Firebird Global Master Fund II Ltd v Republic of Nauru & Anor [2015] HCATrans 215 (3 September 2015)

Last Updated: 3 September 2015

[2015] HCATrans 215

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S29 of 2015

B e t w e e n -

FIREBIRD GLOBAL MASTER FUND II LTD

Appellant

and

REPUBLIC OF NAURU

First Respondent

WESTPAC BANKING CORPORATION

Second Respondent

FRENCH CJ
KIEFEL J
GAGELER J
NETTLE J
GORDON J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 3 SEPTEMBER 2015, AT 10.14 AM

(Continued from 2/9/15)

Copyright in the High Court of Australia

FRENCH CJ: Yes, Mr Parker.

MR PARKER: Can I start by correcting something I said in answer to a question from Justice Kiefel yesterday? This was about the question of whether the bonds transaction was a commercial transaction or whether that was still a live issue. At page 386 of the appeal book, paragraph 68 of the Court of Appeal’s judgment, the Court of Appeal records that:

None of the parties disputed . . . that the proceedings, the subject of the Japanese judgment, concerned a commercial transaction.

I had reached the point yesterday in going through the NML Case, and can I ask the Court to go back to that and consider the applicability of the reasoning of Lord Mance to the present circumstances. Can I start at page 531 of the report - a cornerstone of his Lordship’s reasoning is in paragraph 84 where he states:

I do not consider that the drafters of that Act –

that is the 1978 Act -

or Parliament contemplated that section 3(I)(a) of the 1978 Act had in mind that it would or should apply to a foreign judgment against a foreign state.

Now, he explains why he has that view and, essentially, it rests on the consideration which is mentioned in paragraph 90 of the judgment which begins on page 533, namely, that in 1978 the rules of court provided no basis for obtaining leave to serve out of the jurisdiction. That did not happen until after the 1978 Act. So, in the context of an action on a judgment where one would need leave to serve out, there was no mechanism in 1978 for that to happen and that seems to be a key aspect of his Lordship’s reasoning.

We, of course, point out that that reasoning, whatever its force, is limited to the situation then under consideration, namely, an action to sue on the foreign judgment because, of course, at this time –as our own High Court decision shows – it was clear that one did not need to serve out initiating process of some sort before exercising the powers conferred by the Foreign Judgments Act. So, the truly analogous question would have been if the issue had arisen under the 1933 Act in the United Kingdom and that did not happen. That, as we would put it, is the foundation stone of Lord Mance’s conclusion – or, at least, the conclusion that compelled the agreement of the other members of the obiter majority on that point.

GAGELER J: On the same page, Mr Parker, paragraph 91, second sentence, there is a statement:

It is true that it is now well-recognised that no principle of international law renders state A immune from proceedings brought in state B to enforce a judgment against it in state C.

MR PARKER: Yes.

GAGELER J: Can that be taken as a correct statement of international law?

MR PARKER: Absolutely, although, as we will see in a moment when we come to the Jurisdictional Immunities Case, it may have become more of a positive statement rather than a negative one, but all of the Lords who heard this case made similar statements, both in the majority and the minority, and we accept that. There does not seem to be any dispute about it.

GAGELER J: We will see.

MR PARKER: There is no dispute from me about it, your Honour. I recognise that is not a full answer.

GAGELER J: I think you need more than one person to have a dispute, but we will see.

MR PARKER: Now that, as we would see it, is the foundation stone of Lord Mance’s argument. Can I just draw attention to one other thing that was of significance to the other members of the obiter majority, and that is on page 536 of the report in paragraph 97 between B and C? Just reminding the Court of the chronology, in the United Kingdom there is a 1920 Act, the Administration of Justice Act, which provided for discretionary registration of judgments, rather like the exequatur proceedings. Then there is the 1993 reciprocal enforcement legislation. Next in time is the immunity legislation in 1978, and then in 1982 there was a further Act which, among other things, gave force to what is described as the Brussels Convention about enforcement of judgments.

Now, the point that has been made between B and C on page 536 by Lord Mance is that the effect of the reading which commended itself to Lord Phillips was that the 1982 Act would have been at least partly unnecessary if the work was already being done, as it were, at common law before that date. Whatever may be the – with respect – difficulty in trying to interpret the 1978 Act by reference to what Parliament did in 1982, the same considerations obviously do not apply here.

Now, I have said that some of the arguments that Lord Mance – I have confined my remarks to what Lord Mance said which commanded the assent of the others. The other judgment in the obiter majority is that of Lord Collins, with whom Lord Walker agreed. He did not decide the case on the same grounds as Lord Mance and, indeed, rejected some aspects of Lord Mance’s reasoning. The critical thing for him seems to have been the considerations which appear at paragraph 114 and following of the judgment. That is:

at the time the 1978 Act was enacted it would not have . . . applied to the enforcement at common law of a foreign judgment against a foreign State –

We, of course, emphasise the words “at common law” there –

based on a commercial transaction –

and he explains why, and then he says at the end of paragraph 114:

Nor is it likely that section 31 of the Civil Jurisdiction and Judgments Act 1982 would have been enacted in the form that it was enacted if Parliament had thought that the 1978 Act already applied -

Now, the other judgment was by Lord Clarke, and his analysis is similar to that of Lord Phillips, in particular at paragraph 139 where he accepts NML’s argument as being that the proceedings in England concerned the same subject matter as the proceedings in New York, or related to, and he says – I am now reading about point D on page 544 of the report:

As ever, all depends upon the context, but it seems to me to follow naturally from the conclusion that the New York proceedings were such proceedings that the same is true of these. Both have the same purpose, namely to enforce Argentina’s liabilities under commercial bonds. There is nothing . . . to lead to any other conclusion.

KIEFEL J: It was Lord Clarke’s reasons that contained the reference to “updated meaning” in paragraph 144 on page 545 to which the Court of Appeal referred.

MR PARKER: Yes, I was going to say something about that, and perhaps I should - - -

KIEFEL J: It is probably not relevant for our purposes, but that is where it comes from.

MR PARKER: Can I just make this point about it? The Court of Appeal did not – at least the majority in the Court of Appeal – rely on that.

KIEFEL J: No.

MR PARKER: Although they did, actually, having said they did not rely on it, then expressed the conclusion which your Honour Justice Kiefel has referred to. We would say that it is rather a misnomer to speak of the argument here as one involving an updated construction. The distinction is drawn by Lord Mance in his judgment in paragraph 97. He distinguishes there between a provision which has got a content such as “true and fair view” or “cruel or inhuman treatment” and he says those can update in time, or they can change over time. He then says:

a connecting factor like “relating to” is most unlikely to have this elasticity –

But it is really quite a misnomer to speak of us seeking to update – or the argument in question seeking to update the meaning of the connecting factor at all. All we are doing is saying that the connecting factor, whatever its scope, falls to be applied in circumstances which may or may not have been - - -

KIEFEL J: Is that put against you, that you are applying an updated meaning?

MR PARKER: As I say, the Court of Appeal does not, in terms - - -

KIEFEL J: No.

MR PARKER: - - -say they rely on it, but then Justice Basten seemed to rely on it fairly heavily and they go to the trouble in their judgment of then accusing us, in effect, of having an updated meaning. We would say, despite the fact that Lord Clarke seems to have been prepared to accept that terminology it is really not fortunate terminology in the circumstances of the case at all. There is no updating and, in fact – as we have been at pains to point out – at the time our legislation was passed there was an expressed contemplation that a foreign judgment could be registered – against a foreign state could be registered.

So, we would say that whatever the force of that in its own terms, it does not apply here. The upshot of that is this judgment, to the extent that it bears on the issues before this Court, we would say favours strongly the position that we put and we respectfully adopt and commend to the Court the reasoning in that regard by Lord Phillips and Lord Clarke.

Now I would like to refer to the Jurisdictional Immunities Case. Yesterday, Justice Gageler asked me a question, which I am afraid I did not take in or understand properly when he asked it, which was what Convention was referred to at the passage that I referred to. We think the answer is found at page 101 of the report of the Jurisdictional Immunities Case in the headnote. It is Article 12 of the United Nations Conventions on Jurisdictional Immunities of States and Their Property. I think that is what it is. The paragraph that is relevant under this part of the argument in the Jurisdictional Immunities Case is found at page 151 to 152 of the report. It is paragraph 130. What they say is a:

court seised of an application for exequatur of a foreign judgment rendered against a third State has to ask itself whether the respondent State enjoys immunity from jurisdiction –

“jurisdiction” they mean in the context of the proceedings themselves -

having regard to the nature of the case in which that judgment was given . . . In other words, it has to ask itself whether, in the event that it had itself been seised of the merits of a dispute identical to that which was the subject of the foreign judgment, it would have been obliged under international law to accord immunity to the respondent State.

They have referred there to a decision in Kuwait and also referred to NML. There is a very close parallel between what they are saying there in terms of international law and the reasoning of Lord Phillips.

GAGELER J: There was a commentary on the case by Roger O’Keefe in the British Year Book of International Law for 2012 and he took that reference to be a reference to the dicta of Lord Phillips, Lord Collins and Lord Clarke.

MR PARKER: Indeed, yes, your Honour. That is what – it seems that it can only mean that given the context that they are adopting, the what one might call tendentiously the commonsense or commercial approach or perhaps, more accurately, the approach of characterisation by reference to being able to apply the rules of foreign state immunity meaningfully in the context and that involves looking at the underlying transaction.

GAGELER J: So, how do you use the ICJ decision?

MR PARKER: We say that it seems to be an acceptance that as a matter of international law in determining for the purpose of enforcement proceedings whether one is – whether there should be immunity, one looks to the underlying nature – the underlying transactions and answers the question by reference to the characteristics of the underlying transaction or proceedings.

We would say that if that is, as it seems to be, the principal international law then, if this Court can, there is every reason to read our statute consistently with that and the way to do that is to give the extended meaning or, the broader meaning as it has been called, to the word “concerns”, or as I would prefer to state it to reject the narrow conception of “concerns” which insists that these proceedings do not concern the underlying transaction at all.

GAGELER J: So the underlying principle of statutory construction is, so far as possible, statutory ambiguity, at least in relation to a statute that deals with a matter touching on international law – the statutory phrase should be construed consistently with - - -

MR PARKER: Yes. Now, none of this, of course, touches the narrower argument which I put yesterday which focused very specifically on what, in fact, had to be proved in these particular proceedings but it is all addressed to the broader argument. Your Honours, that brings me to the Court of Appeal’s judgment itself and can I try briefly to identify the salient points of that. We start with the paragraph 73.

FRENCH CJ: Can I just get an indication, Mr Parker, of how we are going for time? Your estimate is three hours and - - -

MR PARKER: I think that I will be longer than that estimate, but I had some discussions with Mr Dick and the result of that is that I think that he will be less. I am still confident we will finish in time.

FRENCH CJ: Well, we will have to.

MR PARKER: I appreciate we have to.

KIEFEL J: What is time, by the way - what is the finishing time?

MR PARKER: I had understood we had today but I may be wrong about that.

FRENCH CJ: I think a little more – we have all the written submissions.

MR PARKER: I understand that, your Honours.

FRENCH CJ: So we need to go to, really, the salient features that you want to emphasise rather than - - -

MR PARKER: With that in mind, could I ask the Court to go to page 387 of the appeal book. The majority in the Court of Appeal identified the existence of section 17(2) of the Immunities Act – that is the arbitration provision – as a reason to construe the provision narrowly. We say about this that it is an area for the application of the aphorism of Sir Owen Dixon that arguments of construction founded on tautology or redundancy are never strong – that is from Teele v Federal Commissioner of Taxation [1940] HCA 3; 63 CLR 201 at 207 - all the more so because of the structure of the Act, because what one has is a broad exemption and then a series of exceptions which are stated, each for their own separate purposes.

In such a structure, it would not be at all surprising to see an element of overlap or redundancy between those different exceptions and particularly also when one looks to the purpose of section 17 in this regard – I will not take the Court to it, but the relevant paragraphs of the ALRC report are 22, 104 and 105. What those paragraphs show is that the concern of the Commission was that because there was a lot of uncertainty about how arbitration could work was to deal with it comprehensively in a single provision, and given that history, it is hardly surprising that there might arguably be some element of overlap.

The other point I want to make about the arbitration exception is that the analogous argument in England, although relied on by Lord Mance in the NML Case and in the courts below, was rejected by the other four judges, that is, including the other two members of the majority.

Paragraph 75 deals with section 21 of the Immunities Act. The Chief Justice seems to have thought that this provided some support for the idea that concerns had to be read narrowly but, in our submission, it is quite the opposite. To the extent that it provides any support, it is suggested that it needs to be provided broadly because otherwise, if one reads “concerns” narrowly, that is, as related to the specific nature of the proceeding then under consideration, then it is hard to see how it could have any work to do at all.

However, if “concerns” is read broadly as relating to the underlying subject matter, then the provision will work and it will also overcome the matter I referred to yesterday, that is, the possibility of Part II and Part IV running into each other. But it will only work if one reads “concerns” in that broader way, in our submission. Even so, in paragraph 77, the Chief Justice accepts the contextual support is limited; considerations flow the other way. In 78, he says that:

the legislation removed a well-established immunity –

I am not quite sure what he referred to there, because it certainly could not be said at that stage that there was a well-established immunity in relation to the registration of foreign judgments; quite the contrary. At the end of the day, even the Chief Justice seems to accept it is finely balanced. We suggest the arguments which I have so far advanced are more than sufficient to tip the balance in favour of what his Honour refers to as the “broader construction”.

That brings me to the second part of the argument about service – proposition 2.1. For this purpose, could I ask the Court to go back to the Foreign Immunities Act and turn to section 23. The Court will there see that there is a provision for service of initiating process by agreement, and then there is a special procedure laid down in paragraph 24 for service through diplomatic channel. In particular, section 24(2)(a), there has to be:

a request in accordance with Form 1 in the Schedule -

and there are provisions for translation and the like. Section 25 picks that up and says:

Purported service of an initiating process upon a foreign State in Australia otherwise than as allowed or provided by section 23 or 24 is ineffective.

Now, because this provision refers to “in Australia”, it did not apply to this case where the service of the – on any view – notice of registration was effected on a government officer in Nauru. It is quite clear that the inclusion of the words “in Australia” were quite deliberate.

When one goes to the Law Reform Commission report, again, I will not take the Court to it, but when one goes to the Law Reform Commission Report which can be found at paragraph 150, one sees that the purpose of those provisions was to prevent visiting heads of state or representatives of a foreign government being harassed or pestered by being served. That is why it is limited to Australia, because the service of originating process elsewhere is a concern – had to be dealt with for other circumstances. The other provisions - - -

FRENCH CJ: So do you say these are facultative and beg the question?

MR PARKER: They are. It is purely facultative and to the extent that it restricts, that it is direct or mandatory, it is mandatory in Australia and not elsewhere. That is an important aspect, we say, in assessing the implication which the Court of Appeal has come up with because the implication is one which extends to everything, whether in Australia or otherwise.

KIEFEL J: But how is the question of submission to jurisdiction under Part II, or the question of immunity more generally, to be addressed if the foreign state is not served at the outset?

MR PARKER: Well, it is, but the question is whether it is required to be served - - -

KIEFEL J: But it is served before an order for registration is made.

MR PARKER: If one goes back to the core – if one goes back to what I have paraphrased as the “core meaning of jurisdiction”, then ordinarily one would expect them to be served with some form of originating process. But the point is that the Court of Appeal’s implication requires that, not just that such documents would be served, but that the procedure – the document initiating the procedure in this case – had to be served.

KIEFEL J: Well, quite so. The process under the Foreign Judgments Act would have to be tailored to meet the requirements of dealing with the immunity.

MR PARKER: Well, can I just refer the Court to section 28 as well so we can see the full scope of what is involved in this? Section 28 deals with default judgments and has a different form that has to be served, the form adapted to a situation where a default judgment has been entered into, and clearly the purpose of that, bearing in mind that the foreign State in question might not be familiar with Australian law, is ordinarily of course they will have been served before a default judgment comes into place, but the purpose of 28 seemingly is to ensure that, even where they have been and they have not done anything about it, they are given a further opportunity once the default judgment has been served on them to come back in and to move to have it set aside.

KIEFEL J: But does not section 28 itself reinforce the notion that they are to be served with originating process, otherwise they could not be in default.

MR PARKER: Well, it certainly assumes that they will be served with something before the judgment is entered - - -

KIEFEL J: Well - - -

MR PARKER: - - - if one takes the – sorry, I did not mean to interrupt your Honour.

KIEFEL J: No, please continue.

GORDON J: The problem with that though, Mr Parker, is that section 3 defines initiating process for the purposes of this Act and does it by reference to, in effect, a piece of paper by which a person becomes a party to a proceeding.

MR PARKER: Yes.

GORDON J: So it strikes it at the very beginning of the process, not halfway through it.

MR PARKER: In section 24 where it applies, yes. The point I am seeking to make is that these provisions do not set out to provide a comprehensive code for service of every form of process that may be generated at every stage of proceedings, and it is limited to those particular things; that is, service of originating process in Australia and service of further notice of a default judgment. So, service of other interlocutory-type procedures are not covered and, importantly, service in relation to - - -

GORDON J: But you cannot draw much from that because they would be dealt with by normal court processes once you are party to the proceeding.

MR PARKER: I think that is the point. The legislation presupposes that that interlocutory process will just be governed by ordinary rules of court. It does not seek to interfere - - -

MS GORDON: Because you have got through the first hurdle.

MR PARKER: Well, again, that would be so if section 24 covered everything, but 24 accepts the possibility that the courts will have their own procedures served outside the jurisdiction and that those will be followed. Presumably they will result in notice being given at an appropriate time. The other point I wanted to make was that there is nothing about service in relation to process of enforcement, so that for instance there is nothing here about, say, service of a garnishee notice. The assumption is that if a garnishee notice is served which gives rise to an issue of sovereign immunity, then the order will have been made but that will be then served, presumably in accordance with the usual court rules, and then the party will come in, that is, the State will come in to defend it and then an order will be made under section 38.

In PT Garuda this Court made the point that that whole structure militates against the idea that somehow the Court has got to decide before it exercises any jurisdiction whether it has immunity or not, but the Act clearly contemplates that there will be some circumstances at least where the Court will act first and consider immunity afterwards. That is critical because, of course, we do know that in this case Nauru did receive the documents, did come in and eventually did move successfully so far under section 38 to have the process set aside.

KIEFEL J: The strongest factor perhaps in relation to your argument is the requirement in section 6(3) of the Foreign Judgments Act, is it not, that the process is to proceed ex parte and the obligation to register a judgment on application so long as a matter is satisfied. But really what needs to be done is to have the two Acts work together, not just read the Immunity Act down.

MR PARKER: The question for present purposes is whether one should imply into the Immunity Act something that is not there and something which will then have the result of in some way bringing it into conflict with or adding some further requirement to the provisions of the Registration Act.

KIEFEL J: But in that regard, to what extent can we take it as informing choices of construction that might be open under the Immunities Act that it is well accepted in international law that you do not proceed against a foreign State, let alone enter judgment against it, without first serving it. Is that something which we can take into account?

MR PARKER: That would depend on whether one considered that this had to be seen as entering judgment against a foreign state and I referred yesterday - - -

KIEFEL J: Well, proceeding against a foreign state at all.

