 Lord Phillips referred (at 286) to a (composite) principle, under which the English and American courts have "as a matter of judicial restraint, held themselves not competent to entertain litigation that turns on the validity of the public acts of a foreign state". 240 However, the general observations in Pinochet, which were concerned with the different question of head of state immunity (see Eng-Lye Ong "Non-justiciability in Private International Law: Principle or Discretion?" (2002) 31(1) Common Law World Review 35 at 42), must now be read in the light of Kuwait Airways Corporation v Iraqi Airways Co (Nos. 4 and 5) [2002] 2 WLR 1353 (below).

Kuwait Airways Corporation v Iraqi Airways Co (Nos. 4 and 5) [2002] 2 WLR 1353 241 Buttes has now been explained, but distinguished, by the House of Lords in Kuwait Airways. On 2 August 1990, military forces of Iraq forcibly invaded and occupied Kuwait. The Revolutionary Command Council of Iraq ("the RCC") then adopted resolutions proclaiming the sovereignty of Iraq over Kuwait and its annexation to Iraq. Kuwait was designated a "governate" within Iraq. When the Iraqi forces took over the airport at Kuwait they seized ten commercial aircraft belonging to Kuwait Airways Corporation ("KAC"). By 9 August 1990, nine of the aircraft had been flown back to Basra, in Iraq. The tenth aircraft, undergoing repair at the time of the invasion, was flown direct to Baghdad a fortnight later. On 9 September 1990, the RCC adopted a resolution, Resolution 369, dissolving KAC and transferring all its property worldwide, including the ten aircraft, to the state-owned Iraqi Airways Co ("IAC"). This resolution came into force upon publication in the official gazette on 17 September 1990. On the same day, IAC's board passed resolutions implementing RCC Resolution 369. On 11 January 1991, KAC commenced proceedings against the Republic of Iraq and IAC, claiming the return of its ten aircraft or payment of their value, and damages. The UN Security Council's deadline for Iraq's withdrawal from Kuwait expired at midnight on 15 January 1991. Military action by coalition air forces began twenty-four hours later. The airfield at Mosul, in the north of Iraq, suffered several attacks from the air. In late January and early February 1991 four of the ten aircraft seized from KAC, moved to Mosul for safety reasons, were destroyed by coalition bombing. The other six aircraft were evacuated by IAC to Iran at much the same time. Following negotiations with the government of Iran, these six aircraft were flown back eventually to Kuwait in July and August 1992. KAC later paid Iran a substantial amount for the cost of keeping, sheltering and maintaining them. 242 In its defence, IAC relied on Buttes, submitting that KAC's argument invited the court, impermissibly, to determine whether the invasion of Kuwait by Iraq, followed by the removal of the ten aircraft from Kuwait to Iraq and their transfer to IAC, was unlawful under international law. 243 In rejecting the defence, Lord Nicholls (with whom Lord Hoffmann agreed) said (at [25] - [26]): "[IAC's] submission seeks to press the non-justiciability principle too far. Undoubtedly there may be cases, of which the Buttes case is an illustration, where the issues are such that the court has, in the words of Lord Wilberforce, at p 938, 'no judicial or manageable standards by which to judge [the] issues': 'the court would be asked to review transactions in which four sovereign states were involved, which they had brought to a precarious settlement, after diplomacy and the use of force, and to say that at least part of these were 'unlawful' under international law.' This was Lord Wilberforce's conclusion regarding the important inter-state and other issues arising in that case: see his summary, at p 937. This is not to say an English court is disabled from ever taking cognisance of international law or from ever considering whether a violation of international law has occurred. In appropriate circumstances it is legitimate for an English court to have regard to the content of international law in deciding whether to recognise a foreign law. Lord Wilberforce himself accepted this in the Buttes case, at p 931D. Nor does the 'non-justiciable' principle mean that the judiciary must shut their eyes to a breach of an established principle of international law committed by one state against another when the breach is plain and, indeed, acknowledged. In such a case the adjudication problems confronting the English court in the Buttes litigation do not arise. The standard being applied by the court is clear and manageable, and the outcome not in doubt. That is the present case." (Emphasis added) 244 Turning to the question whether, as a matter of public policy, an English court, applying its conflict of laws jurisprudence, ought to decline to recognise RCC Resolution 369 as effectual to divest KAC of its title to its aircraft, Lord Nicholls (at [27]) agreed with the courts below that it should so decline and said (at [28]): "The acceptability of a provision of foreign law must be judged by contemporary standards. Lord Wilberforce, in a different context, noted that conceptions of public policy should move with the times: see Blathwayt v Baron Cawley [1976] AC 397, 426. In Oppenheimer v Cattermole [1976] AC 249, 278, Lord Cross said that the courts of this country should give effect to clearly established rules of international law. This is increasingly true today. As nations become ever more interdependent, the need to recognise and adhere to standards of conduct set by international law becomes ever more important. RCC Resolution 369 was not simply a governmental expropriation of property within its territory. Having forcibly invaded Kuwait, seized its assets, and taken KAC's aircraft from Kuwait to its own territory, Iraq adopted this decree as part of its attempt to extinguish every vestige of Kuwait's existence as a separate state. An expropriatory decree made in these circumstances and for this purpose is simply not acceptable today." (Emphasis added) 245 In also rejecting IAC's contention that the issues arising from Resolution 369 were, in accordance with the reasoning in Buttes, not justiciable, Lord Steyn said (at [113]): "For my part this is too austere and unworkable an interpretation of the Buttes case. There were rival claims by rulers to part of the continental shelf and there was a dispute about the motives of a foreign ruler: p 937C-H. Lord Wilberforce found that there were 'no judicial or manageable standards by which to judge these issues' and 'the court would be in a judicial no-man's land': p 938B. He added 'it is not to be assumed that these matters have now passed into history, so that they now can be examined with safe detachment': at p 938C. Buttes was an unusual case decided on a striking out application and without the benefit of a Foreign Office certificate. But reading Lord Wilberforce's judgment as a whole I have no doubt that counsel for IAC is wrong in seeking to derive from it the categorical rule put forward. In any event, in the present case there is no difficulty in adjudicating on Iraq's gross breaches of international law. There is no relevant issue: Iraq accepted the illegality of the annexation and of Resolution 369. In agreement with the Court of Appeal I would reject the argument based on non-justiciability." (Emphasis added) 246 Noting the Court of Appeal's conclusion that, since Resolution 369 constituted a breach of international law, it would be contrary to English policy to recognise it, Lord Steyn added (at [114] - [115]): "The conception of public policy is, and should be, narrower and more limited in private international law than in internal law: Cheshire & North's Private International Law, 13th ed (1999), p 123. Local values ought not lightly to be elevated into public policy on the transnational level. But rightly, the Court of Appeal found support in Oppenheimer v Cattermole [1976] AC 249. In that case the House of Lords considered a Nazi law which discriminated against Jews. … It is true, of course, that the present case does not involve human rights. That is how counsel for IAC sought to confine the public policy exception stated in the Oppenheimer case. I would reject this argument. It is true that the Court of Appeal [in Kuwait Airways] broke new ground. It was the first decision to hold that the acts of a foreign state within its territory may be