The ring of fire: Foreign State Immunity in Firebird Global Master Fund II Ltd v Republic of Nauru.

Author:Gorton, Timothy

I Introduction and Background

In June 2012, fund manager Firebird Global Master Fund II Ltd ('Firebird') registered a judgment of the Tokyo District Court in the Supreme Court of NSW. (1) The judgment was against the Republic of Nauru ('Nauru') and obliged Nauru to pay [yen]1,300,000,000, plus interest. Firebird sought to garnish the amounts from Nauru government bank accounts in Australia. For the small Pacific state, it was potentially catastrophic.

However, in December 2015 the High Court of Australia confirmed definitively that the accounts were protected by foreign state immunity. In Firebird Global Master Fund II Ltd v Republic of Nauru ('Firebird v Nauru), the Court applied two legislative schemes--the Foreign States Immunities Act 1985 (Cth) ('Immunities Act') and the Foreign Judgments Act 1991 (Cth) ('Foreign Judgments Act')--and sought to do so in conformity with international law. This case note takes particular interest in the Court's methods of discerning and applying international legal principles.

Background to State Immunity in Australia

The doctrine of foreign state immunity developed from two historical phenomena: protections extended to foreign diplomats and consuls; and the immunity of a national sovereign before their domestic courts. (2) During the nineteenth century, states generally enjoyed absolute immunity in foreign courts, but '[t]he history of the law of State immunity is the history of the triumph of the doctrine of restrictive immunity over that of absolute immunity'. (3) Driven by decisions of national courts, a doctrine of restrictive immunity emerged that withdrew immunity a state's commercial or non-sovereign acts. (4)

In Australia, doctrine developed in line with British decisions--Australian decisions on the topic were scarce and 'none of them very helpful'. (5) In 1982, in response to the enactment of immunity legislation internationally, (6) the Law Reform Commission ('LRC, now the 'ALRC') considered the issue. In 1984 it released the report Foreign State Immunity. (7) In 1985 the Commonwealth passed the Immunities Act, discussed below. The Immunities Act is now 'the sole basis for foreign State immunity in Australian courts'. (8)

Background to the Dispute

The dispute arose from bonds issued by the no longer existent Republic of Nauru Finance Corporation, which Nauru guaranteed. (9) Both issuer and guarantor defaulted, and the bonds were later purchased by Firebird. In 2011, Firebird obtained judgment in the Tokyo District Court for the default and obtained an order that Nauru pay as guarantor.

Many of Nauru's liquid assets sat in Australian bank accounts, so Firebird sought to register the order in NSW in order to enforce it. In June 2012, a Deputy Registrar of the Supreme Court registered the order for the principal sum and interest. The Nauruan Secretary of Justice was served (purportedly, see below) notice of registration in August 2014, when documents were left at their offices. In September 2014, Firebird sought a garnishee order against Nauru's Australian accounts and Nauru in turn sought to have the registration set aside.

Relevant Statutory Provisions

This section outlines the specific legislative provisions that the High Court considered. Turning first to the Immunities Act, s 9 provides that:

Except as provided by or under this Act, a foreign State is immune from the jurisdiction of the courts of Australia in a proceeding. A major exception to this immunity is provided by s 11: A foreign State is not immune in a proceeding in so far as the proceeding concerns a commercial transaction. (10) As the registration of judgment occurred without Nauru present, it was necessary for the High Court to consider s 27:

A judgment in default of appearance shall not be entered against a foreign State unless: (a) It is proved that service of the initiating process was effected in accordance with this Act and that the time fot appearance has expired; and

(b) The court is satisfied that, in the proceeding, the foreign State is not immune.

Service is to be carried out either by agreement or through diplomatic channels. (11)

Finally, the High Court considered whether Nauru's assets were immune from execution.

Section 30 provides:

Except as provided by this Act, the property of a foreign State is not subject to any process or order (whether interim or final) of the courts of Australia for the satisfaction or enforcement of judgment, order or arbitration award... But this does not extend to what is described as 'commercial property' in s 32:

(1)... section 30 does not apply in relation to commercial property.

(3)... For the purposes of this section:

(a) commercial property is property... that is in use by the foreign State concerned substantially for commercial purposes; and

(b) property that is apparently vacant or apparently not in use shall be taken to be being used for commercial purposes unless the court is satisfied that it has been set aside otherwise than for commercial purposes.

To prove the assets' purpose, the foreign state may submit a certificate of facts. (12)

These provisions, providing foreign states with a restrictive immunity that does not include their commercial operations, necessarily interplayed with processes under the Foreign Judgments Act:

* A judgment creditor is entitled to apply to an appropriate court to have a foreign judgment registered; (13)

* For enforcement purposes, a registered foreign judgment has the force as if judgment had been given by the registering court; (14) and

* A judgment debtor may seek to have registration set aside on application to the registering court. (15)

Decisions of the Supreme Court and Court of Appeal

The decisions of the NSW courts favoured Nauru. (16) The Supreme Court and the Court of Appeal both held that Nauru was entitled to immunity and that the commercial transaction exception in s 11 did not apply to the registration proceedings. The Court of Appeal further held that service should have been effected on Nauru before registration of the foreign judgment and that Nauru's accounts were immune from execution by Firebird's garnishee order. Firebird then sought and obtained special leave to appeal to the High Court.

II The Judgment of the High Court

The High Court unanimously held that Nauru's accounts were immune from execution, even though the foreign judgment did relate to commercial transactions. Across three judgments (French CJ and Kiefel J; Gageler J; and Nettle and Gordon JJ), the Court considered whether:

  1. Foreign state immunity extends to registering foreign judgments;

  2. The dispute was justiciable, concerning a commercial transaction;

  3. Nauru was served improperly and whether this was a basis to set aside registration; and

  4. Nauru's bank accounts were immune from execution.

    Does Foreign State Immunity Apply to the Registration of Foreign Judgments?


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