MR PARKER: But I have referred yesterday to the limited nature of what is involved. I accept that the Court may conclude that under Part II it is still exercise of jurisdiction, but that does not mean it is the same as the exercise of jurisdiction in every case where there is a disputed claim put before the Court. What the Parliament was seeking to do in these provisions was not to provide generally for it, it assumes that the courts will make sensible provisions which will bring matters appropriately to the attention of the foreign state as a defendant, as any defendant would be entitled to.

What these provisions seek to do is to insert two additional mandatory requirements and particular circumstances have been chosen for that, namely, attempt to serve originating process, whatever that is in Australia, on the one hand, and a further opportunity after a default judgment has been entered, that is, where the party has been called upon to appear and has not appeared.

KIEFEL J: One needs to attend to the language of the statutes themselves. That is what – if there is any resolution to this it has to be done within the language of the statute. Section 23 of the Immunities Act when it refers to:

Service of initiating process on a foreign State –

a question which may arise there is whether or not there is an assumption and whether or not the assumption that there will be service of initiating process is derived from the well-recognised rule at international law that initiating process is served.

MR PARKER: Yes, but we are now building, as it were, an assumption on an analogy.

KIEFEL J: Well, no, the question is whether or not there is an assumption as a question of construction of section 23 by reference to international law rules which were well recognised at the time, and to which the ALRC report was addressed in general terms. You say the assumption is not open, because we are looking at matters about whether or not an implication is open in the statute. We are looking at the words of the statute to see if it is, and matters which might aid or detract from an implication. That is the process we are engaged in, not a general discussion of how things might work.

MR PARKER: No. We submit that the approach that one takes to the implication of something into a statute is to ask what is there in the express terms, ask what the objectives are, and ask whether the implication is necessary to achieve those objectives. I am seeking to argue that when one looks at these provisions, one sees that one has narrow and specific objectives which do not require as a matter of necessity that the summons in this case should have been served before proceeding to registration, especially in circumstances when it was required to be served afterwards.

GAGELER J: Mr Parker, perhaps I am just not understanding precisely where this fits into the structure of this litigation. Assume you are correct in your proposition 2.1; what flows from it in this case?

MR PARKER: What would flow from it in this case is that we would be able to hang on to the registration. If we were to persuade the Court that there was no immunity under our argument 1.1, 1.2 or 1.3 – so if we were able to say that there was no immunity from the proceedings, we still have to overcome the finding against us that there is this implication which required service, even if there was - - -

GORDON J: Assume you are right about that, what flows from it? What is left? What is the practical outcome of it? The practical outcome of it is you retain your order for registration.

MR PARKER: No, not unless we succeed on 2.1.

GORDON J: Yes, but assume you are right about 2.1 - - -

MR PARKER: Then we retain the registration.

GORDON J: - - -is the practical outcome of that important because you may therefore execute later against other assets?

MR PARKER: Yes, or, if we succeed on our argument in relation to the garnishee notice, we can succeed on this garnishee notice.

GORDON J: Is there anything stopping you making fresh application?

MR PARKER: No, there is not.

KIEFEL J: If you are wrong about 2.1, do you accept that registration goes?

MR PARKER: In this case, yes.

GORDON J: And you could apply again.

MR PARKER: We could, provided we succeeded on the first step of our argument.

FRENCH CJ: At what point, incidentally, does the Immunities Act – or in what way at all does the Immunities Act engage with the general recognition effected by section 12?

MR PARKER: We would say it has not been suggested.

FRENCH CJ: No, no, I am just wondering because there is already an exposure by the force of the legislation, and in terms of the recognition, at what point does the foreign country engage with that in litigation in which recognition is relevant? It would have to raise the immunity against the recognition, would it not?

MR PARKER: I think that is right, your Honour.

FRENCH CJ: In a defence or counterclaim situation, or some other way?

MR PARKER: Some other way, presumably - - -

FRENCH CJ: Depending on how it arose.

MR PARKER: Yes, that is right. Now, yesterday I went through at some length to try to show the Court the limited nature of this procedure, and we say that the limited nature of it – that is, bearing in mind, when I say this procedure I mean the registration procedure – the limited nature of the actual registration bearing in mind the substantive effect of section 12 and all of those sorts of matters, we say when one takes that into account that is a further reason why one would not derive an implication, the effect of which is that one had to serve the summons and not just serve in accordance with the Foreign Judgments Act after you have achieved registration.

We point to the curiosity of the court’s reasoning below that in the case of South Australia, the outcome of their decision is that one has to serve the summons on the foreign state even though the foreign state is not named as a defendant. The same implication would apply.

FRENCH CJ: The core of your argument, as I understand it, is proper characterisation of Part III is facultative, and the question whether service is required is to be answered by reference to some other statutory provision.

MR PARKER: Facultative and limited and, therefore, there is no basis for extending it by implication because, of course, that just tends to cut across it. I mean, the effect of the decision – it is not clear from the Court of Appeal actually – if I may say, with great respect – whether it is – they speak of, in their implication, of “serving the proceedings” and of “serving it in accordance with this part”. Now, one difficulty with the latter proposition is that they are actually two different forms in the same part. One deals with originating process and is adapted for that purpose and one deals with a default judgment and is adapted for that purpose.

It tends to point up that this implication is simply unnecessary to achieve the objectives that those provisions achieve and, indeed, to imply that, if what they mean is we had to serve Form 1, then it cuts right across those limiting words in section 25. It is as if the words “in Australia” were not there. If it was Form 2, then it is as if those words “default judgment” – judgment in default of appearance – were not there.

NETTLE J: Section 25 does not impose any obligation to serve?

MR PARKER: No, it does not, but the - I am sorry, your Honour, it says if you do not serve in accordance with 23 or 24 it is ineffective.

NETTLE J: Certainly, but it does not impose an obligation.

MR PARKER: It does not impose an obligation to serve, but it - - -

NETTLE J: Just the way in which to serve if there is an obligation.

MR PARKER: Exactly. It just provides for you to do it, and then if you do not do it that way in certain circumstances it is no good.

NETTLE J: In subsection 24(1):

Initiating process that is to be served –

How does one read that? That is otherwise required to be served?

MR PARKER: I do not think in the context of section 25 it can be read - - -

NETTLE J: No, I do not – moving away from 25 to 24.

MR PARKER: Yes, your Honour, it is to be served - - -

NETTLE J: One reads that as “that is otherwise required to be served”.

MR PARKER: Yes, your Honour, exactly. I think the Law Reform Commission paragraphs which deal with that show that quite clearly, relevantly. I can just give your Honour the reference. It is 151. If your Honour looks at that, your Honour will see what they were seeking to achieve by section 24. That deals with the second part of the argument. Now I can come to the question of execution immunity. I will start with this section by referring to the Law Reform Commission report.

GORDON J: Sorry, Mr Parker, what are we dealing with now?

MR PARKER: We now move to Part 3.

GORDON J: The garnishee question?

MR PARKER: Yes, your Honour. Before I just go to the relevant provisions, the paragraphs that are of particular importance start at paragraph 122 which is where the Commission addresses the nature of restrictive immunity from execution and what it was seeking to achieve by the provisions which were later enacted, and section 122 recognises – and this is dealt with earlier in the report; I will not go back to it – that there were two separate principles, one relating to immunity from suit, the other from execution, and that the common law had begun to recognise a restrictive version of execution immunity. At the bottom of page 73 of the report in paragraph 122, having made the point that execution against property is the sort of thing that tends to get other foreign states’ backs up, it still says:

Even allowing for these points it is undeniable that there is an element of risk to friendly relations . . . But no other state which has recently legislated on state immunity has allowed this risk to outweigh the interest of the forum state in ensuring that judgment creditors can obtain satisfaction –

and they take the same view for Australia. Then paragraph 123 deals with the basic structure and again says consistently with foreign legislation, we will start with an overall immunity and then we will have a series of exceptions. Paragraph 124 addresses what are described as “Problems of Definition”, and the point is made in that paragraph that, although there may be some analogy between them, it is not exactly the same question as whether commercial activity should be immune – or liabilities arising out of a commercial activity should be immune from suit. They say in the middle of paragraph 124:

Property in use for non-commercial purposes remains immune; property used for commercial purposes is subject to execution. Whilst easy to state in general terms, this distinction is often difficult to apply. The central difficulty with it, as with the whole topic of foreign state immunity, is injecting some precision and objectivity –

and can we underline those words “and objectivity” –

into distinguishing ‘commercial’ transactions or (in this case) purposes from others.

They then say there are more peripheral problems to be considered; they can be equally perplexing –

How is property with no current use to be treated? Is property in use for both non-commercial and commercial purposes available to satisfy judgments? On whom is the burden of proof -

and the like, and they make that there is no much in the literature. So that was the background to the issues or to the decision. Section 125 deals with the notice – the idea of commercial purposes and there is reference made to the 1976 American legislation and the British legislation. The point is made on page 76 of the report, towards the bottom of the page, that a:

‘purpose’ or ‘motive’ are usually said to be irrelevant. To attempt to use this definition in the context of execution, where ‘purpose’ is intended to be the key discriminator, is not a recipe for clarity.

First the Alcom decision which I will come back to and they say in a rather inconclusive way, on page 77, that they suggest that in the context of execution it should:

be defined independently of the use of ‘commercial’ . . . Due to its fungible character and the ease with which it can be transferred between various uses, money presents particularly acute difficulties . . . The acid test of any proposed provision is how well it copes with bank accounts and other such credits –

So it is clear that this was intended to apply to bank accounts. In fact, the application to bank accounts was seen as an essential issue. Paragraph 126 deals with property being used for mixed purposes and how that should be dealt with. Can I just refer to the first two sentences. They say:

one solution would be to bar execution entirely –

in the case of mixed purposes -

This is not recommended. A state acting in bad faith or even with no more than ordinary prudence would need only to route a few non-commercial transactions through an account in order to ensure that the whole account remain immune.

KIEFEL J: Is this the background to the use of substantiality?

MR PARKER: That is. That is why they adopt the word “substantial”. But, even so, on page 78, in the second-last sentence, they recognise that:

difficult borderline situations may arise, particularly with respect to bank accounts.

They refer there to footnote 53 and that is something that I will be coming back to in a moment. That is the Alcom decision which is the foundation of the suggestion that, in fact, bank accounts just cannot sensibly be seen as being in use to the extent they are not being drawn on. Paragraph 127 deals with property lying idle and they refer here to the UK State Immunity Act and its definition which is “intended use”. So, under the UK Act it is either property which is used or is intended to be used and they say quite clearly that they do not like the idea of intended use. They say:

The rationale of state immunity seems to require no more than actual use for non-commercial purposes be protected. In addition, ‘intended use’ raises as many problems as it solves.

They ask a few rhetorical questions there and they say:

Allowing all these issues to be resolved, in effect, by an ambassadorial certificate seems to favour the foreign state excessively at the expense of the judgment creditor. It is recommended that ambassadorial certificates be accepted only as to actual use.

That is significant because in England, of course, there was a wider certification power and it was one which created a presumption in favour. Ours is the court will seize - narrower. They then go on to deal with money. They say:

Under this provision there will be an inevitable borderline issue of how long the non-use needs to be in order to quali[f]y as ‘idle’. While this should present few problems with real property and with tangible personal property, it is less clear that such a provision would cope with bank accounts and similar funds. For it is plausible to argue that all such funds are idle.

I will come back to that:

Money may be taken out of an account and used for something. But while in the account it is not used for anything if the account is non-interest bearing. If the deposit is earning interest it is in this respect used for a commercial purpose.

Then they say whether the earning of interest should be treated as dominant or incidental is one which could differ, and that is a matter that they say rather hopefully in the last sentence that:

in practice the point will be able to be resolved without the aid of further provisions.

Well, it now has to be. That is the background. With that background, can I now take the Court to the relevant provisions? It starts with section 30 of the Immunities Act, and that is the one which creates the general immunity relating to property. Then section 32 is the one we are immediately concerned with, which is the exception for commercial property, and the exemption is created by subsection (1) for commercial property. There is a definition of “commercial property” – that is in subsection (3)(a):

(a) commercial property is property, other than diplomatic property or military property, that is in use by the foreign State concerned substantially for commercial purposes –

There is a definition of “commercial purposes” in section 3(5) as including:

a reference to a trading, a business, a professional and an industrial purpose.

Now, your Honours, that parallels the definition of “commercial transaction” in section 11(3), where again we see:

commercial, trading, business, professional or industrial or like transaction –

Going back to subsection (3)(a), so we have a definition, but then – this is section 32(3)(a). Section 32(3)(b):

(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.

Here is a clear departure from the English provision. The clear intention here is that once it is not in use, the onus lies on the foreign state to satisfy the court that it has been set aside. That gives rise to a rather complicated series of questions. May I seek to hand up to the Court – I hope this will not make it worse – a flowchart-style document which summarises the issues as they arise.

What we have sought to do here is to represent the form of various decision diamonds, the questions which the Act requires to be asked. So, the first question is, was the property in this case an account balance apparently not in use? If the answer is yes, then one has to go on and ask whether it has been shown to have been set aside. That is diamond 2. Then, if set aside for otherwise than for commercial purposes then it is immune, otherwise it is not. If, on the other hand, the property is in use then one has to ask whether it is in use substantially for commercial purposes. There are five propositions set out in our summary of argument on this point. The first three of them deal with the first decision diamond, that is property being in use.

Now, the finding of the Court of Appeal, or the conclusion of the Court of Appeal, can be found at paragraph 171. Just before I come to that, can I say something about terminology? There are number of different bank accounts and in order to be able to make sense of it can I just indicate to the Court what definitions we are using? We have referred to what is called a “term deposit”. That was a term deposit account with $5 million in it which, at the time the proceedings had taken place, had not matured; that is, it had been placed on deposit some three months or so beforehand and had some three months or so to run.

KIEFEL J: Is this the term deposit referred to as number 18 in the schedule to the notice of appeal?

MR PARKER: It is.

KIEFEL J: Is that a convenient way of identifying what you referred to?

MR PARKER: It is. And just staying with the notice of appeal, Part 3 of the notice of appeal concerns what have been headed “business accounts”. We have given those in our argument the name “government enterprise accounts”. They are accounts which have a connection with various activities carried out by the Nauruan government which either are or could be seen as having some commercial element to them; that is, the purchase of fuel, the operation of aircraft and the like. Those are the ones in Part 3.

KIEFEL J: Sorry, which are the government enterprise accounts identified in Part 3.

MR PARKER: They are 19 to 26, the ones in - - -

KIEFEL J: Otherwise headed “business accounts”.

MR PARKER: Yes.

KIEFEL J: So they are government enterprise accounts?

MR PARKER: We have adopted, we hope, a somewhat less tendentious definition. Within those accounts there are three accounts, 19 to 21, all of which relate to aircraft leasing and they are described as the aircraft leasing accounts and the significance of those is that there is a special separate factual argument relating to them in our proposition 3.3.

FRENCH CJ: Do you say that any money used or set aside for the purpose of making a payment to a private provider of goods or services is used or set aside for a commercial purpose?

MR PARKER: Not here. We do not go that far here.

FRENCH CJ: Yes. Well, how far do you go?

MR PARKER: What we do is we say that money, which – well, first of all, we say that money by its definition in a bank account is not in use at all.

FRENCH CJ: Yes.

MR PARKER: Therefore, the next question is, has it been set aside. We say that, having regard to the construction of the relevant provision, the evidence did not establish that any of these accounts had been set aside in the relevant sense. That is our proposition.

FRENCH CJ: Otherwise they have a commercial - what is the scope of the commercial purpose concept?

MR PARKER: We say that a commercial purpose is to be determined by reference to what objective – whether something has a commercial nature. So we say that, for instance, the buying and selling of fuel – that is, buying it from someone and retailing it to somebody else – is a commercial purpose. We distinguish that from – we say it is commercial notwithstanding that there is said to be a reason in policy why that has been done, or should be done. So, we – and we stop at that point.

FRENCH CJ: That is an example of paying someone money for the supply of goods.

MR PARKER: Yes, but the mere fact of that is not the key. The key thing is that it is part of a commercial – an activity – that is, buying and selling of fuel, and that that activity is properly characterised as commercial. The mere fact that it is a commercial provider is relevant but not part of the test which we propound.

KIEFEL J: When one speaks of setting aside, it is usually setting aside from what? The Nauru does not have its own bank, so to speak, does it? So how does one approach the question of setting aside in this context?

MR PARKER: Well, I was going to come to that when I reached that proposition.

KIEFEL J: I will not take you out of - - -

MR PARKER: May I deal with use first?

KIEFEL J: Yes.

MR PARKER: I think I can deal with it – I hope I can deal with it relatively economically, and then I will come back to that question. So, the first question is use, and we have encapsulated the position with respect to the different accounts in our propositions 3.1. There is a finding by the Court of Appeal that the term deposit was not in use. That is challenged by a notice of contention, but I do not deal with that now. We actually will say at a later point that in fact one could see that as being in use or ought to see it as being in use for a commercial purpose, but for present purposes the Court of Appeal has said it is not in use.

We say in our proposition 3.2 that all of the other accounts, all of which are current accounts with banks, were not in use and that is by their nature. We say that an undrawn balance of a bank account is not in use. Now, can I develop that argument? The argument, as the Court has already seen, is foreshadowed as something that is arguable by the Law Reform Commission itself. That, apparently, is based on the analysis of Lord Diplock in the Alcom Case – Alcom v Republic of Colombia [1984] 1 AC 580. The relevant passage in the reasoning is at page 604 of the report, and it starts at about point C. Now, remembering, of course, that the English context is more – is different and more foreign State friendly. His Lordship is dealing with an argument that says that some of the moneys in the embassy bank account could be drawn on to meet items of expenditure that could be commercial. But he says at C:

The debt owed by the bank to the foreign sovereign state and represented by the credit balance in the current account . . . is, however, [not] one and indivisible; it is not susceptible of anticipatory dissection into the various uses to which moneys drawn upon it might have been put in the future if it had not been subjected to attachment by garnishee proceedings. Unless it can be shown by the judgment creditor . . . that the bank account was earmarked by the foreign state solely . . . for being drawn upon to settle liabilities incurred in commercial transactions . . . it cannot, in my view, be sensibly brought within the crucial words –

Now, that is, of course, because he is using earmarking there in the sense that he intended and the onus effectively is different.

NETTLE J: In effect, every setting aside would have to be a matter of intention, would it not?

MR PARKER: Well, intention would be part of it, but there is more to it than that.

NETTLE J: Well, certainly there is an act of setting aside, but unless it is intended for a particular purpose it would not - - -

MR PARKER: Certainly, there has got to be the act of setting it aside and it has got to be then – can be linked up to a particular purpose so that one can make the judgment about whether that is or is not a non-commercial purpose.

NETTLE J: But if one had an existing bank account and made a determination, henceforth I shall regard that as being set aside for purpose X, it would be set aside, would it not?

MR PARKER: Yes, I am going to come to that when I deal with set aside, but the short answer is yes, if there was an actual act of, as it were, appropriation of that bank account for that particular purpose. Set aside is not the language of England and that is why he expresses himself in that way, and that is why the consideration here was fatal for the judgment creditor, whereas it would not be necessary under our legislation perhaps. However, the point is the analysis. It is a chose in action. At any particular time it consists of a debt representing the undrawn balance.