refused recognition because they are contrary to public international law. On the other hand, the Court of Appeal built on the Oppenheimer case which was permeated, as the Court of Appeal observed, by considerations of the public international law. In my view the Court of Appeal was right to extend the public policy exception beyond human rights violations to flagrant breaches of public international law. It does not follow, however, that every breach of international law will trigger the public policy exception. The present case is, however, a paradigm of the public policy exception. … Marching logic to its ultimate unreality, counsel for IAC submitted that the UN Charter and Security Council Resolutions are not incorporated into our law and must be disregarded. Displaying a commendable internationalism the Court of Appeal observed, at p 1218, para 378: 'the very matters which are before the court, and which KAC seek to rely on for the purpose of showing that Resolution 369 should not be recognised, have already been determined, if not by an international court, at any rate by an international forum, of which nearly all the nations of the world are members, and whose decisions are binding on all those nations, including the United Kingdom and Iraq.' I would endorse this observation. ... " (Emphasis added) 247 Lord Steyn continued: "Not only has the Charter of the United Nations been adhered to by virtually all states, that is 189 states, but even the few remaining non-members have acquiesced in the principles of the Charter: American Law Institute, Restatement of the Law, The Foreign Relations of Law of the United States, 3d (1987), Section 102, comment (h). It is generally accepted that the principles of the United Nations Charter prohibiting the use of force have the character of jus cogens, ie is part of peremptory public international law, permitting no derogation: see Restatement, p 28, para 102, comment (k). Security Council Resolutions under Chapter VII of the Charter, and therefore the resolutions in question here, were binding in law on all members including the United Kingdom and Iraq. And, under article 2(6) of the United Nations Charter, the resolutions called on the few non-members of the United Nations to abide by the resolutions, and they at least acquiesced. There was a universal consensus on the illegality of Iraq's aggression. Moreover, in the light of the letter of Sir Franklin Berman, the Legal Adviser of the Foreign and Commonwealth Office, of 7 November 1997, describing the United Kingdom's consistent position as to the binding effect of the Security Council Resolutions, it would have been contrary to the international obligations of the United Kingdom were its courts to adopt an approach contrary to its obligations under the United Nations Charter and under the relevant Security Council Resolutions. It follows that it would be contrary to domestic public policy to give effect to Resolution 369 in any way." (Emphasis added) 248 On the issue of justiciability, Lord Hope said (at [135] - [137]): "Important questions of principle are raised by the highly unusual facts of this case. There is no doubt as to the general effect of the rule which is known as the act of state rule. It applies to the legislative or other governmental acts of a recognised foreign state or government within the limits of its own territory. The English courts will not adjudicate upon, or call into question, any such acts. They may be pleaded and relied upon by way of defence in this jurisdiction without being subjected to that kind of judicial scrutiny. The rule gives effect to a policy of 'judicial restraint or abstention': see Buttes …, 931F-934C per Lord Wilberforce. As the title to moveable property is determined by the lex situs, a transfer of property effected by or under foreign legislation in the country where the property is situated will, as a general rule, be treated as effective by English law for all relevant purposes. It would clearly be possible for a 'blue pencil' approach to be taken to Resolution 369, by reading it down so that it applied only to the property of KAC that was situated at the time of the resolution within its own territory. The normal rule is that legislative action applied to property within the territorial jurisdiction will be internationally recognised, despite the fact that it has been combined with action which is unenforceable extraterritorially. If this approach is adopted, that part of Resolution 369 which vested title in the aircraft in IAC will provide IAC with a complete defence to this action. Its legality in international law will not be justiciable in these proceedings. IAC accepts however that the normal rule is subject to an exception on grounds of public policy. The proposition which it accepts is that the exception applies if the foreign legislation constitutes so grave an infringement of human rights that the courts of this country ought to refuse to recognise the legislation as a law at all: Oppenheimer …, 278, per Lord Cross …. The proposition which it disputes is that the public policy exception extends to breaches of international law. IAC's argument is presented as one of principle. Arguments directed to breaches of international law are non-justiciable. The public policy exception must be tightly restricted. The only exception that has been judicially recognised is the human rights exception. As that exception is not invoked in this case, it has a complete defence to these proceedings under the act of state rule." (Emphasis added) 249 Lord Hope proceeded (at [138]): "It is clear that very narrow limits must be placed on any exception to the act of state rule. As Lord Cross recognised in Oppenheimer …, 277-278, a judge should be slow to refuse to give effect to the legislation of a foreign state in any sphere in which, according to accepted principles of international law, the foreign state has jurisdiction. Among these accepted principles is that which is founded on the comity of nations. This principle normally requires our courts to recognise the jurisdiction of the foreign state over all assets situated within its own territories: see Lord Salmon, at p 282. A judge should be slow to depart from these principles. He may have an inadequate understanding of the circumstances in which the legislation was passed. His refusal to recognise it may be embarrassing to the executive, whose function is so far as possible to maintain friendly relations with foreign states." 250 His Lordship went on to hold (at [139]) that it did not follow, as IAC had argued, that the public policy exception can be applied only where there is a grave infringement of human rights, and concluded (at [140]): "As I see it, the essence of the public policy exception is that it is not so constrained. The golden rule is that care must be taken not to expand its application beyond the true limits of the principle. These limits demand that, where there is any room for doubt, judicial restraint must be exercised. But restraint is what is needed, not abstention. And there is no need for restraint on grounds of public policy where it is plain beyond dispute that a clearly established norm of international law has been violated." (Emphasis added) 251 In distinguishing Buttes, Kuwait Airways thus holds that English private international law recognises two more exceptions to the rule that unincorporated treaties (even the United Nations Charter: see Bradley v Commonwealth (1973) 128 CLR 557 at 582) do not form part of domestic law, the exceptions being (1) laws that contravene fundamental human rights; and (2) laws that constitute a breach of clearly established principles of international law adopted by international agencies (e.g. UN Security Council) - when the enacting country and the forum are members of those agencies, and are bound to give effect to their resolutions. These exceptions have no application in the present case. Moreover, in Kuwait Airways, the English courts were able to apply the well-established tortious principles governing a claim of conversion of goods. The significance of Kuwait Airways for our purposes is its reading down of the absolute language in Buttes; the identification of the relevant principle as one of restraint, not abstention; and the reliance upon the public policy exception in private international law (see Roger O'Keefe "English Public Policy Internationalised (2002) 61 CLJ 499 at 501 - 502).