Now, as the Law Reform Commission said, one could imagine putting aside – well, let me put aside two other possibilities. One could, I suppose, use a bank account as security. One could, I suppose, also use a bank account for earning interest and, indeed, we say that is what the term deposit is being used for, if it is in use at all. But, apart from that, one uses the account by drawing on it. But we are by definition talking about the chose in action which consists of the undrawn money. That is why we say it is not only plausible, but correct, as the Law Reform Commission tentatively suggested, that the undrawn balance by its nature just is not in use.

It may certainly be set aside - and I will come to that – but the first question is whether it is in use, and the answer is it is not in use. We suggest that such an outcome is entirely consistent with the approach that the Law Reform Commission was suggesting generally. It would mean that the law is that with bank accounts, subject to containing moneys that were undrawn, the foreign states got to satisfy the court that those moneys had been set aside in the relevant sense. Given that money is fungible, can be readily moved from one place to another, that seems an eminently fair way of dealing with money.

KIEFEL J: In approaching subsection (3) and the two scenarios there set out, I wonder whether one needs some guidance as to what it sought to distinguish against. Is it sought to identify what is not being used by a foreign State for the purposes of a foreign State? Is that – for the purposes of a foreign State, I mean, foreign states use money; they have to. What you are looking for is something other than that, so it is either a positive use for commercial purposes or it is a non-use which identifies that it is not in play for foreign State purposes.

MR PARKER: At that moment, it is not being used.

KIEFEL J: It is difficult to approach these questions without identifying what it is that is being identified.

MR PARKER: We would suggest the basic idea is that, of course, execution should not be allowed to interfere with - - -

KIEFEL J: With functioning of a foreign State.

MR PARKER: - - -the function of proper government.

KIEFEL J: Yes, quite.

MR PARKER: If it is in use for a function which can be classified in that way, it is immune. If it has been set aside – and the government has taken the step of actually setting it aside and appropriating it to some future non-commercial use – then we should not touch it either, otherwise it is available.

FRENCH CJ: So if it is set aside in order to provide payment to a commercial provider of goods or services to be applied for government purposes, it is not set aside for a commercial purpose?

MR PARKER: Well, we have not argued that. We did below, but we are not arguing that here. We are adopting the more limited argument that I have suggested.

FRENCH CJ: Yes.

KIEFEL J: You are going to come to the question of how you refer to bank accounts not being in use in the context of Nauru, when it does not have its own bank?

MR PARKER: We suggest that of its nature, it does not matter whether Nauru has its own bank or not. The question is whether a particular piece of property – that is, an account held with Westpac Banking Corporation – is in use and, if so, for what purposes, or if it is not in use, whether it has been set aside. The answer to that, we suggest, cannot depend upon whether Nauru has got one bank account or many, whether they are in this jurisdiction or other jurisdictions. It cannot depend upon whether Nauru has its own bank or its own - - -

KIEFEL J: I would have thought it might be easier to show the commercial purpose, if a foreign State is holding funds in a bank external to its own.

MR PARKER: That may be, and that is what is happening here. There is no central bank, and the money is held with a commercial organisation. Nauru has chosen, no doubt for good reasons, to - - -

KIEFEL J: Or out of necessity.

MR PARKER: As they would put it, for necessity, but they have chosen – I think at one point, they may have had some sort of central bank; they certainly had their finance corporation – but for whatever reason, they have chosen to come to Australia and put their money into our banks. We say that the characterisation of that in terms of use, or setting aside, or purposes, begins and ends with an analysis of what the nature of the property is, and it cannot depend upon more remote considerations such as whether Nauru should or can or does have other banking activities. It is not as if what is being suggested here is that Nauru has got some legislation or something which says that it has got to place its money with Westpac or someone else. It may, but there is just nothing in the record about that. All we have is that they have these bank accounts. They may have bank accounts elsewhere, for all we know.

GAGELER J: Are we dealing with proposition 3.2?

MR PARKER: Yes, your Honour.

GAGELER J: Is that purely a proposition of law?

MR PARKER: Yes.

GAGELER J: Can you restate the proposition?

MR PARKER: Of its nature, money held in a current account with a financial institution is not in use for the purpose of the relevant provision.

GORDON J: Is the reference to nature a reference to the account you just described?

MR PARKER: Of its character, of its nature, as the nature of the legal nature of the property that is a debt.

GAGELER J: A chose in action.

MR PARKER: A chose in action for a particular amount representing the undrawn amount.

GORDON J: Is the default position then that if I seek to execute against a bank account I have already got a tick on your first diamond?

MR PARKER: Yes. It means that - - -

GORDON J: The burden shifts to the foreign State to establish that the fund has been – either had the fund set aside for a particular purpose.

MR PARKER: It does mean that and we say what is wrong with that given that money is fungible?

GORDON J: I am not suggesting that something is wrong. I am just asking whether that is the result of your submission.

MR PARKER: I am sorry, your Honour, and I do seek to make the point that that is, given the fungible nature of money - and can I go back a step. The Commission was concerned at every stage to adopt definitions and provisions which would not be subject to manipulation or vagaries depending on the attitude of the foreign State.

GORDON J: So, if that is right, Mr Parker, then why do you draw the distinction in 3.3 with the aircraft leasing accounts?

MR PARKER: Just because on the facts, if one adopts a wider approach and says, no, you look at the bank account and ask whether it has been drawn on regularly or not regularly. That is the argument against us, that you look at the pattern of drawings and you say, well, having regard to the pattern of drawings that is what it has been used for. Then, on the facts, those particular three accounts - - -

GORDON J: Were dormant.

MR PARKER: Were dormant. Can I just deal with that very briefly now? The evidence on that can be found in the appeal book page – it starts at page 232. One sees a list of accounts that were then concerned – it is a wider list than we are now concerned with, and then proposition 3 is paragraph 3 on page 233 is that they are all:

used for government purposes, being the purposes more particularly set out –

Then the particular accounts, the aircraft leasing accounts are account number 7 on page 234:

The funds in this account were used by RON Government to provide government loans to Nauru Airlines for the procurement and maintenance of its aircraft. The government loans were provided on a non interest/non-profit basis and have been repaid.

The other two accounts, which are number 20 on page 236, line 32 and account 32 on page 238, just pick up the same description. We would say that based on that description these accounts were, on any view of it, dormant, idle, not in use. The Court of Appeal appears to overlook that. The relevant reasoning is at paragraph 171 of the judgment, page 407 of the appeal book. They say:

Leaving aside the Trust account –

which is another name given to the term deposit account –

the suggestion that the accounts were not in use at all, or that the funds in those accounts had not been set aside for some purpose, was implicitly if not explicitly rejected by the content of the Certificate before the Court.

KIEFEL J: Are you going to deal with the certificate question?

MR PARKER: Well, can I deal with it in this way. The certificate cannot be an answer to our argument proposition 3.2, because that is a proposition of law depending on the proper characterisation of the accounts as an asset and the relationship of the legislation to it. The fact that a certificate is produced which asserts that this property is in use does not prove anything. All it means is that the person who is the author of the certificate has a different view of what things are in use, and what “in use” means.

KIEFEL J: You mean the certificate goes to the purpose, not whether it is in use?

MR PARKER: What I mean is the certificate can only be evidence of fact. It cannot be conclusive of ultimately whether the actual facts fit within a particular legal characterisation or they do not. So, the certificate was no reason why the Court of Appeal should not have considered our argument in proposition 3.2. Now, as to whatever other use the certificate may have, from what I have shown the Court, the certificate in relation to those three accounts – that is, the Aircraft Leasing Accounts referred to in proposition 3.3 did not establish that there was then any current use at all. There was no other evidence that did so either.

That brings me to proposition 3.4, which is about setting aside. The question is how is that term to be interpreted in the context of this case – I am sorry, in this particular statutory context perhaps. We suggest there are two important matters of context. The first is that very deliberately a different test has been used from the test under the UK legislation. UK legislation spoke of intention, and our Law Reform Commission rejected that in favour of what might think is a more objective term, “set aside”, and for the reason that is was necessary that it should not depend on the vagaries of intention because that would be too easy to manipulate and it would be too hard to judge on the facts, particularly given that this has got to be assessed, and may have to be assessed at some early stage of the proceedings. It would be very undesirable if one was drawn into a minute analysis of what the intention of different people in the government was about the way in which assets should be used. There is a lot to be said for an objective approach that everyone can look at and say immediately, either this is set aside or it is not set aside.

That is the first matter of context. The second matter of context is that the provision, by its nature, applies to foreign states. We are not asking whether individuals set money aside. We are not even asking whether commercial organisations have set money aside. We are asking whether a State has set money aside. Our submission is that, in that context, the natural meaning of “set aside” is the archetypal meaning that it would have – that is, appropriated in some way by some formal government Act. It could be done by way of appropriation bills. Appropriation bills do not necessarily do it but it could be done in that way.

KIEFEL J: Would you not need to have regard to the constitutional legislation of Nauru to determine these questions?

MR PARKER: No, because the question is what does our term “set aside” mean?

KIEFEL J: What, according to our constitutional setting in our legislative scheme under the Constitution?

MR PARKER: But we are still dealing with a State and a State can only act by officials. Any State will have a bureaucracy. Any State will have some legislative and some administrative group of people to carry out its acts.

NETTLE J: But if an executive officer within the scope of his authority wrote out a piece of paper meaning it to be what it appeared to be – setting aside a particular bank account for governmental purposes – would you accept that that was a “setting aside”?

MR PARKER: Absolutely. A valid administrative provision would be perfectly acceptable and, indeed, no doubt, that is how it works in our system.

GORDON J: Well, you do not need to go so far as to require some form of instrument.

MR PARKER: No, no. It may not even require any.

GORDON J: Fact specific – case specific.

MR PARKER: It may not require an instrument, but what is required is something formal which then tells the bureaucracy that until it is changed - how it can be changed maybe - somebody might have an authority to alter it, but there is something there that tells the bureaucracy until it is changed - - -

FRENCH CJ: You can tell the bank, create an account to be designated – Supreme Court of Nauru salaries accounts – and money will be paid into that account according to the authority, as Justice Nettle put it, of some suitably authorised executive person. You do not have to go, or examine the entrails of appropriations or constitutions.

MR PARKER: Certainly not.

FRENCH CJ: So, there is not particular magic about “set aside” from that point of view, is there? It is a matter of fact in each case.

MR PARKER: It is factual, obviously, on level, but our point is that there has got to be the characteristics of it required are something objective, formal – formal in the sense that it is binding on the other members of the bureaucracy. It is an approach which - - -

FRENCH CJ: It is something that is done by the State.

MR PARKER: Yes.

FRENCH CJ: That is all.

MR PARKER: That is what we say the natural meaning is and one looks, in this case, for the evidence of what the “setting aside” was and the answer is there was no evidence of that character whatever in relation to any of these accounts. The evidence did not, in fact, rise above saying, in the certificate, we are using this for government purposes and some of Mr Adeang’s evidence suggested that they might continue to use it for so-called “government purposes”. It did not arise above, at most, past practice and intention.

That is the very thing which we say the Law Reform Commission had been at pains to ensure would not be enough. It may be that these fuel accounts had been used for three or four years. To take an example, that money is used for purchasing fuel. It may be that these accounts had been used for three of four years only for that purpose. In fact, it may be that the intention was, unforeseen events excepted, it would continue to be used and used only for that purpose.

But as a matter of administration there was nothing to suggest that there was anything binding about that. There is nothing to suggest that they could not pay for the fuel from some other account or that if they felt like it – and when I say felt like it, I mean the relevant officials of the government, and the evidence established that that was an official in the Ministry of Finance who was not called, although he could have been called – relevant official in the government could, if he needed to and the exigencies were such, that if he felt that it was appropriate, he could use the money in that account for some other purpose, and could do so in future.

There was no evidence with any of these accounts that they were committed in that sense at all and that there was any administrative requirement or even decision that they would be used for a particular purpose and only for that purpose.

GORDON J: What do we make of paragraph 3 on page 233 of the appeal book where the certificate says:

Each Account . . . is property . . . used for government purposes, being the purposes more particularly –

described, and then goes on to say, for example, in relation to the BusinessOne Account that it is to pay the salaries of the public servants?

MR PARKER: Well, I will come to that when characterising that on my alternative argument, but the short answer is, first - - -

GORDON J: I will ask a different question. What is missing from that certificate that you would otherwise want, to satisfy your proposition?

MR PARKER: I am sorry, I misunderstood. The first thing to notice about the certificate provision is that it relates to use, not setting aside.

GORDON J: It relates to purpose.

MR PARKER: No.

GORDON J: It says purposes:

used for government purposes, being the purposes . . . set out.

MR PARKER: Yes, but we have now moved to the point where we are arguing that we are dealing with property that is not in use.

GORDON J: I know we are. We may be at cross-purposes ourselves, but if you are using language for purposes - and assume for the moment that is sufficient to be evidence of setting aside for a purpose – what is missing from the certificate that you say should be there?

MR PARKER: Well ,what is missing from the evidence – remember the certificate is only evidence.

GORDON J: Yes.

MR PARKER: What is missing from the evidence is evidence that would persuade the court that there has been some actual formal setting aside.

GORDON J: So it is language?

MR PARKER: Well, it is partly language. It is partly the circumstances in which the certificate came into force or came into existence. The evidence showed that the certificate had been drafted by somebody who had no immediate responsibility for these matters at all, and the certificate is only evidence. We suggest that one could not infer from the way the certificate is presented that there had been the necessary in fact formal action in setting it aside and we also – and I do want to emphasise this – the certificate provision does not deal with setting aside at all and the Commission was only interested in it dealing with use. It was not interested in it dealing with other aspects of what needs to be proved. So we say the certificate has nothing to say here at all and does not overcome the vacuum in the evidence.

If that argument is right, and the preceding arguments are right, in relation to use, then we would succeed in relation to all of the accounts which are the subject of the proceedings; that is, Parts 2, 3 and 4 - not just the so-called government enterprise accounts – the term deposit, the government enterprise accounts and the accounts in Part 4. If we fail at that point, we cannot get to the accounts in Part 4 and we come back to what I have described as the government business accounts.

NETTLE J: You say you cannot draw the inference of setting aside because the certificate only speaks of “as at the date of this certificate”. Is that it? If it had said “has always been and is”, then maybe you could draw the inference, perhaps?

MR PARKER: One has to look carefully at the section as to what it is actually evidence of. It is evidence - - -

NETTLE J: Leastwise it would not be as difficult to draw as it is in this case, where you say it is impossible.

MR PARKER: Perhaps may not be as difficult. I have referred to the evidence which suggested that these decisions were made by a particular official within the government. There was no evidence from that person, and I will not take the Court to it, but the evidence will be found in the cross-examination of the Minister at page 46 of the appeal book.

NETTLE J: Thank you.

MR PARKER: Nauru came to court not addressing this issue, we would say. They thought it would be sufficient to show that in the loose sense the accounts were being used in the sense that they were being drawn on, and they prepared their certificate accordingly, and came to court on that basis. They have not really addressed - - -

KIEFEL J: I am sorry, I might be misunderstanding this. Are you saying that there is some deficiency or less weight should be given to the certificate because of the person who provided the certificate?

MR PARKER: If I needed to say that, I would say that in this context in particular.

KIEFEL J: But they are provided by the Consul-General as required by section 41, are they not?

MR PARKER: Yes, but it is only evidence, so its weight is another question. If it is provided by somebody who does not know and the onus is on the State to satisfy the court, the court does not have to accept it as being sufficient, and we would suggest that that would be a good reason not to accept it.

KIEFEL J: You are drawing a distinction between the method the Act requires the evidence to be given, and the further evidence that is necessary to explain the certificate. Is that right?

MR PARKER: “Satisfaction” is a strong word.

KIEFEL J: It is prima facie evidence, is it not?

MR PARKER: It is evidence – no, it is not. It is different from the English one which says that it, as it were, creates a rebuttable presumption. That was another feature which was deliberately different. The provision is just evidence.

KIEFEL J: Yes, I see.

MR PARKER: Its weight or otherwise, it does not matter now. We would say that the court has got to be satisfied the onus is on Nauru. The evidence shows that there was somebody who could have come along, and if there were limitations on the use of this account of an administrative nature, could have told the court about them. That person did not do so.

KIEFEL J: But the words “is admissible as evidence of the facts” is fairly straightforward.

MR PARKER: Admissible as evidence of the facts as to use that is stated. It is a certificate as to use.

KIEFEL J: I would have thought that at least creates an evidentiary onus the other way.

MR PARKER: Within the terms of its operation.

KIEFEL J: Perhaps we should not spend too much time on that. Onuses are not going to resolve this.

MR PARKER: Hopefully not, but there was not much evidence about this; that is why I am labouring the point, perhaps. I think I have now come to point 3.5, the last point of substance. We are here concerned with the government enterprise accounts, assuming against ourselves that the accounts in some way are being used, or have been in some way committed to these particular activities.

Now, the Court has already seen the restrictive theory of sovereign immunity as it relates to immunity from suit, it draws this very clear distinction between motive on the one hand, or policy objective on the – is another way it is sometimes expressed, and the actual nature of the activity. So it has been said again and again - and we saw this yesterday - that it is not enough to say, well, we are doing this, we are entering into this transaction because we hope to achieve something which we think will be good for the country. One has to look at the nature of the transaction. It is an objective test and it does not depend upon what we would characterise as the political justification offered.

Now, may we suggest that there are two reasons why that fundamental approach exists? The first is the attraction of the immunity should not be self-selecting. I mean by that that the foreign state should not be able to attract immunity simply by saying, well, in our country we think governments ought to do this or do do this, because that would make the immunity of very little value because it would really allow it to wax and wane according to the political theories which were adopted or were said to be adopted in the particular state in question.

Perhaps less obviously, it should be objective for this reason also, but otherwise the courts will be drawn into making value judgments of a political nature about the proper scope of government activities. Can I illustrate with an example? There are many, many activities which, in this country, governments have been involved in at one stage or another. The Premier of Queensland when she introduced legislation to privatise the Queensland Rail gave a whole list to Parliament, and they included, I think, such things as hairdressing.

Now, if one allows the objective to be – the State to say, well, in our State we think that it is very important that governments should be involved in that because there has been market failure or we think that the prices are too high or too low or whatever else it is, then the courts will be faced with either accepting that and allowing the State to just, in effect, select for itself whether the immunity applies, or will be forced to stay, well, now we will have to make a judgment about your State. Is it really right that you should be involved in this aspect of the market and not that? Does it really depend upon the size of the State or its level of economic or political development?

FRENCH CJ: Can I just come back to trying to identify with precision, so far as one can, the parameters of the concept of commercial purpose as you are advancing it. I am looking at paragraph 65 of your submissions and you are talking about fuel:

The purchase of fuel was undoubtedly a commercial transaction, whatever [the Republic’s] intentions may be as to how the fuel, once purchased, is to be used. Funds “used” or “set aside” to pay for those purchases must, in Firebird’s submission, have been funds “used” or “set aside” for a “commercial purpose”, namely to satisfy [the Republic’s] commercial obligations arising out of such transactions.

Now, that sounds very much like something that is applying as a criterion a payment to a private provider for the supply of services or goods is a commercial purpose.

MR PARKER: I can see now why I misled your Honour by hint of believing that we are putting the case more broadly than that.

FRENCH CJ: I just want to know how you are putting it.

MR PARKER: No, well, the way we are putting it is that if one simply looks at the activity and says is this buying and selling, and if it is, you stop, that is commercial.

KIEFEL J: So you are accepting that it is not correct to have regard to the nature of the transaction itself but rather one should look more generally to why property is in use or not in use?

MR PARKER: At one level I think I am accepting that. It all depends upon exactly what one means by purpose and the like in what your Honour put to me – the proposition your Honour put to me. The answer to the Chief Justice is, we say, one has to have an objective – we look to objective criteria. The relevant objective criteria are found in the nature of the property and the way it has been deployed and not the reasons why it is being deployed, not the political justification offered for why it is being deployed in that way.

FRENCH CJ: So if the State sets aside money to buy computers, for use by public servants, from a private service provider, a company that sells computers, what is the purpose?

MR PARKER: I am prepared to accept, in spite of those misleading words in the submission, or potentially misleading words, that is a government purpose. If it is going to be used for running the government then that is a government purpose but we are dealing with something different here because the evidence shows quite clearly that these are enterprises in the sense that we have used them. This is fuel being bought by the State but then not used necessarily to put into the fuel tank of a particular person whose – you know, the Prime Minister’s car. This is money being bought by the State which includes – sorry, this is fuel being bought by the State which the State then retails. It sells the fuel to petrol stations and to other operators on the island and to individuals.

FRENCH CJ: So, we should delete reference in 65 to the qualifier, “whatever RON’s intentions may be as to how the fuel, once purchased, is to be used”?

MR PARKER: Yes. Now, I was just addressing why we have an objective test. I have addressed it in the context of suit. We say the same considerations should apply when one looks at the immunity from execution. Admittedly, the questions are not exactly the same but there is an analogue and, in particular, we should adopt the same objective measure. One should be just looking at the property and saying, well, what is the nature of this property, how is it being deployed?

Can I illustrate what we would say by way of an example? Suppose the State decided that it was desirable to create employment by setting up a factory to make a particular thing on Nauru and they imported machinery for that purpose, set it up and started running the factory. We say that property would be used for an industrial purpose, that is the word in our legislation, and one would characterise it as that independently of whether it had been done to make money and then sell the products overseas or whether it had been done to create employment and whether the goods that were made were sold to the islanders at a reduced price or even no price at all because the nature of the activity is the industrial activity. That is the objective question. That is the objective test.

FRENCH CJ: That is the example you put at paragraph 64 of your submissions?

MR PARKER: It is indeed.

FRENCH CJ: So is it a kind of commercial vibe or, more politely, a multifactorial test?

MR PARKER: It is a question of going through and seeing whether, one having regard to the objective characteristics of both the property and the way it is being deployed, it answers the description. I do not know whether that is a vibe answer or not, your Honour.

FRENCH CJ: That is as good as it gets, is it? Okay.

MR PARKER: I just do not think we can do it any other way, your Honour. The Commission has left the courts to complete this aspect of it, and the distinction just has to be drawn. The question for this Court is what should the test be and how should the test be applied?

NETTLE J: If you look at the certificate, there are only three counts where the use of the funds is other than governmental in the purest sense. That is the aircraft leasing, and possibly the electricity.

MR PARKER: There is the fuel as well, your Honour.

NETTLE J: Fuel accounts?

MR PARKER: Yes.

NETTLE J: But the fuel is moneys which they have received from flogging fuel, and they are going to use for pure government services.

MR PARKER: The phrase “government services” unfortunately in the certificate is stated in terms that are so wide that they include, for instance, the provision of goods and services to the population at a cost.

GORDON J: No, no, in relation to that first fuel account, it talks about using it to pay salaries of government employees.

NETTLE J: That is the account numbered 22, and the other one is 24:

predominantly for the purpose of providing Government Services.

MR PARKER: The difficulty arises because there are more accounts that were then in issue than are now in issue.

NETTLE J: Yes.

MR PARKER: The fuel accounts in my lexicon are the ones which are – if the Court has the certificate – number 6 on page 234. I am sorry, I am just trying to find the other one – could I deal with 6 at the moment? Money comes from the US there, but that says:

The funds are used . . . to purchase fuel to supply to the population of RON and business located on RON. The main customers –

et cetera. That is why I say what I said about the fuel.

NETTLE J: Yes, I understand, thank you.

MR PARKER: There is another account which we have defined as a fuel account and I will try to see if we can – yes, it is number 15.

NETTLE J: Yes, I understand.

MR PARKER: Can I ask the Court to look at what the Court of Appeal said about this? It starts at paragraph 172. In the second sentence of paragraph 172, the Chief Justice says:

“commercial purposes” itself is not defined.

That is a mistake, as I have shown the Court. It is defined. He says:

It does not seem to me that the fact that money is expended or proposed to be expended on what might be described as commercial transactions necessarily means it is in use for commercial purposes. If the funds are to be used for the purpose of government administration, performance of government’s civic duties and functions to its citizens, or for the advancement of the community, it does not seem to me that the fact that that object is achieved by entering into commercial transactions means that the funds are used for commercial purposes -

So far as it goes, we accept that, although we do not – provided, of course, that it is not accepted that the civic duties and functions are just those which the government thinks it is a good idea to do. But certainly, as far as government administration is concerned, as I have indicated in answer to the Chief Justice, we would accept it. His Honour then says – I am now reading from the last three lines of the page:

By contrast, if the money was in use for investment in a commercial venture, even if the object was to obtain funds for a governmental purpose or to promote the welfare of citizens, the money would most likely be in use for commercial purposes.

So much is so. The point is that, in this case, we fall between those two alternatives posited by the Chief Justice. These are moneys which are not being used at least for government purposes in the totally uncontroversial sense. They are being used for activities which could be done commercially but which the government chooses to do for, essentially, reasons which are ultimately based on public policy as they perceive it.

Paragraph 176 – his Honour has already observed, of course, the distinction, the traditional distinction between motive, but then in 176 he comes close to undermining that – or he does in substance undermine it – because he says:

In determining substantial commercial purpose it is also important to bear in mind the individual circumstances of Nauru. Its remote location and small geographical size and population render the provision of many commercial services uncommercial for private entities –

and so forth. The difficulty with that reasoning is that ultimately it involved taking a political judgment. My question of whether particular activities either can be done commercially on suitable terms or cannot be is ultimately a matter on which governments may differ. No doubt, fuel was available for Nauru for people at some price. When it is said, it is uneconomic to do it then the government is saying there is a market failure and the price would be, as we judge it, too high for our citizens or for some of them.

But to allow that consideration to influence, it would be to accept that for one State the proper function of government, or the core function of government might extend so far but for another State in different commercial, economic state of development, it would be otherwise. Ultimately, that would bring the court into a non-objective assessment because the court would have to make some assessment about what the state of development of the country was.

Now, we say that by introducing that concept, the Chief Justice has undermined the objective nature of the test and turned away from looking at the objective factors. Then, when one sees how he deals with the fuel account, which is at paragraph 182, there is the example - he specifically refers there:

to supply to its citizens on a not-for-profit basis -

But there is clear authority in other contexts that whether you seek to make a profit or do make a profit cannot matter. It cannot depend on that. Suppose one had a government which wished to raise money from its people or from a section of its people and deliberately instituted a monopoly and then forced them to buy from the government at a big mark-up so they could then use the money for some other purpose. Would the outcome be different?

NETTLE J: You do not need a profit motive to carry on business, but you do need it for a commercial purpose, do you not?

MR PARKER: Well, we say the commercial purposes are supplied simply by the fact, as the evidence shows, that the government buys it and then sells it. Now, true it may be that they choose to sell it at a price which will just cover their costs of buying it. But they are still selling it. They are not giving it away, they are retailing it. The answer to whether the purpose is commercial cannot depend upon the price for which they retail it, because if one allows that to happen again, moving away from the objective criteria and one is ultimately making some sort of value judgment about what governments should do or should not do, or can or cannot do as part of their core function.

NETTLE J: Do you say a not-for-profit hospital would be in the same category?

MR PARKER: Well no, I would not, but a hospital is an interesting example because it illustrates that as with all these things, conceptions of what governments can or should do change over time. Centuries ago, there were no government hospitals.

NETTLE J: Let us say the government conducts a private, not-for-profit hospital.

MR PARKER: Well, if it was a not-for-profit hospital, then I would say not because what it is not doing is retailing medical services.

NETTLE J: No, it is selling medical services at a cost which just covers its outlays.

MR PARKER: Well, then it would be different because it is actually charging people.

NETTLE J: Like Cabrini, for example. That, you would say, would be carrying on a commercial purpose.

MR PARKER: Like a what, I am sorry?

NETTLE J: Cabrini Hospital. Any of the big commercial providers of public hospitals would be commercial?

MR PARKER: Well, I do not know the answer to that because - - -

NETTLE J: I am just trying to see if one carries on a not-for-profit activity – a business, but not for profit – charging only so much as is necessary to cover costs because one is so motivated by altruistic considerations, is that commercial?

MR PARKER: Well, the answer is yes, we would say, because you characterise it according to what the activity is and that is buying and selling. The motivation and the price – because otherwise one is led have to insert the qualifier “not-for-profit”. One has to look at whether the profit is right. We have to look at whether the profit is appropriate. What if they charge 5 per cent mark-up? What – to take my example – what if they charged a huge mark-up because they actually wanted to use it as a cash cow to raise money? Would the answer be different?

Can I emphasise – and I will not take the Court to it because of the time – but in the Weltover Case in the US Supreme Court, which we have referred to in our submissions, it is admittedly a case about immunity from suit. But the judgment for the court specifically makes this point that where you are determining whether something is a business or a commercial activity does not depend upon a desire to make profit and actually making profit. Again, that is not part of the objective circumstances. You just look at what you are doing.

GAGELER J: What case is that?

MR PARKER: That is the Weltover Case in Argentina. It is referred to at one point in the submissions and I think it is in the materials before the Court. It is at page 614 of that report.

GAGELER J: Chief Justice Bathurst at paragraph 173 relies on a Hong Kong case for stating what he describes as the test that he then goes on to apply. Do we get anything useful from reading that case?

MR PARKER: We would not suggest that it would really add to the analysis that we have to undertake based on our statute and the considerations which are linked to it.

Now, I am not going to deal separately with all of the other accounts. The Court has seen the nature of our argument and we have explained why. Despite perhaps appearances to the contrary in the names of the accounts, the way some of the accounts are put, we would characterise each of these accounts as enterprises in the sense that they involve activity which should be characterised as trading or commercial or industrial, and I am not going to take up time by going over that.

Can I come back finally to the term deposit and refer the Court to paragraph 177 where his Honour seems to have accepted in the last sentence that:

what are effectively Nauru’s reserves are to be used for government and sovereign purposes –

In our respectful submission, that confuses the issue. One cannot draw any inference from the place where Nauru keeps its money that they are to be used in the relevant sense. Of course the test is not whether they are intended to be used; the question is whether they have been set aside.

Finally, paragraph 205 deals specifically with the term deposit account. It records a submission that “the funds were not in use”. That does not completely capture everything we say. He says:

In contradistinction to the other accounts, there was a lack of evidence as to what the funds . . . were intended to be used for or that they had recently been used for any particular purpose.

It has got to be satisfied that they were set aside. He says:

There is no reason to doubt the correctness of the Certificate that the funds are held as cash reserves to provide future government services.

The reality of the matter is that this was money that was set aside because there was no immediate – I will not use the words “set aside” – there was no immediate use for it. They were parking the money and in the meantime they were earning interest. I think one only has to read again paragraph 127 of the ALRC report to see that that could never have been the Commission’s intention that money of that sort should be immune from execution simply because there was a possibility, or even if there were a settled intention, that the money would be used in future to provide for the workings of government.

Government services in this context, one has to remember, includes, according to the certificate, the provision of fuel – sorry, the purchase of fuel and the fuel operations, for instance. We would submit that the fuel account had not been – it had not been demonstrated to the court that the government of Nauru had set it aside and, in particular, I am now picking up the words in the sixth-last line:

In the absence of any evidence to suggest the government of Nauru carries on any commercial activities . . . I am satisfied that the government services for which the funds have been set aside are non-commercial.

That is to invert the onus. Nauru had to show that this account, all of it, had been set aside in the relevant sense, and it did not. We say that the evidence established in fact the contrary proposition, that it was being used to earn interest, and that is the proper characterisation of what went on. But if we are wrong about that, then it had at least not been set aside. Those are our submissions.

FRENCH CJ: Thank you, Mr Parker. Yes, Mr Dick.

MR DICK: I think we should have provided the Court our outline of submission.

FRENCH CJ: Thank you, yes.

MR DICK: There is actually one correction I should make to the document. If the Court moves to paragraph 10 which refers to “Firebird’s contention” - it has an extra word in there which we can delete - “that certain accounts” - it says “were in use” - it should say “were apparently not in use”. I will come back to that. I will move through the outline in order, if it please the Court.

FRENCH CJ: Yes, thank you.

MR DICK: When dealing with the first question, namely, whether or not Nauru was entitled to the section 9 immunity we point to the definition of “jurisdiction” in Garuda in paragraph 17. This is paragraph 1a of our outline and that critical phrase that there must be the “imposition of duties” on a foreign state by process of Australian courts.

In this case, as the Court was taken to yesterday, that was the concept that each of Chief Justice Bathurst and Justice Basten relied on in finding that there was jurisdiction being exercised in the proceedings for the application of the foreign judgment. I will just give the Court the references again and perhaps go to them briefly. In the decision of the Chief Justice, it is paragraph 62 and the critical words at about line 25:

The registration of a judgment in this case has the effect of exposing Nauru to execution against its property in the event that judgment is not met.

That plainly imposes a duty and obviously that aspect of the registration of the foreign judgment is caused by the operation of section 6(7) of the Foreign Judgments Act. That is what converts the foreign judgment into a judgment of the Supreme Court. At paragraph 241 of the reasons of Justice Basten, his Honour applied the same analysis. Having referred to Garuda at paragraph 17 in the preceding paragraph, he made the correct finding, we say, that the proceeding, namely:

the proceeding for registration of the judgment obtained in Japan and the process -

picking up those words in Garuda:

to which the property of Nauru was sought to be subjected was the motion for an issue of a garnishee order.

That is obviously the step that imposes the relevant obligation or duty on Nauru because it is exposed to a liability, namely, execution on its assets in Australia.

The proposition in 1b, I do not think is contested, namely that the application for registration was a proceeding, and that what was going on in that proceeding was an exercise of judicial power. If I can turn to point c, which is the appellant’s contention as to what “jurisdiction in a proceeding” means in section 9, namely this idea of adjudication of substantive rights and liabilities, we firstly say that it is a gloss on section 9, and we do not see any reference to that concept of jurisdiction anywhere in the Immunities Act. But also – and the Court has already been taken to section 17 of the Immunities Act – we think it is inconsistent with section 17(2). That is the provision dealing with the enforcement of arbitral awards; if I could just take the Court to that. Section 17(2), where:

(a) . . . a foreign State would not be immune in a proceeding concerning a transaction or event; and

(b) the foreign State is a party to an agreement to submit to arbitration a dispute about the transaction or event . . .

the foreign State is not immune in a proceeding concerning –

the enforcement of that arbitral award. What that evinces is a legislative recognition, we say, that the section 9 immunity would apply, and it was necessary for the legislature to specifically provide that no immunity should apply, i.e. we know that in that type of proceeding, namely a proceeding for the enforcement of a foreign arbitral award, that there would not be this adjudication on substantive rights and liabilities of the type that Firebird is contending for. Nevertheless, the legislature assumed that there would be immunity, so it expressly provided that there should be no immunity in subsection (2).

Even if we were wrong on those propositions, it is our submission that the result of registration of the foreign judgment is the imposition of a new or additional substantive liability on Nauru, as provided for by section 6(7). If I could take the Court to TCL Air Conditioner, because we think the same point was being made there - - -

FRENCH CJ: So you accept section 17 does not cover the enforcement of the arbitral award, or the enforcement of the registered arbitral award is still subject to the protections under Part IV?

MR DICK: Yes. We rely on section 17 for a number of purposes in our arguments, particularly when I come to the question of “concerns” in section 11, but it is for the particular purpose I have identified at the stage of jurisdiction.

FRENCH CJ: Yes, I understand.

MR DICK: TCL [2013] HCA 5; 251 CLR 533 - paragraphs 32 and 33 in the decision of the Chief Justice and Justice Gageler, we say are apposite to the analysis of what is going on in the registration of foreign judgment proceedings. So, in paragraph 32, it is the second-last sentence:

An order of the competent court determining the application –

and here we accept we are dealing with an arbitral award, but for present purposes it is the same – a good analogy –

on the merits then operates of its own force as a court order to create a new charter by reference to which those questions are in future to be decided as between the parties to the application.

Similarly, in paragraph 33, in the third sentence:

A proceeding for the enforcement of the arbitral award . . . remains one that involves a determination of questions of legal right or legal obligation resulting in an order that then operates of its own force.

We say that that is exactly what is going on in the application for registration of the Japanese judgment in this case. Section 6(7) has the same effect, as is being described in paragraphs 32 and 33 of the judgment. We also would submit that as a general proposition, matters that go to the enforceability of a right as is occurring in these proceedings for registration of the foreign judgment, would generally be regarded as matters of substance we say. So, if that substantive test is the correct one – namely, the one that Firebird advances – for all those reasons we say it is satisfied by a proper analysis of the effect of achieving registration of the foreign judgment.

Now, our learned friends for Firebird rely on section 12 of the Foreign Judgments Act. I will take the Court back to that because we understand it to say, look, you do not need registration. Section 6(7) does not really add much to what would otherwise be the position. We dispute that. Firstly, we should point out to the Court, because my friend did not refer to it, that section 12 really needs to be read with section 10. Section 10 of the Foreign Judgments Act provides:

(1) No proceedings for the recovery of an amount payable under a judgment to which this Part applies, other than proceedings by way of registration of the judgment, are to be entertained by a court having jurisdiction in Australia.

FRENCH CJ: Section 12 says nothing about suing on the judgment.

MR DICK: No, that is right, which was your Honour’s point yesterday. So, our short submission is that firstly, insofar as section 12 gives any right, it is limited and does not have the bite that section 6(7) gives. Read together with section 10, section 12 is no more than a form of statutory res judicata. So reading those two sections together, they permit recovery of the judgment sum only by way of the new right that is created by registration and the operation of section 6, but otherwise prohibit all actions on the foreign judgment and the underlying cause of action.

NETTLE J: Even self-help, say, a set-off?

MR DICK: We accept that it is arguable that section 12 could be relied on by way of set-off. It is the first time we heard it yesterday. It might not be subject to a strikeout but, even if it did apply, it would only go that far, we say.

GAGELER J: In its terms it goes further, does it not? It says “defence or counter-claim”.

MR DICK: Quite. But that would not rise to suing without registration on the unregistered judgment. That is why one needs to read section 10 and section 12 together.

GAGELER J: There may be an issue about that.

MR DICK: Well, suing for recovery of an amount payable under the judgment, we think that is reasonably clear.

NETTLE J: That is a counter-claim.

MR DICK: Yes. So therefore the reference to “counter-claim” in section 12 we say would need to be read down so that it did not encompass that style of action, unless of course section 6(7) – unless the judgment had been registered. You need registration to ensure that the foreign judgment is then treated as a local judgment. That satisfies section 10 with respect to proceedings for recovery of the amount payable under the judgment, but without that, in our submission, section 12 by itself would not go that far.