Analysis of the Australian cases 252 It will be convenient to refer to the High Court decisions first.

Potter v Broken Hill Proprietary Co Ltd (1906) 3 CLR 479 253 Holding that, since the grant of a patent is an exercise of the sovereign power of a State, the validity of the grant is not examinable in the courts of another State, except if the question arises merely incidentally, Griffith CJ, citing Hernandez and Moçambique,said (at 498 - 499): "It is settled law that an English Court cannot entertain a suit in which the question of title to foreign land is directly in controversy: …. The Courts will no doubt entertain such a question of title if it arises merely incidentally in a case in which the foundation of the jurisdiction is a personal obligation arising from contract or quasi-contractual relationship between the parties. But this is the only exception." (Emphasis added) 254 Barton J said (at 504): "[I]t is clear that these exceptional cases go to prove the rule, for unless the inquiry is incident to the exercise of the jurisdiction in personam, it may be inferred that the jurisdiction does not exist, that the subject matter must not be dealt with, and that the validity of the records, judgments and acts of State of another Power is not otherwise examinable." 255 Citing Moçambique, O'Connor J (at 510) said: "The principles of international law, which systematizes the comity of nations, generally recognize that the Courts of a country will not inquire into the validity of the acts of a foreign State, except subject to certain well-known limitations." 256 His Honour went on to say (at 513): "One can hardly imagine anything more against the principle of the comity of nations than that an English Court should take it upon itself to decide, for instance, upon the validity of a concession granted by the Czar of Russia to an English company, or to determine, as between two concessions granted by him in reference to the same subject matter, which should prevail." (Emphasis added) 257 But O'Connor J added (at 514): "It is true that the principle of international law with which I am dealing is subject to certain modifications. For instance, it has been generally recognized that the Courts of a State may inquire into matters, which by comity of nations would otherwise be outside their jurisdiction, where the act or transaction in the foreign country is not directly but only indirectly the subject of inquiry. Again, there are cases in which a Court of Equity in the exercise of its jurisdiction in personam will investigate acts and transactions which have taken place in a foreign country, which would otherwise by comity of nations be outside their field of inquiry." (Emphasis added) 258 In Hesperides, Lord Wilberforce (at 536) cited both Potter and Inglis v Commonwealth Trading Bank of Australia (1972) 20 FLR 30 as local examples of the application of the Moçambique rule. However, as noted, in Renault v Zhang, Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ (at [76]) have reserved both Moçambique and Potter "for further consideration in an appropriate case".

Attorney-General (United Kingdom) v Heinemann Publishers Australia Pty Ltd (1988) 165 CLR 30 259 In holding that a claim by the United Kingdom Attorney-General for an injunction restraining a former officer of the British Security Service and his publisher from publishing his memoirs ("Spycatcher") containing information said to be confidential and acquired by the author when in the Service, was not maintainable in Australian courts, Mason CJ, Wilson, Deane, Dawson, Toohey and Gaudron JJ said (at 39) that, although the obligation sought to be enforced was personal to the officer, "it lies at the core of the relationship" that subsists between the United Kingdom Government and the officers of its Security Service. Their Honours upheld two defences raised in that case - (1) that domestic courts will not enforce a foreign penal, or public, law; and (2) that the case involved issues that were "non-justiciable", observing that "[t]o some extent [these defences] run together" (at 40). Their Honours noted that principle (1), above, is "sometimes described as a rule of public international law, and, at other times, as one of private international law"; and (citing Hernandez) that there is "a related principle of international law … that, in general, courts will not adjudicate upon the validity of acts and transactions of a foreign sovereign State within that sovereign's own territory". Observing (at 41) that this principle "rests partly on international comity and expediency", their Honours cited the description of the principle by Lord Wilberforce in Buttes (at 931 - 932) as one of "judicial restraint or abstention" and as "inherent in the very nature of the judicial process". Their Honours said (at 41): "The associated rule with which we are presently concerned has traditionally been expressed as a bar to jurisdiction, although the rule might now be more correctly described as one rendering a claim unenforceable." 260 Noting that for the purposes of this principle of unenforceability, the action "is to be characterized by reference to the substance of the interest sought to be enforced, rather than the form of the action", their Honours concluded (at 46 - 47) that the proceedings were to be classified as an action attempting, impermissibly, to enforce "a governmental interest". 261 Their Honours went on to observe (at 47) that, in any event - "There are no manageable standards by which courts can resolve such an issue and its determination would inevitably present a risk of embarrassment in Australia's relations with other countries." 262 Brennan J, whilst expressing (at 48) "general agreement" with the majority, said (at 49): "[A] distinction can be drawn between two bases on which the court might refuse to enforce such an obligation of confidence though it is an obligation recognized by foreign law. The first basis is that it would be contrary to the public policy of the forum State to enforce the obligation; the second is that the court denies the capacity in international law of the relevant provision of the foreign law to give rise to the obligation sought to be enforced. The distinction is between a refusal to enforce what is recognized as an existing obligation and a denial of the existence of the obligation sought to be enforced. Sometimes the first basis is expressed as a rule that foreign laws offensive to the policy of the domestic law will not be enforced, domestic public policy prevailing over the offensive foreign law. As Sir Hersch Lauterpacht observed in Netherlands v. Sweden; Convention of 1902 [[1958] ICJ Reports 54, at p 92]: 'in the sphere of private international law the exception of ordre public, of public policy, as a reason for the exclusion of foreign law in a particular case is generally - or, rather, universally - recognized.' Where the court refuses to enforce an obligation on the first basis, the court accepts the capacity of the foreign law to give rise to a legal obligation but declines to enforce the obligation inconsistently with the public policy of the domestic law." (Emphasis added) 263 Thus, it appears that an influential consideration in declining to exercise jurisdiction in Spycatcher was the special context of the Security Service relationship.