FRENCH CJ: There might be some difficult questions about the intersection between section 12 and foreign state immunity according to the circumstances of the case.

MR DICK: There might be, but none of that detracts from our proposition that whatever rights section 12 is giving, section 6(7) gives different and, we would say, additional rights.

FRENCH CJ: Yes.

MR DICK: Now, our friends for Firebird do say in their reply submission that our construction of jurisdiction in a proceeding within section 9 would render Part IV otiose and he may have referred to that orally yesterday. In our submission, nothing that we are putting about the construction of jurisdiction in section 9 would have that effect and in very short terms the way, in our submission, the Immunities Act works is that question number one always will be, is there immunity in the relevant proceeding? That is section 9.

If there were no immunity, for example, because there had been a submission under section 10, then the hypothetical plaintiff could obtain registration – if we are talking proceedings for registration of a foreign judgment – and take steps to enforce as if the registered judgment were a judgment of the local court. That is the effect of section 6(7).

If, in the same proceeding, a garnishee order were sought and the issue of immunity has already been determined and it would not arise again, and if the garnishee order were sought in a separate proceeding, then the issue of jurisdiction immunity would arise. But it having already been determined in the first proceeding, section 21, we say, would mean that it does not arise for consideration again; nothing that renders Part IV otiose or nothing inconsistent with the reading of the Act as between Parts II and IV that I have just outlined, having regard to the way, we say, the Court should construe the meaning of “jurisdiction” in a proceeding in section 9.

One other point is that in the written submissions our friends for the appellant say that section 7(4) – which we have relied on – if I could just ask the Court to turn to that – section 7(4) of the Immunities Act. They say that that is a transitional provision and does not assist in the proper construction of the interaction of Parts II and IV. We dispute that. In our submission, a careful reading of section 7 shows that it is true that subsections (1), (2) and (3) all require proceedings to have been commenced after the Act but what subsection (4) provides is that:

Part IV –

execution and execution immunity -

only applies where, by virtue of a provision of Part II, the foreign State is not immune from the jurisdiction of the courts –

So it, therefore, assumes that the relevant proceeding is one to which Part II does apply – i.e. it falls outside of the exclusion in section 7(1). I just draw the Court to that provision because it is consistent with the way we contend that Part II and Part IV operate.

We note that the Commonwealth have done additional analysis on this question of jurisdiction in a proceeding by reference to the constitutional matter. We say that one does not really need to go that far or engage in that analysis to satisfy oneself that there is jurisdiction in a proceeding in the present case, but if it were necessary we contend that the registration proceedings do satisfy the matter test and that is either because the matter is the satisfaction of the requirements of section 6 and 7 of the Foreign Judgments Act, and then the question of whether or not the registered judgment can be enforced or possibly a series of individual matters, namely, whether section 6 and 7 apply and then whether or not enforcement should be ordered. But on any analysis, the registration proceedings do fall within section 9, in our submission.

Next, it is our submission that the Foreign Judgments Act has not impliedly repealed the Immunities Act. It is plain that a later statute will impliedly repeal the earlier Act, if there is actual contrariety such that they cannot stand with the other but, in our submission, as per paragraph 2.b, the two Acts are capable of operating together. The short point is that the Foreign Judgments Act is concerned with the jurisdiction of the foreign court and it assumes or makes no provision for the amenability of the defendant to the jurisdiction of the local court, whereas the Immunities Act focuses on the jurisdiction of the local court and creates an immunity to that jurisdiction.

If I could just take the Court to the Court of Appeal judgment. Firstly, the decision of the Chief Justice at paragraph 56; that was where the Chief Justice addressed this point and, with respect, we say that analysis, which is along the lines of what I have just outlined, is correct. The two statutes can harmoniously sit together. They deal with different topics and the same style of analysis was undertaken by Justice Basten at paragraph 261, page 441 of the appeal book.

FRENCH CJ: So does your argument rise any higher, really, than the proposition that this falls into the category of any later statute of general application imposing rights, liabilities, duties, et cetera?

MR DICK: It rises higher to the extent that it does deal with - each Act do deal with specific subject matters, so one does need to have regard to the text and the purpose of each, but when one does it in the way that I have outlined, there really is no inconsistency because once there is a question of immunity which arises, which there may well not be in virtually every case where someone comes along to the Court to seek registration of a foreign judgment because it involves private parties, but once a question of immunity arises, one needs to then have regard to the Immunities Act. That really is the simple point.

Once a question of foreign State immunity arises, we look at the Immunities Act and ask the question whether or not section 9 immunity applies, otherwise the Foreign Judgments Act will generally operate within its four walls because there will not be any occasion to be considering the position of a foreign State. We also submit that section 7(4)(c), which Firebird relies on quite heavily in the Foreign Judgments Act, does not support Firebird. It is directed – perhaps if I just take the Court back to that section quickly - - -

FRENCH CJ: I think the point is pretty clear in terms of your submission, is it not? This is just to do with immunity in the foreign court.

MR DICK: Correct.

FRENCH CJ: Going to its jurisdiction.

MR DICK: That is exactly right. That is a concern of the Foreign Judgments Act, this is looking at what was going on in the foreign court because it has to look at the regularity and the like of the foreign judgment in order to identify whether registration is appropriate. What you do not see anywhere in the Foreign Judgments Act is a reference to the jurisdiction of the local court, to the Australian court, and any question of immunity from that jurisdiction. Without taking the Court to the references, Chief Justice Bathurst again said essentially those things at paragraph 54 of his Honour’s judgment, appeal book page 381. Those are our submissions on the first question. Can I now deal with section 11?

The starting proposition - and we need to have open the Immunities Act section 11 - is that the proceeding must concern a commercial transaction. The proceeding here is the proceeding for registration of a foreign judgment. For the reasons that we have elaborated on in our submissions, that proceeding is concerned with the foreign judgment and whether or not the requirements of section 6 and 7 of the Foreign Judgments Act have been satisfied, and in that way those proceedings do not concern a commercial transaction. They do not require the Court to inquire into the underlying transactions that might have given rise to the foreign judgment.

Now, our friends said, well, it just so happened on this application that the guarantee was in evidence. It did not need to be. What needed to be in evidence - and there is no suggestion that the Deputy Registrar paid any regard to the contract or the guarantee - all that needed to be shown for the purposes of section 7(4)(c) was that there had been a consent by Nauru to the jurisdiction of the Japanese court. So, on this aspect of the argument we also rely on the TCL Air Conditioning Case. If I could take the Court back to that. Starting at paragraph 78 with the decision of Justices Hayne, Crennan, Kiefel and Bell because we think - - -

KIEFEL J: That is the theory of replacement, really, that one judgment replaces the other. But that really does not answer the substantive question that arises here.

MR DICK: I accept that I will need to go further, but we think as a starting point it is important because what goes on in an arbitral award, as referred to in paragraphs 78 through to 80, i.e. the underlying claims and transactions, are replaced and substituted by the judgment, the new rights and liabilities; either the arbitral award, or the foreign judgment. Then obviously, there is the further step at registration that the foreign judgment becomes operative as if it were a judgment of the court.

KIEFEL J: That might be fine so far as it goes, but here we are concerned with whether or not an immunity and an exception to it is called into question. Can I raise two things? Firstly, as a matter of ordinary language, the word “concerns” in section 11(1), I would have thought, means “is about”. In your outline, you refer to concerns referring to a relationship.

MR DICK: Yes.

KIEFEL J: If “concerns” is about and directs attention to the subject matter, it is not quite the same thing as “relates to”, is it?

MR DICK: No, we do not use those words “relate to”. On one view, “relate to” are broader words than “concerns”.

KIEFEL J: Yes.

MR DICK: We do not particularly take that point, but “relate to” always depends on the context.

KIEFEL J: But “concerns”, if it is about something, means the proceeding is about the subject matter. The subject matter in the context of section 11 is a commercial transaction and the commercial transaction is found in the underlying proceedings. Before I get your answer, can I put the second aspect in context as you heard me ask yesterday? Section 11(1) is directed to the operation of the restricted doctrine. If the narrower view taken by the Court of Appeal is correct, the restrictive doctrine can never operate in relation to the registration of a foreign judgment.

MR DICK: Can I deal with both those matters, perhaps deal with the first one now, and then deal with the restrictive doctrine a little later because what I want to – just jumping ahead to that – submit to the Court that, just as it was important in NML to look at what the state of play was concerning restrictive immunity and the approach that might have been taken with respect to registration of foreign judgments in 1978 in the UK, one should engage in the same exercise in 1985. So perhaps I can deal with restrictive doctrine then.

But with respect to “concerns” meaning “about”, in our submission, one would still need to – and accepting that an immunity is what is in question – one still needs to look at what the proceeding is about, and our submission is that the proceeding for the registration of the foreign judgment is not about the underlying transaction, the bond issue, what was going on with the guarantee, et cetera.

NETTLE J: Do you accept that “proceeding” for the purposes of section 9 includes a proceeding for the enforcement of a foreign judgment under the Act?

MR DICK: Yes.

NETTLE J: Why does not one just read 11(1) as a proceeding for the enforcement of a foreign judgment which concerns a commercial transaction?

MR DICK: Because by the time enforcement comes along, we are not concerned, we say, with the underlying transaction. We are concerned with the fact that we have a binding local judgment regularly obtained that can be enforced against assets in the jurisdiction. There is no inquiry in those proceedings – the garnishee proceedings – about any aspect of the underlying commercial transaction, assuming it is a commercial transaction.

KIEFEL J: Are you not reading section 11(1) to say the proceeding concerns a registration of a foreign judgment, full stop? Is that not how the Court of Appeal read it?

MR DICK: No, with respect, your Honour. We think the way the Court of Appeal read it was in certainly the wider sense that Justice Nettle has identified, because it was looking at the process by which my client would become subjected to duties and obligations. So, it was extending beyond the proceeding for registration and at least looking at the garnishee proceedings.

GAGELER J: On this view - and this is possibly just asking a question that Justice Kiefel has already asked - you get to the effect where section 9 produces absolute immunity from registration of a foreign judgment irrespective of its subject matter because the word “concern” is used throughout to define each of the exceptions.

MR DICK: That is right, your Honour, subject to there being submission to jurisdiction under section 10.

KIEFEL J: Can I ask you this? This will take you ahead a little but I think in relation – I think it arises out of what Justice Nettle asked. In relation to execution as being the final step that is sought against your client, do you accept that section 32 of the Immunities Act – section 32(3) of the Immunity Act, insofar as it refers to commercial purposes, is attempting to - seeking to apply the international law restrictive doctrine, notions arising from it?

MR DICK: Not necessarily, your Honour, because we think that really what the legislature had in mind was something quite different when it came to recommend this exception and including the definition of “commercial purposes”, namely, to avoid the problem which was identified in Alcom of tying the definition of commercial property to the definition of “commercial transaction” which would require the particular transactions to be the focus as opposed to the purpose.

KIEFEL J: I have been somewhat imprecise. The restrictive doctrine relates to a jurisdictional question.

MR DICK: Yes.

KIEFEL J: International law also recognises, however, that commercial purposes may be relevant to enforcement and execution. It might not be an offshoot of the restrictive doctrine per se but it has a similar connotation that you distinguish between what is done for the purposes of sovereign State activities and what is not. Do you see what I mean?

MR DICK: Yes, yes.

KIEFEL J: If one accepts that that might inform section 32, my question is would it not also inform section 11?

MR DICK: At a very general level, we accept that the doctrine of restrictive immunity must inform these exceptions, because they are all derogations from absolute immunity.

KIEFEL J: Yes.

MR DICK: But the difficulty, we say, comes at the next stage, of trying to identify what is the relevant principle of restrictive immunity apparent to the legislature at the time that might be of assistance to this Court in construing the section.

KIEFEL J: I suppose all I am really saying to you is it is, as a question of construction, informed generally by international law. You have a question of consistency within the Act. That is what I was really trying to point to.

MR DICK: Yes. I am not trying not to answer your Honour’s question - - -

KIEFEL J: I appreciate that.

MR DICK: - - - but the difficulty we have with trying to apply broad concepts of international law is identifying what those principles are and whether they were applicable at the time of the Act.

KIEFEL J: Yes, I understand that. I will be interested to hear what you have to say.

FRENCH CJ: Mr Dick, that may be a convenient moment. We will adjourn until 2 o’clock.

AT 12.45 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 1.58 PM:

FRENCH CJ: Yes, Mr Dick.

MR DICK: I am now moving to paragraph 3b on our outline and looking at other provisions of the Immunities Act that support our construction of “concerns” in section 11. Can I firstly take the Court to section 17, again, a provision dealing with the enforcement of arbitral awards and just focus in section 17(2) on subparagraphs (a) and (b) for this reason. Those subsections identify that where the legislature wanted to address the underlying transaction or event, they used clear language so that the way section 17(2) operates is to, in subsection (a), focus attention on the situation where:

a foreign State would not be immune in a proceeding concerning a transaction or event; and

(b) the foreign State is a party to an agreement to submit to arbitration a dispute about the transaction or event;

then subject to any inconsistent provision in the agreement, the foreign State is not immune in a proceeding concerning the recognition . . . or for the enforcement, of an award –

dealing with those matters. So, we firstly rely on the use in section 17 of the language which clearly directs attention to the underlying transaction or event and contrast that with section 11. The same submission can be made with respect to section 19 which deals with bills of exchange.

KIEFEL J: Can it not also work against you on another view of the construction, namely, that the Act links the loss of immunity with specific transactions or events? So the words in section 11 “concerns a commercial transaction” may consistently be seen to mean concerning the transaction and the facts supporting it. That would be so in section 19 and, in a similar way, sections 12, 13, 14 - I am sorry, section 12 at least.

MR DICK: Well, we say - - -

KIEFEL J: It refers to – concerns the employment. It refers to circumstances. It is not arid.

MR DICK: But that, with respect, your Honour, would be the way in which, for example, section 12, section 13, would need to be read if the broad construction of “concerns” that our friends advance in section 11 were right. But one does not have to do that. Our point is that the text of the statute identifies where the legislature says one should do that, and draws a distinction in sections 17 and 19, for example, where it clearly uses language that directs attention to the underlying transaction or event with, we say, the other sections - section 11, for example - - -

KIEFEL J: But, Mr Dick, what is the difference in language between section 17 and section 11? Section 11 refers to a commercial transaction. Section 17 refers to a transaction or event.

MR DICK: Yes.

KIEFEL J: I mean is it just that there is a general description of “commercial” in section 11?

MR DICK: No.

KIEFEL J: They are both identifying transactions.

MR DICK: But what section 17, for example, is doing is actually it is referring to a proceeding that concerns a transaction or event where, by reason of this Act, the foreign state would not be immune. So actually it has as its starting point – it says in order for the loss of immunity to apply in subsection (2)(b), there must first be a transaction or event within some other section of this Act that by operation of that section there has been a loss of immunity for the foreign state. Perhaps if I can develop the submission a little further. What we further say is that if the broader construction of “concerns” in section 11 were right, then one would not need section 17(2) at all for - - -

FRENCH CJ: That assumes, does it not – and for all practical purposes that might be right, but in terms of theoretical classification it might not – that the class of transaction or events dealt with in 17(2) is limited to commercial transactions or events. Now, no doubt things which are the subject of arbitration for the most part are, but not necessarily always.

MR DICK: But we go further than that. That might be right, with respect to section 11, but if one were to give a consistent construction to “concerns” across all of the exceptions – so take, for example, contracts of employment. If there were a proceeding concerning the registration of an arbitral award involving a foreign state dealing with that subject matter, on our learned friend’s construction one would not need section 17(2) because, on the broader construction of “concerns”, the immunity or the loss of immunity, or the exception with respect to those types of proceedings would already be found in section 12. The same point would be made with respect to, for example, an arbitral award involving a foreign state that had as the underlying event death or personal injury to a person - - -

NETTLE J: But you still do not have the necessary overlap. Despite the specific provisions, there will be arbitrations to which they do not relate because of the subject matter which will fall under 17.

MR DICK: Well, they cannot, with respect, your Honour, because the trigger for section 17 applying is subsection (2)(a). There has to firstly be a proceeding concerning a transaction or event in respect of which the foreign state is not immune.

NETTLE J: Yes.

MR DICK: So we say it actually works both ways against our friends, namely, if the proceeding to enforce the arbitral award concerns the subject matter of any of the exceptions, then one does not need section 17 because the loss of immunity will be found in those sections. But conversely, if it is not, section 17(2) will never apply because section 17(2)(a) will not be triggered, and we say that - - -

KIEFEL J: But is not – I am sorry, please finish.

MR DICK: Well, we say, that that would be a very unlikely result intended by the legislature. It is not just a matter of there being some questions of overlap. It would completely erode section 17 of any effect at all.

KIEFEL J: But are they not concerned with two different things – section 11 and some of the following sections are concerned with the loss of immunity by reference to the subject matter of the transaction or the nature of what is involved. Section 17 is concerned with the loss of immunity in any transaction at all where you have bound yourself to the outcome of the arbitration. It says nothing - it says nothing about how you construe section 11.

MR DICK: Well, if we just use section 11 as an example. If our proceeding were a proceeding for the enforcement of an arbitral award involving a foreign State where a commercial transaction were involved, on the broader construction of section 11, one would not need section 17 because that would be, within section 11(1), a proceeding concerning a commercial transaction and the immunity would be lost.

Similarly, one would not need section 17 if the arbitral award involved a foreign state as employer dealing with the subject matter in section 12 because the broader view of concerns would need to follow through all of the provisions dealing with the exception and in no case would section 17 be required.

KIEFEL J: But section 17 is probably just recognising, as is often done, particular aspects about arbitration proceedings and people binding themselves to it.

MR DICK: Well, we say it is a very important provision, your Honour. We agree with your Honour, but it would - - -

GORDON J: Life is not compartmentalised into whether it is commercial or whether it is arbitration. These provisions were specifically directed to deal with particular subject matters. The fact that they may overlap in practice is interesting, but irrelevant, is it not?

MR DICK: It is relevant, but because in this case it is more than just an overlap, your Honour, it is either a complete overlap, or one does not ever get the benefits of section 17 that we say tells against the broader construction of “concerns”. If one construes “concerns” in section 11 and the other sections in the way that we contend for, the issue does not arise because when we come to the arbitration clause, it has work to do.

The first question is the one posed by section 17(2)(a) and is either answered or not answered by reference to one of the other sections dealing with the loss of immunity. Then, because we have proceedings for enforcement of an arbitral award involving a foreign state, the loss of immunity with respect to those proceedings is confirmed by section 17(2) and one would not be then straining, we say, to use the exceptions in other provisions, such as sections 11, 12 and following, to achieve the same result.

NETTLE J: But 17 is predicated on a submission to jurisdiction, is it not, that is, if you lose immunity because the foreign state is party to an agreement to submit the dispute to arbitration?

MR DICK: Quite, but only if there has already been satisfaction of subsection (2)(a), your Honour. You have firstly got to have a finding that the foreign state would not be immune in a proceeding concerning that particular transaction or event, and then the further step that there has been a submission as per subparagraph (b).

NETTLE J: Yes, I see.

MR DICK: We say the same analysis applies with respect to section 19, but I will not go through the permutations again.

FRENCH CJ: Well, putting it shortly, you say the premise upon which 17(2)(b) operates is that, absent that provision, a proceeding concerning the enforcement of an award made pursuant to an arbitration would not be a proceeding concerning a commercial transaction?