Queensland v Commonwealth (1989) 167 CLR 232 264 In this action, a claim was made for a declaration of invalidity of a proclamation in respect of an area described as "Wet Tropical Rainforests of North-East Australia", made in purported pursuance of the World Heritage Properties Conservation Act 1983 (Cth). It was held by the majority (Mason CJ, Brennan, Deane, Toohey, Gaudron and McHugh JJ) that the proclamation's validity depended upon whether the protection or conservation of the property was an international duty; and, if so, whether its inscription in the World Heritage List by the World Heritage Committee in accordance with the Convention for the Protection of the World Cultural and Natural Heritage, was sufficient and conclusive to establish the existence of such an international obligation (at 238 - 239). Their Honours said (at 239 - 240): "The existence of such an international duty must be decided as a matter of fact, though this Court has no jurisdiction the exercise of which can affect the existence under international law of any purported obligation imposed on Australia. In Secretary of State for India v. K. B. Sahaba ... Lord Kingsdown said: 'The transactions of independent States between each other are governed by other laws than those which Municipal Courts administer: such Courts have neither the means of deciding what is right, nor the power of enforcing any decision which they may make.' See also Cook v. Sprigg .... Although municipal courts do not administer international law, they take cognizance of international law in finding facts and they interpret municipal law, so far as its terms admit, consistently with international law. Regard may therefore be had to the terms of the Convention in deciding whether an international duty of protection and conservation exists, but the existence or otherwise of the duty is not necessarily concluded by the municipal court's construction of its terms or by its opinion as to the Convention's operation. The existence of an international duty depends upon the construction which the international community would attribute to the Convention and on the operation which the international community would accord to it in particular circumstances. The municipal court must ascertain that construction and operation as best it can in order to determine the validity of a law of the Commonwealth, conscious of the difference between the inquiry and the more familiar curial function of construing and applying a municipal law." (Emphasis added) 265 In other words, issues arising out of international relations are not always "non-justiciable". As Sir Anthony Mason has observed ("International Law as a Source of Domestic Law" in B. Opeskin and D. Rothwell (eds) International Law and Australian Federalism (1997) (at 220 - 221)): "[I]t is a fundamental principle of legal policy that municipal law should, wherever possible, be consistent with ... international obligations. Thus, there is a prima facie presumption that the legislature does not intend to derogate from international law. Accordingly, domestic statutes will be construed, where the language permits, so that the statute conforms to the State's obligations under international law. Through this rule of statutory interpretation, international law is an indirect source of domestic law. ... [And] [t]he [High] Court has also referred to customary international law to assist statutory interpretation."