MR DICK: Yes, or anything else, as per the other exceptions, yes, your Honour.

KIEFEL J: Does it operate in relation to a commercial transaction such that if it is not immune under section 11, then section 17 applies?

MR DICK: Well, it cannot apply because in that circumstance section 17(2)(a) will not have been satisfied. You have to satisfy (2)(a) first, so where a foreign state would not be immune, answer no; you do not go any further. So that is the work we say that it has to do, whereas I will only be repeating myself – but section 11, if the broad approach were taken, would really be posing a different test in respect of the same proceeding because you would not be engaging in that two-part analysis. You would just be asking the question is there a commercial transaction that underlies this arbitral award? If the answer is yes, then there is an immunity and we do not need to consider any other aspect of section 17.

FRENCH CJ: But if there is a commercial transaction on which you could be sued, but you have gone to arbitration about it, the fact that the subsequent proceedings, the enforcement of an award given pursuant to the arbitration, does not take you out of the scope of the – or at least it brings you within the scope of the jurisdiction.

MR DICK: Quite, and that is how we say - - -

FRENCH CJ: The logic of it being that – so the premise being that 11 would not cover the position of an arbitral award.

MR DICK: Correct, it would cover the - - -

FRENCH CJ: I mean an alternative way of saying it is for the avoidance of doubt, of course, as distinct from inferring a premise.

MR DICK: Well, the way your Honour expressed it, with respect, is why we say our approach gives a cohesive construction to the sections.

FRENCH CJ: I understand that, yes.

MR DICK: The other point that we have made in writing and which was also made I think by Lord Mance at paragraph 94 of NML is that if the appellant’s construction of “concerns” were correct, it would seem illogical to be giving an exception for foreign judgments in respect of matters that satisfy the Australian nexus, as we see in section 12 with respect to contracts of employment, section 13 with respect to personal injury, section 14, et cetera, but to deny the exception for foreign judgments where there is a foreign nexus, i.e., for example – and I am just plagiarising what Lord Mance has said – where you have a foreign judgment against a foreign state in respect of an Australian employment contract, that would attract the exception, but if you had a foreign judgment in respect of a foreign contract, it would not.

So we say that, together with the other contextual matters that I have identified, are strong pointers, before we get to questions of restrictive immunity and the like, that the drafters of the legislation did not intend a broader construction of “concerns” to be applied, and we have just tried to summarise I think in a shorthand way in paragraph 3c of the outline those points.

Can I next address the Court on proposition d which, in answer to a question from Justice Gageler, would we have put that submission, namely, the effect of the Immunities Act is that the foreign state is immune in a proceeding for registration of the foreign judgment unless there has been a submission, but can I just develop why we say that that is not a surprising outcome.

Firstly, we agree with our friends that Australian States had made provision for registration of foreign judgments and for those judgments to be enforceable as if they were a judgment of a court based on the 1933 UK Act and its analogues. Of course, we ultimately see that in section 6(7) of the Commonwealth Act now, the Foreign Judgments Act.

But since 1974, in accordance with its international obligations under the New York Convention, Australia had provided for the recognition of international arbitral awards and for their enforcement as if they were judgments of the court. That is section 8(2) of the International Arbitration Act.

So, if we move to the position as at 1985 when the Immunities Act was enacted, there were at least two types of procedures whereby a matter was rendered enforceable as if it were a judgment of the court: firstly, foreign judgments in the way I have outlined; and, secondly, international arbitral awards. But it was only in respect of the latter, namely international arbitral awards, that there was any international obligation of recognition on Australia, and it was obvious that foreign states could be the subject of such awards.

Now, when we turn to the Immunities Act, we see a number of things. Firstly, specific provision has been made for enforcement proceedings of arbitral awards against foreign states – that is section 17(2). As I have laboured, specific provision there expressly looks through to the underlying transaction, the subject of the arbitration, and if satisfied provides an exception to the immunity.

Now, Firebird submits that it would be an odd result if the proceedings here were for enforcement of a foreign arbitral award against Nauru and there would be no immunity, but that there is a different position with respect to the foreign judgment, but we say that is not surprising because there is an express provision - section 17(2) – that squarely deals with the matter, and that was the legislative intention.

On the other hand, foreign judgments are not identified at all in the Immunities Act, and they were not referred to by the Law Reform Commission. Now, our friends say that is unhelpful because you cannot get any guidance from the report, but we say there is a good reason for it. It was because there was no obligation on Australia to enforce awards involving foreign states and we will come to enforcement of judgments involving foreign states and even the analysis of Lord Phillips in NML does not go that far.

KIEFEL J: Well, that is as concerns the Commonwealth, I take it. You are referring to the Commonwealth’s position.

MR DICK: No, even the State Acts do not specifically provide for enforcement. They do not expressly refer to foreign judgments against foreign states. I will come to Hunt v BP shortly, but they only refer to foreign judgments, and as we see also in NML - and the position, I think, applies here - there was no recorded instance seeking to register a foreign judgment against a foreign state as at the time of enactment of the Immunities Act. In relation to the 1978 UK Act, Lord Phillips says that at paragraph 18 of NML.

Now, the UK enacted its original legislation in 1978 but then critically, we say, made specific provision in 1982 for the enforcement of foreign judgments against foreign states. The Law Reform Commission and Parliament had all of that information available to them at the time of enacting the Immunities Act in 1985. What they did was use the 1978 UK Act as their model but they specifically, and, we say, critically, did not incorporate the provisions of the 1982 UK Act.

KIEFEL J: But there were, in accordance with what is said in NML, provisions for service – service in the States of Australia outside the jurisdiction in relation to foreign states which were not available in England. That is what distinguished it in NML. That was the problem with the 1978 legislation.

MR DICK: One, we do not think there were those provisions but the problem - - -

KIEFEL J: In NML, it was that that was identified by Lord Mance and some of the other – I think, Lord Collins as well.

MR DICK: Yes.

KIEFEL J: From which an inference was drawn, either alone or in support of what the position in relation to the legislation was, that it could not have been intended to refer to foreign judgments because there was an inability to deal with them under that legislation, having regard to the Rules of Court.

MR DICK: Can I just deal with that in two stages. Firstly, insofar as there was State legislation of the type referred to in Hunt v BP at the time of the Immunities Act, we say that does not inform the discussion because those provisions were not specifically directed to registering foreign judgments against foreign states.

KIEFEL J: It may not have been but does that mean it was not possible to do so and that the questions of immunity would have just arisen and been dealt with at common law?

MR DICK: At that time, the answer is yes.

KIEFEL J: Could not the ALRC have approached the matter on that basis and that is why they did not mention it because the problem in the 1978 Act in the UK was addressed?

MR DICK: We think that the reason that it was not addressed was because it had never arisen and if there was going to be any presumption it would not have been able to have been done.

NETTLE J: The reason it had not arisen is because of absolute immunity up until 1983 and now there was a new doctrine of immunity apparently it had been across the board subject only to limited exceptions.

MR DICK: But it was at not all clear that any erosion of absolute immunity would bring with it a loss of immunity when one was seeking to enforce a foreign judgment against a foreign state, your Honour. It is not – I will come to NML in a moment but perhaps I should do it now. There is an assertion by Lord Phillips, perhaps if I can continue answering your Honour by reference to NML? If the Court could go to paragraph 26 about point H or a little below, Lord Phillips poses the question:

Whether a state is immune from such a claim should, under the restrictive doctrine of state immunity, depend upon the nature of the underlying transaction that has given rise to the claim, not upon the nature of the process by which the claimant is seeking to enforce the claim.

Now, his Lordship asserts that and then asserts that the doctrine of restrictive State immunity leads to that conclusion but does not identify, we say, in that paragraph or elsewhere why that would be so.

NETTLE J: It is more of a question why it would not be so? I mean, given that the object was to make a new restrictive doctrine of immunity which applied generally subject to only limited exceptions, why would it not be so?

MR DICK: We think one reason it would not be so is because unlike the position with respect to arbitrations there was no international obligation on Australia to recognise or enforce foreign judgments against foreign states. We think section 17 is quite telling that insofar as the legislature had in mind the doctrine of restrictive immunity it was looking to see whether there were any obligations that might require specific proceedings to be the subject of an exception and that is why you do not see foreign judgments, in our submission, against foreign states.

Perhaps because we are dealing with a loss of immunity, it is perhaps more important than simply saying well, why not, if we are going to downgrade the immunity, why do we not just introduce some broad concepts and they can apply to various proceedings, including proceedings to enforce foreign judgments against foreign States. We would say with something as significant as that, having regard to where the law had been under the doctrine of absolute immunity, that something more in the nature of an obligation accepted by Australia to recognise such judgments would have informed the decision whether or not to introduce an exception.

KIEFEL J: Do you accept that the doctrine of restrictive immunity informs the Foreign State Immunities Act, given what was said by the Australian Law Reform Commission?

MR DICK: We do, your Honour, but we say it has to be done in a careful way and, for example, in the way that I have tried to develop with respect to arbitrations, so that one would not, in our submission, pick a general section like section 11 that simply refers to commercial transactions, and read into it a construction that would have the effect of eroding - - -

KIEFEL J: But it is not picked out of there. Commercial transactions by foreign states are at the very heart of the restrictive doctrine.

MR DICK: Yes, we accept that. But perhaps, even to develop the submission a little by reference to the way that their Lordships dealt with it in NML, that really was not the approach that was adopted. As we read the decisions – and I will come to them next – what was really informing the approach of the court was the 1982 Act which is specifically - - -

KIEFEL J: Quite so. There was quite a lot of argument about whether or not in 1978 in a common law proceeding legislation could operate in a way where the restrictive doctrine had not come into effect. Most of the judgments were spent discussing that matter of construction and interpretation, whereas the simple answer, of course, was that given the new treaty obligations and the Act giving effect to it, there was no immunity in any event.

MR DICK: Quite, but that is why we say – and I will not, as your Honour has, with respect, summarised that analysis, take the Court through it again. The position under our Act is quite different. What we would commend to the Court is the style of analysis that Lord Mance engaged in, where he essentially said “I am trying to determine whether the ‘commercial transaction’ exception should extend to a case such as the present. I find that it could never have been in the contemplation of the draftsmen”, and it is straining credulity to read so much into - - -

KIEFEL J: But it was in a totally different context from what we are concerned with, surely? His Lordship was concerned with the 1978 Act and where it was in the scheme of things – how it could be interpreted in the scheme of what was occurring. In that context, a commercial transaction – because the restrictive doctrine had not taken into effect and because there were problems with service, it could not be seen to have extended to foreign judgments. But here, we are construing legislation that has commercial transactions and foreign judgments right in our scope.

MR DICK: Well, it has commercial transactions but it does not have foreign judgments. We would actually say - - -

KIEFEL J: Sorry, I should have said foreign states.

MR DICK: Yes. Well, it has foreign states in mind, but it has been very careful to identify these situations in which the exceptions should apply. So, without going back through them, we know that it is not under section 12 just any contract of employment that the foreign state is a party to. It has to be one that has the territorial nexus with Australia, and what we do not see is anything like the 1982 UK Act which would have been available to the draftsmen and the Law Reform Commission if they wanted to take it into account and apply it, where attention is specifically directed to proceedings for the enforcement of foreign judgments against foreign states.

So we say that the reasoning really of all the judges in NML supports our approach. It is just that when we come to Lord Phillips, for example, his Lordship takes the view that it is appropriate to include in the construction of the exception in the 1978 Act concepts that come from the 1982 Act. For the reasons that Lord Mance put forward, we say that would not be appropriate and when we apply it to the Australian Act there is nothing in the text of the Immunities Act that would support that approach and there was no later Act from which one could adopt the same approach to construction.

KIEFEL J: Coming back to our legislation - - -

MR DICK: Yes.

KIEFEL J: - - - on your argument, if one had regard simply to the Foreign Judgments Act and a proceeding involving the registration under that and there was nothing else, a foreign state would be able to claim absolute immunity?

MR DICK: So if it were a proceeding for enforcement of a foreign judgment against a foreign state?

KIEFEL J: Well, on the application to set aside registration of a judgment against the foreign state, the foreign state would be able to plead absolute immunity?

MR DICK: No, would just plead section 9 immunity, as we have ultimately done in this case.

KIEFEL J: So the way in which it would operate was that, so far as concerns registrations for foreign judgments, so long as that was the proceeding involved, there would be absolute immunity and no question of the restrictive doctrine could be raised?

MR DICK: Well, we would not express it as that - I just need to understand, is your Honour countenancing that we have the present Immunities Act available to us, i.e. that this is happening at some point after 1985?

KIEFEL J: Yes, as a current point, but - - -

MR DICK: Yes, so our position is, because the registration is proceeding against a foreign state, we get the benefit of section 9 and we assert the immunity at that stage. We do not characterise it as absolute immunity anymore because - - -

KIEFEL J: But my point is you are doing that only because of the nature of the proceeding, that is, because it is a proceeding for registration of a foreign judgment and your argument with respect to section 11, that is how it is achieved. It means you do not have to face the restrictive doctrine at all.

MR DICK: Well, with respect, your Honour, we think we do in two ways: one, that insofar as the restrictive doctrine has found its way into the Immunities Act, then we are construing the Immunities Act in a way that we think is consistent with that. What we are doing, if I anticipate your Honour’s put a question correctly, is that we are reading the commercial transaction exception in a way that does not enable the taking into account of the underlying transaction.

But for the reasons that I have outlined, we do not actually see that as being inconsistent with the doctrine of restrictive state immunity. We do say, in addition to what I have submitted on paragraph 26, namely, it is asserted that that doctrine would require in this type of case a taking into account of the underlying transaction but we do not see any support for the proposition.

Insofar as to address a matter that Justice Gageler raised with my learned friend, Mr Parker, I think, in paragraph 91 of Lord Mance’s judgment about the principle of international law that is referred to there, we accept that there may be – we have not been able to find one – but there may be no principle of international law that can be relied on to render state A immune in those circumstances. But we say, well, two things – there is no principle that says that immunity should be lost, and one would have thought with immunity that some clear statement would be required; but, secondly, there is no obligation on Australia.

It has not entered into, as it has with arbitrations, any international obligations to give that style of foreign judgment, namely, one against a foreign state, recognition. That is very telling, we say. That is why we do not see a provision like section 17 directed to proceedings to enforce foreign judgments in the Immunities Act.

GAGELER J: What do you say about the ICJ decision?

MR DICK: We say it really turns on its particular facts. We do not think that it can be elevated to some general principle that would inform the proper construction of our Act. So we actually – in the way that we put the case – we do not have any particular regard to it. I know our friends from the Commonwealth have put a submission to the Court - a more specific submission to the Court on it. But because we say there is no occasion to apply that case in the proper construction of our Act, it really is of interest to the Court but not something that informs the specific question, namely, the meaning of “concerns”.

GAGELER J: Is that because you say we have to put ourselves in the international law headspace of the parliamentary draftsman as at the date of the Act?

MR DICK: It does not necessarily involve that. It just means that that case itself cannot be elevated to the status, we say, of an international law principle because it turns on the particular facts, the particular cause of action. We do say, though, consistent with our earlier submission, that if one is trying to construe that these concepts “concerns a commercial transaction” in our Act, it is relevant to try and understand what Parliament had in mind by reference to the state of play at the time in the way that I have outlined, namely, international obligations with respect to enforcement of international arbitral awards, including those involving foreign states, but no such obligation with respect to foreign judgments involving foreign states.

GAGELER J: Is there anything in the Law Reform Commission report that demonstrates any advertence to the 1982 Act in the United Kingdom?

MR DICK: No, no, and as we read our Act, it is very closely modelled on the 1978 Act. To anticipate one change, where the Law Reform Commission thought that it would be a good idea to change something, it specifically identified it in the body of the report so that – jumping ahead to “commercial purposes” we know that at page 77 of the Law Reform Commission report, they were concerned about the definition in the UK Act that tied commercial purposes to commercial transactions. So that was specifically changed, but otherwise we do not see any advertence in that report to the 1982 UK Act.

GORDON J: Just so I am clear, if your submission is right, then you would never get to 32.

MR DICK: Correct, that is right. So we would succeed at the stage of having our immunity – no exception would apply and one does not need to go to sections 30 and 32.

GORDON J: Is that consistent with the split that was taken between suit and execution?

MR DICK: Yes. So that is consistent with, I think, the submission that I put as to the proper structure and approach to dealing with immunity in the Act, including section 7(4). Yes, my learned junior reminds me, your Honours, that just if the Court still has NML open, in Lord Mance’s decision at paragraph 91, we would say that his Lordship did pose the correct question, namely, in the first sentence:

It is true that the 1978 Act adopted the restrictive theory of state immunity, but the question before the Supreme Court –

of the UK and, indeed, now for this Court with respect to our 1985 Act is:

how far and in respect of what transactions.

The ultimate reasoning of Lord Mance which we would adopt is to say there really was no basis when one looks at the position as at 1978 for concluding that the registration of a foreign judgment against a foreign state would fall within the commercial transaction exception.

Just while I am on the proper construction of “concerns”, can I briefly deal with section 21 of the Immunities Act and the submission that our friends made because we make a couple of submissions: firstly, that if the broad construction of “concerns” were correct, that is the one that is advanced by Firebird, one would not actually need, we think, section 21 because one would always be in the subsequent proceedings including an appeal or related proceedings looking at the underlying transaction, whereas very briefly the history of section 21 can be found, if the Court has the Law Reform Commission report, firstly at page 136 of that report, clause 21 as originally drafted. That is the explanatory material. The clause provides that if:

a foreign State is not immune in a proceeding, it is not immune in any other proceeding (including an appeal) –

that flow from it. So the emphasis there was on “proceedings”. Then, if we just move back a little to page 118, the original form of the provision, under the heading “Related proceedings - 21” again uses that language of “proceeding”. When we come to the text of section 21 in the Immunities Act itself, the language had to change a little because what was contemplated - and if the Court has that section there those words:

a foreign State is not immune in a proceeding in so far as the proceeding concerns a matter –

i.e., that there might be some part of the proceeding where the foreign state was immune but some part where it was not and the proper reading of section 21, now that has introduced that concept of “matter” is really to say in the other proceeding including the appeal, what is not to be re-agitated is that aspect of the proceeding being the matter in respect of which there has been a finding of a lack of immunity. So that is our construction on section 21.

FRENCH CJ: Could I just ask - I understand the contextual arguments that you have put? This may be implicit in what you have been saying, but how would you formulate a purposive basis for the construction which you advance?

MR DICK: The starting point, your Honour, would be to identify and give primacy to the immunity in section 9 and, therefore, the need for clear words to deprive the foreign state - - -

FRENCH CJ: Take it away.

MR DICK: - - - consistent with that are, we say, the way Parliament has done it in section 11 and following - - -

FRENCH CJ: No, I understand they are contextual arguments, yes.

MR DICK: Yes, but as a matter of purpose, what we say about section 11 is that in many cases there will not be any difficulties. For example, the proceedings against a foreign state in this country will concern a commercial transaction and that, one would have thought, would be a relatively straightforward exercise. But the question of purpose only comes in where you have this aspect, we say, of remoteness, because you have a foreign judgment, it is a foreign State, and you have to grapple with, in this case, what is the nature of the proceeding in order to answer the question whether or not it concerns a commercial transaction.

We say that the purposive construction of section 11 in that situation is that one looks carefully at the particular proceeding – in this case, registration of the foreign judgment – and asks, is there really any aspect of that proceeding that concerns in a jurisdictional sense the underlying commercial transaction? We say no.

KIEFEL J: I think you are slipping back into language again.

FRENCH CJ: Yes.

KIEFEL J: You were getting close to purpose, I think, when you, with respect, said that you are looking at things remotely and underlying transaction – I thought you were almost going to say that there would be a difficulty because you would need to look at the factual substratum of the action in the other country, or something like that, which would be difficult.

MR DICK: Perhaps I should have finished the sentence. We do advance that submission, but then say, perhaps to answer an earlier question from your Honour Justice Kiefel, we do not think that there is anything about the restrictive doctrine that would mean that insofar as that doctrine is enshrined in the Act that its purpose is somehow rather being diminished by such a construction.

KIEFEL J: But what is the difficulty for a court on the application to register a foreign judgment in looking at the nature of the proceedings below to see if it relates to a commercial transaction in order to determine whether or not the restriction on immunity should apply? Why would that not be furthering the purposes of the Immunity Act?

MR DICK: Because it is not apparent whether or not that particular transaction is a commercial transaction and the subject of immunity is relevant where what is being sought to be done is to enforce a foreign judgment against that foreign state. What one is concerned about in registration proceedings is the inquiry, we say, that is really undertaken under the Foreign Judgments Act. Has it been obtained regularly? Have there been, in terms of section 7(4)(c), any issues about consent to jurisdiction and the like? All of those matters are the subject of inquiry as part of the registration proceedings. Why then is it necessary for the Court under the Immunities Act to start looking again into the underlying aspects of the foreign judgment?

GAGELER J: Mr Dick, this might be slightly off topic, but if you look at section 11(2)(a)(ii) does that have the effect that if a foreign state enters into a transaction where there is an exclusive jurisdiction clause in a contract, then the commercial transaction exception does not apply and proceedings in Australia on that contract would be met with the general immunity in section 9. Really, where I am going with this is just thinking about the circumstances here. If the suit had not been brought in Japan - - -

MR DICK: Yes.

GAGELER J: - - - but had been brought in Australia it would have been – on the assumption on which we are proceeding – a commercial transaction. But, at least on one view, the exception to immunity would not be applicable because of the exclusive jurisdiction clause.

MR DICK: Yes.

GAGELER J: I am not quite sure where that goes.

MR DICK: No. I am just trying to think where that goes as well, your Honour. What that tends to show is that the relevant inquiry – it is very similar to the inquiry that takes place under the Foreign Judgments Act under section 7(4)(c) but does not, in our submission, mean that one then – when one comes to the Immunities Act in the context of registration of a foreign judgment – says that opens the gateway to looking at the original underlying commercial transactions if there are any. It really just is more directed at proceedings, I think, that would be commenced against the foreign state in this jurisdiction and a similar inquiry to what the registering court has to do when it is looking at what has gone on, in this case, in Japan. Those are our submissions on section 11, your Honours.

Can I next deal – hopefully more quickly – with service? That is paragraph 4, and following, of our outline. If I could just take the Court back to the service provisions in Part III. It is our submission that the provisions in 24 do disclose, at the very least, an implicit requirement as the Court of Appeal found for service of initiating process such as the summons in this case. One matter perhaps where we disagree with our learned friends is in relation to section 25. As we read section 25, yes, it does focus on:

service of an initiating process upon a foreign State in Australia –

as per sections 23 and 24, but it seems to contemplate that there may be other ways in which the foreign state could be served, namely, out of using any relevant court rules.

Really, the reference to “service in Australia” in section 24 is that the Australian Attorney-General’s Department is the relevant body that is effecting the service. The service itself seems to take place by serving out on the Department or organ of the foreign state that is equivalent to the Australian Department. One gets that from section 24(3), because it is talking about:

Where the process and documents are delivered to the equivalent department or organ of the foreign State in the foreign State -

The only point at which we advance an additional submission in our notice of contention to what the way the Court of Appeal analysed the matter is with respect to section 27. The short point is that we think that section 27 is a further pointer that service is expressly required and is not just being an implicit requirement, because we read those words:

A judgment in default of appearance -

as being not one that requires anterior service, but simply where a judgment such as the one that was obtained is obtained where, for example, the judgment debtor has not appeared. What is critical – and what should have been done in this case, we submit, in the registration proceedings – is that no judgment should have been made and entered without proof of service of the initiating process; i.e. the summons in this case.

So, we simply point to subsection (1)(a) as tending to confirm a construction that actually requires expressly the summons to be served, as opposed to it being heavily implicit in sections 23 and 24. But if we are wrong about that and the Chief Justice is correct, then we say it is very plain both from the text of the sections and also, we say, from general principles of international law that it is critical that an initiating process seeking orders of the type that our friends were seeking against Nauru ought to have been served so that it was brought to their attention.

NETTLE J: So the implication arises as a matter of international law rather than from the text itself?

MR DICK: No, we rely primarily on the text, but we – I think we have given a reference in our submissions to the text, the international law text that tends to show that in every jurisdiction it seems to be accepted that initiating process of the type we are concerned with here needs to be served. But no, our primary contention is that we support the Court of Appeal’s reasoning that it is implicit in the service provisions that initiating process must be served.

Can I next deal with execution, sections 30 and 32? That is paragraph 7 of our outline. I have already made the point in paragraph 7 that we think is important when the Court comes to construe section 32 that our Act deliberately did not adopt the 1978 Act approach of treating commercial transactions and commercial property in the same way, because of the problems that had been identified in Alcom.

In view of the time I will not take the Court to the relevant provisions of the UK Act, but one can see that in that Act commercial property is tied to the definition of “commercial transaction”, whereas in our Act section 32(3) is, we say, quite different. What is really required is an investigation of the purposes of the relevant asset or property, rather than a focus on the transaction that gives effect to those purposes.

Can I just make a general submission in response to what our friends from Firebird have said about the evidence before the courts below? In our submission, there was ample evidence to support the detailed factual findings that were made by Chief Justice Bathurst that each of the accounts were in use for non-commercial purposes and in the case of the trust account we say the same conclusion could have followed or, in the alternative, his Honour was correct to identify a setting aside of funds in that account for governmental purposes.

The Court has been taken to the section 41 certificate. The only point, as we understand it, that has really been raised against us is – or firstly, it was given by the very person that section 41 says it must be given by, and that person might not have had personal knowledge of all the matters. Well, we do not think that is a good point because it would not have been compliant with section 41 and section 41 is the way in which, or the means by which, the statute tells a party that it should prove a matter such as whether or not funds and assets are being used for particular purposes.

But in addition, the certificate was backed up by oral evidence in-chief and evidence in cross-examination by Mr Adeang, who was the Minister for Finance and Justice of Nauru, and the effect of that evidence – and again I will not take the Court to it now; it has all been set out in great detail by Chief Justice Bathurst – was that the descriptions that were given to each of the Westpac accounts did bear a very close relation to what Nauru regarded as the purpose for the funds. That is why it is not surprising that when we see an AusAID account, for example, one that is now no longer challenged, that referred to substantial funds that had been provided by Australia to Nauru for governmental purposes, and so on.

The next proposition seems to be that, because the evidence does not go so far as to demonstrate a parliamentary appropriation of funds for a particular purpose, that that means that either the funds cannot be treated as being in use for a non-commercial purpose or as being set aside for a non-commercial purpose. In our submission, there is no support for that proposition in the Act itself and there is no reason why it would be necessary to have such a step. What is necessary is for there to be evidence before a court from, in this case, the identified person under section 41 and, further, the relevant Minister as to what the purposes were for each of the relevant funds.

NETTLE J: What about the set aside point that there was no evidence even of an executive officer determining to set aside the moneys rather than just leaving them in there and using them?

MR DICK: Well, in our submission, your Honour, that really is more a question of semantics than a substantial point because as Chief Justice Bathurst found with respect to the trust account one could still rely on the certificate and on the evidence to demonstrate that there had been a setting aside in an account of funds in that case for future governmental purposes.

NETTLE J: Just an inference of setting aside?

MR DICK: Yes, it is an inference and, indeed, to the extent that we need to we would say that if the Court were not satisfied that any of the accounts found by the Court of Appeal to be in use for the non-commercial purposes as found by Chief Justice Bathurst that the same result would follow using exactly the same evidence as those funds as having been set aside for non-commercial purposes.

Just turning to paragraph 8 of our outline, which is the proposition that some of the bank accounts were in use for commercial purposes because, as we understand it, it is still being advanced that the moneys were spent on commercial transactions, we do rely on the way in which Chief Justice Bathurst dealt with that matter, if I can just take the Court back to the judgment at paragraph 172.

FRENCH CJ: What page in the appeal book?

MR DICK: Page number – page 407.

FRENCH CJ: Thank you.

MR DICK: It is really at about line 33 where his Honour squarely deals with the submission:

It does not seem to me that the fact that money is expended or proposed to be expended on what might be described as commercial transactions necessarily means it is in use for commercial purposes. If –

and the evidence establishes this in spades, we say:

the funds are to be used for the purpose of government –

then if that object is achieved by entering into commercial transactions one still falls outside the exception. In answer to a question that your Honour Justice Gageler asked about the judgment referred to by the Chief Justice in paragraph 173, we do rely on that judgment. We have not come along today to squarely make submissions on it but we say, one, it supports the proposition on which the Chief Justice relied and the reasoning is sound.

NETTLE J: So if the government is carrying on the business of an oil company, buying and selling petrol – whether at a profit or not, put aside – because it conceives that to be appropriate in the circumstances in which it operates, that is governmental?

MR DICK: Correct – well, provided it does not have the requisite aspect of a commercial purpose. For example, here with the fuel, it was being purchased by the government and sold, but not for profit. As the Chief Justice found, that really took it outside of there being a commercial purpose.

If we just travel over to page 412, the fuel accounts were the ones that did need to be grappled with a little by the Chief Justice, because he accepted that prima facie that might not look like one that was immediately a governmental or a sovereign function. But there was detailed evidence which is earlier referred to in his Honour’s judgment that because Nauru is a very small country, a very poor country, what might otherwise have looked like a commercial purpose was not, particularly where it was being supplied on a not-for-profit basis.

If I could just give the Court the references to a couple of the accounts that my friend did focus on orally – if the Court just goes to page 477 of the appeal book, the particular accounts that were the subject of some submission were those in 19 to 21. We can hopefully pass over 19 – it only has a very small balance in it; 20, although all money is imported to Nauru – I think $10.57 is not probably worth fighting about. Palco, which is the Pacific Aircraft Leasing account – that is addressed by the Chief Justice back at page 412, paragraph 184. We rely on his Honour’s reasoning and finding there.

One other reference to give to the Court, which my learned friend I do not think did, was in the certificate in relation to that Palco account, back at page 236 in paragraph 20. There was evidence that the funds in that account were being used, i.e. they were in use:

for the same purpose as the Yaren Aircraft Leasing Co Account –

the important distinction being that the funds were continuing to be used, as opposed to any loan having been repaid. That is further support for the Court of Appeal’s finding.

The next proposition advanced by our friends which we have tried to address in paragraph 9 of our outline which is that whilst ever there is a credit balance in an account it must not be in use, we do not think that is the correct construction. We accept that the Law Reform Commission said there might be a plausible argument to that effect but we do not really think that that is a purposive approach to the question of whether or not there is commercial property because it would have the effect that where bank accounts are concerned – where there was a credit balance – that there would necessarily not be a use of that account.

That seems, in our submission, not to be what Parliament intended, but rather the way the section ought to be construed is to identify if there is a body of funds, there are regular drawings, both historically, and there is evidence of intention and if it can be established that those purposes are governmental and non-commercial, then the finding should be that those funds are in use but not for commercial purposes and that was the approach that Chief Justice Bathurst adopted.

But our fall-back position, as I submitted, if we are wrong and the onus is on us to establish a setting aside, then we say all the same evidence would be relied upon to demonstrate that those funds had been set aside for the governmental purposes that are the subject of the detailed findings of Chief Justice Bathurst.

Lastly, in paragraph 10 of our outline, we address the submission that the accounts in paragraphs 19 to 21 of the page of the appeal book I just went to – not apparently being in use should be rejected and we rely on what the Chief Justice said at page 407 of the appeal book, paragraph 171. His Honour addresses that in the third sentence where he says:

the suggestion that the accounts were not in use at all, or that the funds in those accounts had not been set aside for some purpose, was implicitly if not explicitly rejected by the content of the Certificate.

Then, importantly, Mr Adeang gave some oral evidence:

that it was not likely to be the case that some of these accounts had not been drawn on for some considerable time. To the extent that the bank statements showed inactivity for the period of one month over some of the accounts –

that was not enough to detract from the evidence. We say that reasoning was correct and it would be wrong, simply because there had been a relatively short period in which there had not been activity on the account to find that the account was not in use.

It is relevant to note that at the time this evidence came before the Court, those accounts had been frozen by the garnishee order, and that was a matter of submission below that they could not be touched, and some of the one-month period in question was during that period. We have addressed the position in relation to the trust account and I think I have orally addressed the matter in paragraph 12 about the section 41 certificate. We rely on it and we say that was appropriate evidence.

The only last matter – it normally would not be addressed – but just on any question of costs, it would also be relevant and in our favour that whatever be the result, about half of the accounts and the moneys are no longer the subject of any appeal by our friends. I just raise that for the Court because any questions of costs would need to take into account that we have had substantial success on all of those matters. But those are our submissions. May it please the Court.

FRENCH CJ: Yes, thank you Mr Dick. Yes, Mr Solicitor.

MR GLEESON: Your Honours, in light of the time, I thought I would just deal directly with commercial transaction exception if that is convenient. If there is any time left other points might be relevant but there probably will not be. Could I put two broad submissions. One is a textual submission, and then the second seeks to answer the purpose question. But as I do that, could I just emphasise that the very large issue before your Honours is not limited to the commercial transactions exception, because whether you take the broad or the narrow view of “concerns”, it will carry through to all of the exceptions.

So, really, what is before the Court is whether, on the one hand, implicitly, there is a mechanism for enforcement of foreign judgments against foreign states outside the general immunity across all the exceptions in the Act on the one hand, or whether, on the other hand, foreign judgments are left within the core immunity subject to submission. So, it will affect every exception, not just commercial transactions.

Your Honours, then the textual submission that we wish to make commences at this point that each of the exceptions in sections 11 to 21 has the same basic structure. Each of them is an exception from the immunity in section 9:

in a proceeding –

and then the next words are critical:

in so far as the proceeding concerns –

Then there is a defined subject matter which in just about every case involves an act or activity or action of a foreign state. So the connection arises from these words:

in so far as the proceeding concerns –

We would submit that what that directs attention to – close attention to – is what are the legal issues that fall for determination in the proceeding and do those legal issues concern – in the sense of are they about – the defined subject matter that follows.

Now, because of the way this is structured, the one proceeding may concern more than one subject matter and there may be immunity for one and not for another. That also tends to emphasise its close attention to the legal issues that fall for determination and that really is consistent with the underlying principles of sovereign immunity because of course the reason for the immunity in the first place is the reflection that one State should not be exercising imperium over the Acts of another; that is, should not be sitting in judgment on those Acts.

Then the exception comes about because of a recognition that there are cases where a State has sufficiently put itself into the ordinary field of commerce or private law, particularly in its dealings with the State in hand such that it should not be able to claim its general immunity. Now, where that leads to in relation to section 11 - - -

GAGELER J: Mr Solicitor, will you reconcile that submission with the ICJ decision in due course, or not?

MR GLEESON: Yes. Where that comes to in relation to section 11 is that a proceeding or part of it would concern a commercial transaction insofar as it tenders for the court legal issues concerning the commercial transaction, and they would typically be issues such as the existence, the validity or the performance of the commercial transaction, whereas in a proceeding to enforce a foreign judgment, whether at common law or by registration, a different set of issues are tendered for consideration, namely, whether the conditions either of the common law or sections 6 and 7 of the Foreign Judgments Act are met. So it is a different form of imperium being exercised over the foreign state.

Now, if that distinction is correct and if it is carried through, if the Court were then to look, for instance, at section 12, on our view a proceeding would concern the employment of a person under an Australian contract if it tenders legal issues about such a contract, for example, breach of contract or the like.

However, a proceeding which seeks to enforce a judgment given in, say, Japan, concerning an Australian contract will not attract the exception in section 12. The reason for that is actually quite clear when one thinks of the purposive notions behind section 12. Section 12 is one of a group of sections which identifies an activity of the foreign state which not only is in the field of private law or commerce but where the foreign state has brought itself into territorial connection with Australia. So, the choice to employ a person in Canberra is deemed to be a sufficient engagement with the ordinary private law of Australia to deprive the immunity of its effect.

Now, if one takes the broader view of section 11 and carries it through to section 12, what section 12 then does is to say that a proceeding for the enforcement of a Japanese judgment in respect to a person employed in Australia becomes the subject of an exception and that would be giving section 12 a completely different sort of operation to its core operation because one would ask what would be the purpose of granting that sort of exception to immunity, a rather different purpose to one that says if you come and employ people in Australia you should be subject to the jurisdiction of the Court in respect to such suits.

KIEFEL J: Why do not sections 11 and 12 operate in their own terms? Section 11 refers to commercial transactions anyway.

MR GLEESON: The reason, your Honour, is that the words that I was emphasising “in so far as the proceeding concerns”, which are the bridge in each of these, must be given the same meaning and if they have the meaning in 11 of – look at the legal issues in the proceeding and see if they are about the subject matter, then they will have that meaning in 12.

KIEFEL J: I see, yes.

MR GLEESON: If they have the opposite meaning in 11, the broad meaning which is, in effect, provided there can be said to be some relationship between the proceeding and a commercial transaction, there is a commercial transaction in the background because it led to the judgment which led to the enforcement, then one carries that through to section 12 and one would equally carry it through to 13, 14, 15 and 16 which are the territorially-based exceptions.

That is why the case is – one of the reasons why it is so critical because, for instance, under section 13 the purpose of that, we would submit, is clear. If the foreign state does things in Australia which cause death or damage it has thereby exposed itself to the ordinary tort law of the land and that makes perfect sense.

But on the broader Firebird approach, what you could bring within section 13 is a proceeding to enforce in Australia a judgment in Japan in respect to personal injury caused in Canberra. That would seem to raise a totally different range of considerations to those which have animated section 13.

FRENCH CJ: Is it such a large question?

MR GLEESON: It is a very large question for this reason, your Honour, because where I wish to go is – and perhaps I will come to the purpose. In principle, there are at least three ways you can solve the intersection between enforcement of foreign judgments and foreign state immunities. The first and simple, and perhaps default, position is that which we contend for, which is that the subject of foreign judgments has not been dealt with as a separate area to receive the benefit of restrictive treatment.

So that says yes to your Honour Justice Kiefel’s question, is that the effect of it? It has not been given separate treatment such that the only exception will be if the foreign state waives immunity. That is the first way you can solve the problem. That is the way we say it has been done.

It is not a completely surprising way of solving the problem, because if the court compares two provisions – that is section 10(2) and (5) on the one hand, with the section Justice Gageler referred to, section 11(2)(a)(ii), one can see that on our construction, those sections can lead to rather similar results, simply leaving it to the parties to document their bargain.