Mabo v Queensland (No. 2) (1992) 175 CLR 1 266 Accepting (at 31) that the validity of the acquisition of territory by a sovereign State for the first time is not, as an act of state, justiciable in the municipal courts, Brennan J observed (at 32): "[But] those courts have jurisdiction to determine the consequences of an acquisition under municipal law. Accordingly, the municipal courts must determine the body of law which is in force in the new territory. By the common law, the law in force in a newly-acquired territory depends on the manner of its acquisition by the Crown. Although the manner in which a sovereign state might acquire new territory is a matter for international law, the common law has had to march in step with international law in order to provide the body of law to apply in a territory newly acquired by the Crown." 267 In considering the need for recognition by the Crown of native title, citing Cook v Sprigg, his Honour noted (at 55) first, that pre-existing rights and interests in land must be established, if at all, under the new legal system introduced on an acquisition of sovereignty; and secondly, that treaties do not create rights enforceable in municipal courts, Brennan J said (at 55): "[I]f the Crown were to confiscate private property as an act of State (54) in acquiring sovereignty of a territory or if the Crown were to extinguish private property pursuant to a law having effect in the territory (55), thereafter no recognition of the rights and interests which had existed under the old regime would be possible." 268 In footnote (54), his Honour cited Secretary of State for India v Sahaba (1859) 13 Moo PCC 75 (also cited above, as noted, in Queensland v Commonwealth). In Sahaba, the Privy Council held to be not justiciable in a municipal Court a seizure by the East India Company "in the exercise of their Sovereign power" of the assets of the Rajah of Tanjore, an independent Sovereign, because the "real character" of the act done was "a seizure by arbitrary power on behalf of the Crown of Great Britain, of the dominions and property of a neighbouring State, an act not affecting to justify itself on grounds of Municipal law ... " (at 77). 269 In footnote (54), Brennan J added: "but cf. Attorney-General v. Nissan, [1970] A.C. 179, at p. 227 ... ". 270 In Nissan, a British subject sued the Attorney-General in the High Court, claiming declarations that he was entitled to be compensated by the Crown in respect of the seizure and occupation of his hotel in Cyprus by British forces. The Crown raised, as a defence of law, a preliminary issue that the actions of the British forces were its acts of State on the territory of an independent sovereign, performed in pursuance of an agreement with the Cyprus Government, and as such were not cognisable by the court. But it was held by the House of Lords that the action could proceed. Lord Reid noted (at 207) that Nissan raised for the first time the question of the rights of a British subject who complains of an infringement of his ordinary rights of property by an act of the Crown done outside the Crown's dominions. Lord Reid had earlier (at 207) observed that, where an act of a servant of the Crown infringes the rights of a British subject, it is no defence to plead that the act was ordered or ratified by the Crown or the Government; that in Johnstone v Pedlar [1921] 2 AC 262, it was held that an alien (other than an enemy) in the United Kingdom is in the same position; but that, since Buron v Denman (1848) 2 Ex 167, it has been accepted that where the act complained of "was done against an alien outside Her Majesty's dominion ... the English courts cannot give redress ... ." Lord Reid also (at 213) saw "great difficulty in holding that the prerogative [of taking] can operate in foreign territory." Lord Wilberforce had similar doubts (at 236). Lord Pearce (at the reference (p 227) cited by Brennan J) held that since it was not necessary that the troops be stationed in the plaintiff's hotel, the occupation of the hotel was not an act of State. Lord Pearce went on to say (at 227 - 228): "Admittedly the British occupied the hotel. I do not find it easy in the present state of the case to see what set of facts the defendant can establish which does not import an obligation to pay on one ground or another, whether the prerogative applies or not. It is confusing to describe the aspect of the prerogative here in question as a right to take. It is a right to take and pay. This appears both from the cases of De Keyser's Hotel [1920] A.C. 508 and the Burmah Oil Company [1965] A.C. 75. So far as concerns things which the owner has for sale, therefore, the Crown is in no better case than the ordinary man. In a supermarket every man may take and pay for the goods that are displayed. The Crown has, however, by virtue of the prerogative a right not only to take and pay for that which is for sale, but also to take and pay for that which is not for sale, for example the cash-desk of the supermarket, or even the whole supermarket itself. If it does this properly as of right within the prerogative, it must pay for that which it took. If it does this in excess of the prerogative either by bluff or by pressure or by common consent, it likewise produces as a rule a situation in which it must pay for that which it took. The Crown is in this respect under the common law no better off than any person or corporation. The question, therefore (apart from the prerogative) will be whether, if some corporation on these facts (whatever they may prove to be) took over the hotel, it is liable to pay." 271 Lord Pearce added (at 229): "The prerogative was the warrant for the presence of British troops in Cyprus. Therefore, the prerogative is operating within the lines of the army when it is on foreign soil. Of course it cannot operate against an alien in an alien land. But when sovereign and subject meet through the operation of the prerogative in an army overseas, there seems no inherent reason why the prerogative should not be valid. It seems reasonable that he should, as part of his allegiance, be under a duty to the sovereign in respect of the prerogative right which is for the protection of that realm of which he is a subject." 272 In footnote (54), Brennan J also cited Burmah Oil where it was held, by a majority of the House, that the demolition of the plaintiff's property was carried out without statutory authority, yet lawfully in the exercise of the prerogative; but that there is no general rule that the prerogative can be exercised by taking or destroying property, without making payment for it, even in time of war or imminent danger, except where the taking or destruction arose in the course of military operations in actually fighting the enemy. 273 In footnote (55) Brennan J said: "As in Winfat Ltd. v. Attorney-General, [1985] A.C. 733". 274 In Winfat, under local Hong Kong legislation, compensation (but less than full market value) was payable upon resumption of land held for development. The developer challenged the validity of the legislation, seeking to rely upon a provision in the Convention for Extension of Hong Kong 1898, made between the Emperor of China and the British Crown, that land required for official purposes was to be bought at a fair price. In rejecting the challenge, Lord Diplock said (at 746): "The elementary fallacy of British constitutional law which vitiates the land developers' claim is the contention that this vaguely expressed understanding, stated in the Peking Convention, that there shall not be expropriation or expulsion, is capable of giving rise to rights enforceable in the municipal courts of Hong Kong or by this Board acting in its judicial capacity. Although there are certain obiter dicta to be found in cases which suggest the propriety of the British Government giving effect as an act of state to promises of continued recognition of existing private titles of inhabitants of territory obtained by cession, there is clear long-standing authority by decision of this Board that no municipal court has authority to enforce such an obligation. This was laid down by Lord Halsbury L.C. in Cook v Sprigg [1899] A.C. 572, 578-579, and by Lord Dunedin in Vajesingji Joravarsingji v. Secretary of State for India in Council (1924) L.R. 51 Ind.App. 357, 360-361. What the High Court and Court of Appeal of Hong Kong are bound to enforce in the New Territories is the municipal law of Hong Kong made in the manner authorised by the Constitution as a British colony that has been granted to Hong Kong by the British Crown as sovereign of those territories for the duration of the cession." 275 In considering the act of State establishing New South Wales, Deane and Gaudron JJ held (at 95) that it is open to the domestic courts to consider the question whether that act of State, or other act or declaration performed or made as part thereof, or some other expropriation of property, had the effect of negativing the strong assumption of the common law that pre-existing native interests in lands in the Colony were respected and protected. In proceeding to consider the enforcement and protection of common law, their Honours, albeit as a minority opinion on this point, concluded (at 112) that if common law native title is wrongfully extinguished by the Crown, the effect of those legislative reforms is that "compensatory damages" can be recovered, provided the proceedings for recovery are instituted within the period allowed by applicable limitation of actions provisions.

Horta v Commonwealth (1994) 181 CLR 183 276 In an action in the High Court for declarations of the invalidity of the Timor Gap Treaty and of the Zone of Cooperation and the Consequential Provisions Acts, it was held by Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ: (a) the statutes were validly enacted under s 51(xxix) of the Constitution as laws with respect to the area of the Timor Gap, and with respect to the exploration for, and exploitation of, petroleum resources within that area; (b) even if the Treaty were void or unlawful under international law, or if Australia's entry into, or performance of, the Treaty involved a breach of Australia's obligations under international law, the statutes would not thereby be deprived of their character as laws with respect to external affairs; (c) absent a circuitous device (or sham) in order to attract legislative power, the propriety of the recognition by the Executive of the sovereignty of a foreign nation over foreign territory cannot be raised in Australian courts; and (d) accordingly, it was unnecessary to decide also whether the claim for a declaration that the Treaty was invalid was, as the Commonwealth contended, not justiciable. 277 For holding (c), above, the Full High Court cited (at 196) Chow Hung Ching v The King (1948) 77 CLR 449 at 467. A question there arose whether there was immunity from local criminal jurisdiction of Chinese nationals, members of a labour corps, subject to military discipline but not part of the armed forces of the Republic of China. Latham CJ said (at 467): "There are certain matters in respect of which a statement by a Minister is accepted by a court as conclusive, e.g., the question as to whether a person is a foreign sovereign, or whether a foreign State exists, or whether territory belongs to a foreign State, or whether a person has been recognized as a foreign ambassador or as a member of a diplomatic staff, or whether a ship is a warship or a public vessel of a State. There is authority that the answer of the appropriate minister will be accepted by a court as conclusive on these matters, but, as already stated, there is no authority that such a statement is to be accepted by a court when the question is whether a particular individual belongs to a foreign navy or army or air force. Whether he so belongs or not is a matter of law and fact which does not depend upon any recognition of his position by the Government of any other country."

Attorney-General (Cth) v Tse Chu-Fai (1998) 193 CLR 128 278 In considering the circumstances in which a court should take account of the views of the Executive on matters which are its peculiar responsibility, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ referred (at 149) to the "exceptional rule giving conclusive effect to official statements" and to those matters of fact "which the Executive is authorised to decide", instancing inter alia, "the extent of the realm or other territory claimed by the Crown" (citing Ffrost v Stevenson (1937) 58 CLR 528 per Latham CJ at 549). Their Honours said (at 149): "There is a fundamental question under Ch III of the Constitution of the competence of the Executive ... to determine conclusively the existence of facts by certificate where they are disputed constitutional facts. No such issue arises in this case. The proper construction of par (b)(ii) of the definition of 'extradition country' and of the term 'Hong Kong' in the 1997 Regulations is a matter of law. ... As we have indicated, extradition from Australia requires statutory authorisation. It is the province and duty of courts exercising jurisdiction with respect to matters arising under such a statute to construe and apply it. The Executive, a representative of which is a party to a controversy arising under the 1988 Act, cannot, by a certificate furnished by another representative, 'compel the court to an interpretation of statutory words which it believes to be false'. Nevertheless, as Scarman LJ pointed out in In re James..., in construing the statutory provision which takes as a factum for its operation a matter pertaining to the conduct of foreign affairs, the communication of information by the Executive may be both helpful and relevant." (References omitted) 279 Their Honours concluded (at 150): "The certificate should be understood as a statement that, at its date, 9 September 1997, Australia dealt with the [People's Republic of China] on the footing that it was responsible for the international relations of the [Hong Kong Special Administrative Region]. Given the conclusion of the above agreement with effect from 1 July 1997, it would be a reasonable inference that this state of affairs had been in existence on 14 July 1997, the date of the receipt of the extradition request with respect to the first respondent. The certificate should have been admitted on that basis. However, it remained for the court, against the factual background, including the terms of the Basic Law, to construe and apply the terms of par (b)(ii) of the definition of 'extradition country' and the term 'Hong Kong' in the 1997 Regulations." 280 As I followed their arguments, the respondents here do not (and could not) suggest that the Attorney's certificate is conclusive of any legal question, but they do contend for its relevance. In my opinion, it is both helpful and relevant on the question of the application of public policy considerations, viewed in the light of Australia's domestic and external interests. 281 The "non-justiciability" and "act of state" doctrines have also been considered in decisions of this Court and of the Supreme Court of Victoria.

Minister for Arts, Heritage and Environment v Peko-Wallsend Ltd (1987) 15 FCR 274 282 In proceedings for judicial review of an Executive decision to nominate an area under the World Heritage Convention, it was claimed that such a listing would have the effect of empowering the Executive to proclaim the area as "identified property" for the purposes of the World Heritage Properties Conservation Act 1983 (Cth), with the possible consequence that the applicants' mining activities in the area would become unlawful. The main ground relied on for judicial review was a claim of denial of natural justice, that the Executive did not afford the applicant an opportunity to be heard before the Executive made its decision to nominate. The Commonwealth's defences were, first, that there had been no denial of natural justice because Peko had been granted, in effect, an opportunity to be heard; and secondly, that the claim was, in any event, not justiciable. The Full Federal Court (Bowen CJ, Sheppard and Wilcox JJ) accepted both arguments. 283 Bowen CJ said (at 278 - 279): "… the whole subject-matter of the decision involved complex policy questions relating to the environment, the rights of Aborigines, mining and the impact on Australia's economic position of allowing or not allowing mining as well as matters affecting private interests such as those of the respondents to this appeal. It appears to me that the subject-matter of the decision in conjunction with its relationship to the terms of the Convention placed the decision beyond review by the court." (Emphasis added) 284 Wilcox J said (at 307): "… although the decision had possible municipal legal significance, the decision primarily involved Australia's international relations. Issues arising out of international relations have widely been regarded as non-justiciable." (Emphasis added) 285 For the last proposition, his Honour cited: · Observations of Lord Wilberforce in Buttes (at 937 - 938) (presumably those quoted above). However, as has been said, his Lordship's remarks assume flexibility in this area, an assumption confirmed in Kuwait Airways. · Remarks made by Brennan J (on the "political question" doctrine) in Gerhardy v Brown (1985) 159 CLR 70 (at 138) (in a different context - see below). However, as Dixon J observed, the real question is whether the relevant considerations are compelling. · Ex parte Molyneaux [1986] 1 WLR 331 (at 336) where an application for judicial review of entry into an agreement between the United Kingdom and Ireland setting up an inter-governmental conference, claiming a declaration that the agreement was invalid, was dismissed by Taylor J on the grounds that the agreement "is akin to a treaty" and "concerns relations between the United Kingdom and another sovereign state and it is not the function of [the] court to inquire to [this] exercise of the prerogative …. or by way of anticipation to decide whether the method proposed of implementing the agreement is appropriate". (Emphasis added) As has been seen, no such challenge is propounded here. · Chicago & Southern Air Lines Inc v Waterman Steamship Corp (1948) 333 US 103 at 111, where in refusing judicial review of a decision to issue foreign aeronautical certificates (a decision approved by the President), Jackson J said (at 111): "[T]he very nature of executive decisions as to foreign policy is political, not judicial. Such decisions are wholly confided by our Constitution to the political departments of the government, Executive and Legislative. They are delicate, complex, and involve large elements of prophecy. They are and should be undertaken only by those directly responsible to the people whose welfare they advance or imperil. They are decisions of a kind for which the Judiciary has neither aptitude, facilities nor responsibility and which has long been held to belong in the domain of political power not subject to judicial intrusion or inquiry." (Emphasis added) 286 As mentioned, the chequered history of the American political question doctrine since 1948 must now be taken into account. 287 Wilcox J added (at 307 - 308): "In particular the courts have disclaimed the entitlement to adjudicate upon decisions by the Executive concerning the exercise of its treaty-making power…. The present case relates to a decision to implement a treaty. It raises the same problem for the courts as a decision to enter into a treaty. The decision to nominate Kakadu Stage II for recognition and better protection under the existing Convention was not different in kind from a decision to enter into a treaty to secure the recognition and better protection of this part of Australia. In my opinion it should be concluded that the decision made in this case was not such as to be justiciable or to attract the obligations of natural justice." 288 In this connection, Wilcox J cited Blackburn v Attorney-General [1971] 1 WLR 1037 (at 1040) and Koowarta v Bjelke-Petersen (1982) 153 CLR 168 at 229, both (like Molyneaux) unsuccessful attempts to obtain judicial review of the wisdom of government's decision to enter into a treaty, a type of challenge not attempted here. 289 Sheppard J (at 280) "agree[d] generally" with Bowen CJ and Wilcox J. 290 Strictly speaking, their Honour's reliance upon the "non-justiciability" doctrine was obiter. In so far as their reasoning appeared to depend upon the American "political question" doctrine, reference should be made to the explanatory observations of Gummow J in Re Ditfort; Ex parte Deputy Commissioner of Taxation (1988) 19 FCR 347, considered next.

Re Ditfort; Ex parte Deputy Commissioner of Taxation (1988) 19 FCR 347 291 A bankrupt applied for an order annulling the sequestration order on the ground that, in connection with his extradition from Germany to Australia, false and misleading statements had been made by the Australian Government to the German Government. The Deputy Commissioner of Taxation argued that inquiry into these allegations was "not justiciable". Rejecting the contention, Gummow J said (at 367 - 368): "It has recently been observed in this Court that issues arising out of international relations have been widely regarded as 'non-justiciable', and that, in particular, the courts have disclaimed entitlement to adjudicate upon decisions by the executive concerning the exercise of its treaty-making power: Minister for Arts, Heritage and Environment v Peko-Wallsend Ltd ... at 307. On the other hand, in an influential judgment of the United States Supreme Court (Baker v Carr 369 US 186 at 211 (1962)), the subject was approached somewhat differently. Brennan J, in delivering the opinion of the Court, said (at 211): 'There are sweeping statements to the effect that all questions touching foreign relations are political questions. Not only does resolution of such issues frequently turn on standards that defy judicial application, or involve the exercise of a discretion demonstrably committed to the executive or legislature; but many such questions uniquely demand single voiced statement of the Government's views. Yet it is error to support that every case or controversy which touches foreign relations lies beyond judicial cognizance. Our cases in this field seem invariably to show a discriminating analysis of the particular question posed, in terms of the history of its management by the political branches, of its susceptibility to judicial handling in the light of its nature and posture in the specific case, and of the possible consequences of judicial action.' The term 'case or controversy' was taken by Brennan J from Art III, s 2(1) of the United States Constitution. The term 'matter' in Ch III of the Australian Constitution was selected with the intention of ensuring that the content of federal jurisdiction in Australia was at least as wide as that given by the term 'case or controversy' …." (Emphasis added) 292 Noting that the expression "non-justiciable", when used in relation to international relations conducted by Australia, identifies several distinct legal rules or principles, Gummow J adverted (at 368) to the rule that, in some areas, including the extent of foreign territory, an Executive certificate will be conclusive. After cautioning against the use of English decisions on "non-justiciability" in an Australian federal constitutional context (at 368 - 369), his Honour said (at 369 - 370): "Additional considerations appear where the issue is not one of alleged lack of constitutional power, but rather one of the propriety of the conduct by the Executive Government of the Commonwealth of relations with foreign governments within the scope of its constitutional powers in that behalf. The plaintiff will, as in the case with claims put forward on constitutional grounds, still have to possess the necessary standing to claim the relief sought. But there being no question arising under the Constitution or involving its interpretation, where are the disputed rights supplying the necessary content of a 'matter' within the meaning of Ch III of the Constitution? Dealings between Australia and foreign States will not normally, in the absence of legislation, create rights in or impose obligations upon Australian citizens or residents: Ingram v Commonwealth (1980) 54 ALJR 395; Simsek v Macphee (1982) 148 CLR 636. A breach of Australia's international obligations of itself will not be a matter justiciable at the suit of a private citizen: Tasmanian Wilderness Society Inc v Fraser (1982) 153 CLR 270 at 274. However, the taking of a step in the conduct of international relations, whilst of itself neither creating private rights nor imposing such liabilities, may be a step in a process which as a whole may have that effect. In such cases, the process may give rise to matters justiciable at the suit of an individual." (Emphasis added) 293 Gummow J continued (at 370): "The decision of the Full Court in the Peko-Wallsend case, that nevertheless the complaints made were 'non-justiciable', reflects another element in the constitutional concept of a 'matter'. This is that, even if the plaintiff has standing in respect of the complaint sought to be agitated before a court exercising federal jurisdiction, nevertheless there will be no 'matter' if the plaintiff seeks an extension of the court's true function into a domain that does not belong to it, namely the consideration of undertakings and obligations depending entirely on political sanctions. Such non-justiciable issues include agreements and understandings between governments within the federation (South Australia v Commonwealth (1962) 108 CLR 130 at 141) and between the Australian and foreign governments: Gerhardy v Brown (1985) 159 CLR 70 at 138-139. Those issues do not give rise to 'matters' in the sense necessary for the exercise of federal jurisdiction." (Emphasis added) 294 In South Australia v Commonwealth (1962) 108 CLR 130, the High Court considered an agreement which had the sanction of statutes. But Dixon CJ (at 141) distinguished between, on the one hand, "the exercise of the jurisdiction reposed in the Court", and, on the other, "an extension of the Court's true function into a domain that does not belong to it, namely, the consideration of undertakings and obligations depending entirely on political sanctions". 295 In Gerhardy v Brown, above, Brennan J considered the nature of the obligation to take a "special measure" imposed by the Racial Discrimination Convention (given effect to by the Racial Discrimination Act 1975 (Cth)) "when the circumstances so warrant", observing (at 138): "[W]hen the legal rights and liabilities of individuals are in issue before a municipal court and those rights and liabilities turn on the character of the Land Rights Act as a special measure, the municipal court is bound to determine for the purposes of municipal law whether it bears that character. But the character of a special measure depends in part on a political assessment that advancement of a racial group is needed to ensure that the group attains effective, genuine equality and that the measure is likely to secure the advancement needed. When the character of a measure depends on such a political assessment, a municipal court must accept the assessment made by the political branch of government which takes the measure. It is the function of a political branch to make the assessment. It is not the function of a municipal court to decide, and there are no legal criteria available to decide, whether the political assessment is correct. The court can go no further than determining whether the political branch acted reasonably in making its assessment:…" (Emphasis added) 296 After referring to the passage in Baker v Carr (at 217) cited above, Brennan J said (at 139): "The court does not have to decide a political question; at most it must decide the limits within which a political assessment might reasonably be made. To determine the matter, it is necessary to apply any relevant legal criteria, for example, that the wishes of the beneficiaries for the measure are of great importance in satisfying the element of advancement. It is also necessary to find, as matters of fact, the circumstances affecting the racial group and the effect which the special measure is likely to have on those circumstances." (Emphasis added) 297 In Ditfort, Gummow J proceeded (at 370): "Another such issue would appear to arise where a foreign government sued in an Australian court exercising federal jurisdiction and in substance sought to enforce outside its territory a claim arising out of acts of that State in the exercise of powers peculiar to government: Attorney-General (UK) v Heinemann Publishers Australia Pty Ltd …, a case which was not approached on the footing that the State court was exercising federal jurisdiction, and where the principle propounded was characterised primarily as a common law rule of private international law, exemplified by Huntington v Attrill [1893] AC 150 at 156." 298 In Huntington v Attrill [1893] AC 150, the Privy Council applied (at 156) the rule that all breaches of public law punishable by pecuniary mulct or otherwise, at the instance of the State Government, or someone representing the public, are local in the sense that they are only cognisable and punishable in the country where they were committed. 299 Gummow J went on (at 370 - 371) to consider the American "political question" doctrine, noting that it had attracted "considerable criticism, not the least in its application to the conduct of foreign affairs", and observing (at 371): "An alternative path, though not always clearly marked as such in the United States decisions, has been that which emphasises the discretionary nature of equitable relief (by way of injunction and declaration). The result is that there may be a case or controversy properly before a United States federal court, but equitable relief may nonetheless be withheld:…." (Emphasis added) 300 Of the American "act of state" doctrine, Gummow J remarked (at 371): "Some authority suggests the foreign act of State doctrine is best seen as a species of the same genus which also includes the 'political question' doctrine: International Association of Machinists v OPEC 649 F (2d) 1354 at 1358-1359 (1981); Sharon v Time Inc 599 F Supp 538 at 547-548 (1984). Other authority sees the doctrine as requiring a factual inquiry in each case as to whether a decision by the court will adversely affect the conduct of foreign relations or pass judgment on the laws, conduct or motives of a foreign State: Airline Pilots Association v Taca International Airlines SA 748 F (2d) 965 at 969-970 (1981); Ramirez de Arellano v Weinberger [745 F (2d) 1500 (1984)] … at 1534)." (Emphasis added) 301 Noting (at 371) that the Hernandez "act of state" defence "seemingly now has the imprimatur of the House of Lords in Buttes…", Gummow J observed (at 371): "It has not yet been necessary finally to decide if any such doctrine exists in this form in Australia, although support for it is apparent in the joint judgment in Attorney-General (UK) v Heinemann Publishers Australia Pty Ltd (supra) at 347-348, 349. In any event, the present case does not involve the doctrine. The applicant in these proceedings complains not of failings of the German Government, but of alleged shortcomings of the Australian Government." 302 In concluding that the applicant had standing, and that the issues raised were elements of a "matter" within the Court's jurisdiction, Gummow J remarked (at 372 - 373): "… the conduct of relations between Australia and Germany enters into consideration by the court, because in the course of dealing with the matter in respect of which the court has jurisdiction (viz the application by the bankrupt for annulment under s 154 of the Bankruptcy Act ) it is necessary to construe the terms of ss 43 and 52 of the Bankruptcy Act which repose discretions in the court. In my judgment, the issues which the applicant agitates would have been properly taken into account by the court in the exercise of those discretions. Therefore, they are to be considered in deciding, under s 154, whether the sequestration order ought not to have been made. I note that in another context the Full Court has indicated that on its proper construction, the discretion given by statute to a decision-maker permitted him to have regard to particular treaty obligations of Australia: Gunaleela v Minister for Immigration and Ethnic Affairs (1987) 15 FCR 543 at 559; cf F A Mann, Foreign Affairs in English Courts (1986), pp 94-96." 303 It appears that his Honour's approach, which is reflected in the remarks of Sir Anthony Mason cited at the commencement of these reasons, is also consistent with the reasoning in Kuwait Airways.

Dagi v Broken Hill Proprietary Co Ltd (No. 2) [1997] 1 VR 428 304 On an application to strike out a statement of claim, in proceedings in the Supreme Court of Victoria in trespass and nuisance by persons claiming to have been injuriously affected by the discharge of by-products of a mine in Papua New Guinea, Byrne J held that such claims, which essentially concerned rights, whether possessory or proprietary, to or over foreign land, in the sense that those rights were the foundation or gravamen of the claims, were not justiciable. On the other hand, a claim in negligence, whose foundation was the plaintiffs' loss of amenity or enjoyment of the land or waters, was held justiciable. 305 Byrne J said (at 441): "In my opinion, [intellectual property cases such as Potter] demonstrate that, at common law, the court will apply the principle [explained in Moçambique]underlying the substantive distinction between claims which are local and those which are transitory to determine justiciability. They show that, at common law, the court will refuse to entertain a claim where it essentially concerns rights, whether possessory or proprietary, to or over foreign land, for these rights arise under the law of the place where the land is situate and can be litigated only in the courts of that place. The claim must not merely concern those rights; it must essentially concern them. This is because the rights must be the foundation or gravamen of the claim." 306 Claims were also made in contract, alleging that the State of Papua New Guinea held on trust for the plaintiffs certain rights pursuant to various agreements and statutes, and that the plaintiffs were entitled to sue to enforce those rights as beneficiaries of that trust. It was held that, as these claims called into question the acts of the Government of Papua New Guinea, the act of State doctrine as articulated in Hernandez, prevented the court from inquiring into those acts, and those claims were therefore not justiciable.

307 This decision reinforces the importance of determining the true character, as a matter of substance, of the particular claim or claims sought to be propounded in the litigation.

I certify that the preceding one two hundred and twenty-seven (227) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Beaumont.

Counsel for the Applicants: Mr F. Douglas QC Mr C. Ward Mr G. Kennett

Solicitor for the Applicants: Deacons

Counsel for the First Respondent: Mr D. Bennett QC Mr H. Burmester QC Mr S. Lloyd Ms R. Irwin

Solicitor for the First Respondent: Australian Government Solicitor

Counsel for the Third, Fourth and Fifth Respondents: Mr T. Bathurst QC Mr S. Gageler SC Dr A. Bell

Solicitor for the Third, Fourth and Fifth Respondents: Freehills

Date of Hearing: 16 and 17 May 2002

Date of Judgment: 3 February 2003