What I mean by that is that under section 10(2) and (5), Mr Parker’s predecessor entitled clients could have bargained with Nauru and could have obtained a clause saying if we need to sue you, you agree we can enforce against you in Australia a judgment obtained anywhere in the world. They may have had to price that into the bargain, and that would have been a matter for them as part of their commercial transaction. They chose not to do so.

On the other hand, the effect of section 11(2)(a)(ii) is that if a foreign state is engaged in a commercial transaction and wants to escape the direct jurisdiction of the Australian court, then it will have to provide for that in its bargain, and that may also affect the pricing. On the view we take, although foreign judgments are simply not treated as a separate subject matter for restrictive immunity, the result is that it comes down to the bargain between the foreign state and the counterparty as to what the results will be, not just for enforcement but even for the primary liability.

GAGELER J: It would be the same if the default rule were otherwise, though. The bargain could override, could it not?

MR GLEESON: The bargain can override in any case. All I am indicating is that even within the commercial transactions exception, the bargain may override that, so you may end up in the same position. That is the first solution to the problem. Your Honour Chief Justice French said does it matter?

If one tries to go beyond the simple solution, at the moment the arguments have been left perhaps on the basis of “it is obvious what happens next” that you look through to the underlying transaction, and therefore, that is a reading which could be placed on this statute. The problem is it is not obvious what happens next because there are at least two radically different ways in which you can engage in any exercise of look-through.

The first way – and if your Honours could go to NML at page 529, under the 1982 English Act, section 31 – the manner in which the look-through occurs in England under this bespoke scheme is sometimes called the mutatis mutandis model. The English court asks whether the Japanese court would have had jurisdiction if it had applied the rules corresponding to the English rules.

So, in my example for the tort claim, the question the English court asks is, would the Japanese court have had jurisdiction if I apply my English exceptions mutatis mutandis. So the question I ask is, did the tort occur in Japan, not did it occur in Australia? One can understand the purpose of that. The purpose of that is to carry through the underlying purpose of the core acceptance which is to say if a foreign state has gone to Japan and injured someone, it has sufficiently exposed itself to the domestic law of Japan to be subject to the jurisdiction of the court.

Now, one can then see that section 31 of the 1982 Act carries the philosophy of the 1978 Act through, in a relatively consistent manner, and provides one principal way of dealing with the intersection of foreign judgments and sovereign state immunity. If your Honours can then compare that with another option which is from the Jurisdictional Immunities Case in the ICJ, commencing at paragraph 125 on page 150, the court having recognised that a different, or additional species of issues are involved when one is looking at the enforcement of foreign judgments and as they say at the end of 125, the court is being asked:

to enforce a decision already rendered by a court of another State, which is deemed to have itself examined and applied the rules governing the jurisdictional immunity of the respondent State.

Then the court at 127 and 128 makes pellucidly clear that the answer to the question of immunity may be different in the enforcing court to that which it was in the judgment court as, in fact, it was in this case because the court was not prepared to pronounce upon whether the first set of courts had respected the immunity. It simply went to the question of what would happen before it and that is clear, just on that point, at paragraph 132, where the court actually gave the example that there might be a waiver of immunity in the judgment court but there may be no waiver in the enforcement court and, therefore, there may be immunity in one but not the other.

So, pausing on that point, that is an indication that the statement of the international law principle that your Honour Justice Gageler asked about in the various judgments in NML requires qualification because this case – both in principle and in decision - is an illustration of how a foreign state may be unable to obtain immunity in the judgment court but can obtain it in enforcing court.

Then the critical point I wanted to come to is paragraphs 130 to 131. Bearing in mind this is a 2012 decision, almost 30 years after our Act, the rule that is being pronounced here appears to be a different rule to the 1982 UK rule. On this version of look-through, the enforcing court asked itself the question:

whether, in the event that it had itself been seised of the merits of a dispute identical to that which was the subject of the foreign judgment, it would have been obliged under international law to accord immunity -

Now that seems to indicate, if I have read it correctly, that in my example of the tort case, the Australian court says, what would I do if I had been seized with the merits of the identical dispute which was decided in the Japanese court? I do not do any mutatis mutandis, and so if it was an injury in Sydney but leading to a Japanese judgment, then I recognise an exception. But if it is an injury in Japan leading to Japanese judgment, I do not. That seems to completely invert the whole purpose of those territorially-based exceptions to immunity.

Now, the reason I go to that is to show that there are at least two radically different solutions to how one intersects between foreign judgments and foreign state immunity if one is minded to go into that territory. The purposive construction we would then put upon the statute is that it has simply not addressed itself to the difficult choices that would be necessary were it to create a bespoke exception for registration of foreign judgments.

That is a perfectly understandable view, given one does not see a single word referring to foreign judgments in the Act. One sees no reference to it in the law reform material. There was an available English model which was not followed for reasons that we are not aware of, and therefore the word “concerns” can operate as I have indicated.

KIEFEL J: Well, on that view, if the Foreign States Immunities Act is taken not to have turned its mind at all to the question of foreign judgments, it should not apply. Section 9’s reference to a “proceeding” is not to a foreign judgment proceeding.

MR GLEESON: It does not slide into that abyss, your Honour, because - - -

KIEFEL J: Really?

MR GLEESON: I have divided my time up into where it is needed, but the section 9 argument is answered for all the more general reasons that have been put and that I have put in the written submission that one simply starts by saying, do we have jurisdiction of the courts in a proceeding, which is any invocation of the judicial power of the courts to implead that foreign state to bring it before the process of the court and to adjudicate over it. A proceeding to enforce a judgment is that, whether it be done at common law or whether it be done under statute.

So what I have said about the statute not dealing with foreign judgments is to say that having stated the general rule in the most pervasive of terms – and I might just add to that that although they have not been referred to, the definitions of “proceeding” and “initiating process” in section 3 confirm the breadth of those terms – the statute then says, well, here is the manner we will grapple with, the hard part. Here is the exceptions that we will recognise, and we will deal with a variety of circumstances in manners that appropriately give effect to the broad proposition of restrictive immunity, but we will not treat with the subject of foreign judgments in that area.

FRENCH CJ: Now, the purpose – I am not wanting to trivialise it – but I say is to keep it simple.

MR GLEESON: Yes.

GAGELER J: Do we take paragraphs 128 and 130 of the ICJ judgment to state international law as it currently exists?

MR GLEESON: The short answer to that question is yes. The technical answer is that, although it is the highest court in the world, its judgment is persuasive and does not directly bind even any other international tribunal of the world. Can I say though, your Honour, that paragraph 60 on page 125 is also important because the court acknowledged there that it was:

not called upon to address the question of how international law treats the issue of State immunity in respect of acta jure gestionias.

So, although paragraph 130 states a version of the look-through principle, in a sense it was an easy case because, having found that the Acts of Germany were sovereign Acts, they were not dealing with any of the exceptions and so one can see it was fairly quick to get to the result they got to.

Your Honours, there are two textual matters that I want to then further add to. One has been mentioned, but there is one fresh one which is section 7(1). Section 7(1) is a transitional provision and it seems to not only follow the structure of the exceptions - it talks about a proceeding concerning a subject matter – but it seems to identify a variety of subject matters which we then see repeated in sections 11 to 22, and the commercial transaction exception would be a species of paragraph (b) and we would submit that a proceeding to enforce a foreign judgment, whether at common law or by registration, would be under paragraph (d):

a proceeding concerning . . .

(d) a right, a liability or an obligation that came into existence –

If one contemplated a case where the underlying commercial transaction occurred before the Act came into force and the foreign judgment were granted after the Act came into force, we would contend that paragraph (d) would be the applicable paragraph and it would not be appropriate to say, well, both paragraph (b) and paragraph (d) are triggered, because then you would receive contradictory answers to the question.

So what that is tending to confirm is that when one sees an expression “a proceeding concerning a transaction or event”, you do not read that as also referring to rights, liability or obligations that may arise by reason of later judicial or arbitral determination about that transaction.

Now, your Honours, could I come then to section 17? The submission that I wish to put on this supports Mr Dick that it is an important indicator. The submission is slightly different to part of his submission. It is not just about overlap. That is not the point. The point is that if the Court looks at the tail end of section 17(2), the Parliament has chosen to deal with a situation where recognition and enforcement is sought of a creature which is the result of a judicial or quasi-judicial process.

It has done that in respect to arbitrations. It has not done that in respect to foreign judgments as we know. This is a fairly strong pointer that one would not read other exceptions, not just 11, but all of them that use language of “transactions and events” as already conferring a derivative exception for recognition and enforcement. You would not read the other ones impliedly as doing that because where Parliament has intended to deal with recognition and enforcement it says so.

Now, your Honour Chief Justice French asked Mr Dick is this a premise or in a softer version is it for the avoidance of doubt. Now, it could well be even either but if Parliament for the avoidance of doubt has said if you are wanting to recognise and enforce awards, here is our express mechanism to show that can happen by way of exception, why would not one expect that the very same thing would happen if there was an implication that foreign judgments could be enforced under these other provisions?

GAGELER J: Mr Solicitor, cannot the other exemptions overlap with each other? Could you not have a commercial transaction that involves the ownership, possession and use of property?

MR GLEESON: There could be overlap, as it were, horizontally between exceptions. That is why I am saying this is not a point about overlap. It is a point about the structural use of language - that the way section 17(2) has been set up it says assume under paragraph (a) that you are not immune in a proceeding concerning a transaction, so that could be any one or more of exceptions that have been triggered. So you have that position of non-immunity.

It then says, provided you have got an extra fact, as Justice Nettle pointed out, provided you have got submission then if another proceeding comes along, namely, one for recognition and enforcement, it will be deemed to carry the same exception, the same tag as the primary proceeding. So, in the whole structure of that as a provision Parliament has drawn a distinction between the proceeding concerning the transaction, as it were, the primary proceeding, then it has adverted to a related proceeding, a proceeding for recognition and enforcement. That is the distinction being drawn in the very language between - - -

GAGELER J: Save for the opening words, of course, at paragraph (a) that refer to precisely the sort of case we were discussing before of an exclusive jurisdiction clause.

MR GLEESON: Yes, so our point is that this very language has shown Parliament treating the proceeding for recognition and enforcement as a separate proceeding to the proceeding about the underlying transaction or event requiring separate attention and yet it has never done that for foreign judgments.

Now, the logic of the plaintiff’s case is that implicitly in every one of these provisions one has already read in - and your Honour Justice Nettle put it this way in argument earlier and we would disagree with it so can I just say that -but your Honour said, well, one possible reading is “section 11 is not immune in a proceeding” and then at that point insert “for recognition and enforcement” and then return to the text “in so far as the proceeding concerns a commercial transaction”.

What we would submit is wrong about that is that the critical bit, the definition of the character of the proceeding has been brought in at the wrong point. That comes in at the stage of “in so far as the proceeding concerns”. At that point, you are looking at the proceeding, you are looking at its legal issues, you realise that they concern recognition and enforcement and you then say, well, that is a different set of issues to those in a commercial transaction.

Your Honours, could I then just go to, and perhaps almost finally, to NML, which your Honours have heard too much about, but nowhere near enough of Lord Mance, in effect. The critical parts of Lord Mance’s judgment were delightfully danced over by Mr Parker. The critical part, really, is first of all paragraph 85, which is really the point I have just sought to take up, that the legal issues tendered in a claim on the commercial transaction are quite a discrete set of issues to those which will arise in the recognition in an enforcement case.

Then, at paragraph 89, the very last sentence, that is the way I seek to put the section 17 point; not about overlap, but put it that way. Then, the centrepiece of Lord Mance’s reasoning is really paragraphs 92 and 93, and they have been given no attention by Mr Parker. What is critical to Lord Mance’s reasoning is that if you take the broader view, you achieve a partial and oddly imbalanced lifting of State immunity.

That is so for two reasons. The first, in paragraph 92, is that you have not lifted State immunity in what would be the most obvious case, namely a submission to the Japanese court. You just have not addressed the most obvious case in which, under international law, it would be appropriate to say if you have submitted to the foreign court, how can you possibly claim that you want immunity?

Then paragraph 93, when he refers to the “partial and illogical” lifting of the exceptions is the point I have sought to make about the territorial limits, namely that the manner it would have to work, being consistent, is not the manner of the 1982 Act, but is this very, very strange manner in which you confer immunity where the territorial connection of the foreign state is not with the foreign court in which it is being sued to judgment. As Lord Mance says at the end of 94:

they make no real sense as a basis for distinguishing between foreign judgments in respect of which state immunity is and is not said to exist.

In 95 –

On NML’s analysis, section 3 . . . therefore gave a very partial and haphazard mandate for the enforcement of foreign judgments –

I said to be quick to your Honour the Chief Justice the benefit of our construction is it is simple, that is true. But the reverse of that is it avoids what is inevitably being forced upon you, which is a very partial and haphazard mandate for the enforcement of foreign judgments. The real difference with Lord Phillips was that he recognised it had that result – that is at paragraph 34 – and he said near the end:

It was illogical that the 1978 Act did not make provision for the enforcement in this country of such a judgment.

That is dealing with the matter through what might have been regarded as a consistent and a principled approach. If there is a New York judgment in respect of a personal injury in New York, one would expect that would be an appropriate case to enforce here because that would be the parallel to our section 12, and yet you get the exact opposite result if you take the broader view. Lord Phillips said “I accept that is illogical”. He gives a reason –

the draftsman of the 1978 Act did not deal generally with foreign judgments –

We agree –

That omission was made good by section 31 of the 1982 Act –

So the real difference between Lord Phillips and Lord Mance is they both agree that Mr Parker’s construction produces illogical and haphazard and partial – dealing with the foreign judgments, Lord Phillips says “I would tolerate that”. Lord Mance says “That is not a preferable construction”. That is really where the court is placed in this matter, but as I emphasise, it affects all the exceptions, not just the commercial transactions exception.

KIEFEL J: Mr Solicitor, if Mr Parker were right about section 9, or if on a view of your submissions the Foreign States Immunities Act did not apply at all to a foreign judgment proceeding, what would the result be in relation to immunity?

MR GLEESON: Well, it would probably be in the area which has been raised in some arguments in the lower courts of the potential for the common law to remain in respect to that area, and therefore there would be absolute immunity at common law. Now, clearly the whole point of the Act was not to achieve such a result, but if Mr Parker were correct, it would produce the result where, unless you fell back on the common law, you could have foreign judgments against foreign states in matters which truly were matters of sovereign exercise which Australian courts would be enforcing, and that would run contrary to the very core of the principle. So, I am not sure we would positively urge that outcome, that there is a common law filler.

But it is part of the problem with his approach to section 9 that you either end up saying some foreign judgments can be enforced, but not others, against foreign states depending upon the form – which as your Honour Justice Nettle pointed out, is an entirely unsatisfactory way of dealing with the matter of principle – or you see a gap in the Act, which is also not a terribly attractive point to land on; not necessarily fatal, but not terribly attractive.

So, we would submit in the end, section 9 has all the breadth you need to capture any sort of exercise of judicial power of a foreign state. Parliament stopped short of dealing expressly with foreign judgments. As an exception, had they needed to do so, there would have needed to have

been a bespoke scheme, there was not, and I have then explained how the Act falls back. In terms of the materials we gave to your Honour, they were simply the article by Mr O’Keefe that your Honour Justice Gageler referred to, plus the 2004 Convention which is still not in force. May it please the Court.

FRENCH CJ: Yes, thank you, Mr Solicitor. Yes, Mr Parker.

MR PARKER: Can I deal first with the “concerns” point; our proposition 1.3? My learned friend the Solicitor-General has developed an argument which fastens on the other provisions - that is the provisions in section 12 and the like; the other exceptions – and sought to deduce from them some sort of restriction on or conclusion as to the meaning of the word “concerns” in section 11. This is in relation to what is said to be the unsatisfactory or partial or haphazard nature of the outcome. That is an argument which originated, or at least that idea, is one that originates with the judgment of Justice Stanley Burnton.

The important point is that at least four of the Law Lords rejected that expressly. The reason why they rejected it is because all the other exceptions have got a territorial nexus, and commercial transactions do not. Now, the references to that are Lord Phillips at paragraphs 30 to 39, Lord Collins at paragraph 112, and Lord Clarke at paragraph 140. Lord Mance, although he adopts a variation of the argument, actually makes the point quite clearly at paragraph 87 that one cannot accept the argument in the full force of the way that his Lordship Justice Stanley Burnton presented it. In those circumstances, we would submit the argument is not one which the Court should pay attention to in considering the impact on section 11.

If that is so, then the further difficulty which my learned friend the Solicitor sought to erect, namely, one does not know what the “look-through” is, as I think he put it – there is some doubt as to what the “look-through” ought to be – it just does not arise, because the dichotomy that he posed between the two different types of look-through fasten on the territorial aspect of jurisdiction, and that is not an aspect of section 11. So, whatever other interesting questions might arise in relation to other exceptions - - -

KIEFEL J: But the point I thought the Solicitor made was that it carries over into the other section necessarily.

MR PARKER: The argument seems to be, because it is going to produce a result under section 12, section 13 and section 14 which is seen as being asymmetrical in some way, that we therefore have to adopt some narrower meaning in section 11 where the asymmetry does not arise. The asymmetry cannot arise because the question just does not rise.

KIEFEL J: Because there is not territorial connection?

MR PARKER: There may be some question – I do not accept there necessarily is – there may be some fascinating question about how one deals with the possibility of a Japanese court giving a judgment an injury to an Australian person in Australia and whether the Act has dealt with that fully and symmetrically. There may be a question about that. That was what Lord Phillips was conceding in paragraph 34. He was saying that it does seem rather asymmetrical – is the word I would prefer – asymmetrical to say that one can enforce a New York judgment in relation to an injury in England in England, but one cannot enforce a New York judgment in relation to a New York injury in England.

Now, whether one regards that as asymmetrical or strange or not, or whether one regards it as a likely event to happen that one would have a New York judgment about an injury in England, that is then sought to be enforced back in England, really is - - -

KIEFEL J: But do you say all of that discussion was directed towards the construction of the 1978 Act, or does it have wider ramifications, as the Solicitor-General suggested?

MR PARKER: It was, of course, confined to the Act in that discussion.

KIEFEL J: But it might have wider ramifications.

MR PARKER: To the extent that it is sought to be used here, it was not successful and the suggested – as I have called it – asymmetry is something which this Court does not need to address in this case.

FRENCH CJ: Perhaps it does not go to the point of substance, but I do not think there is anything particularly unusual about American state courts purporting to exercise long-arm jurisdiction in respect to torts based on events occurring overseas subject to a 14th Amendment constraint.

MR PARKER: I accept that, but that is not to say they do it in cases of sovereign immunity and get away with it, your Honour. But, in our submission, that is not a sound basis – that is, issues arising in relation to these other theoretical considerations – for departing from the appropriate construction of section 11 itself, and that seems to have been the view of at least the majority – well, at least four of the judges in the Supreme Court who dealt with the issue.

In terms of textual matters, can I just make this observation about section 17? The argument against us is one that not only insists that what one sees in section 17 represents an assumption which has to be then built into the construction of other provisions as opposed to simply dealing with it separately for the abundance of caution; it not only says that, but it also rests on some sort of analogy between proceedings to enforce an arbitration and proceedings to enforce a foreign judgment.

It would be one thing, if we were seeking in these proceedings to enforce an arbitral agreement - an arbitral award, I am sorry – under section 11 directly without going under section 17. But we are not, and we do not accept the unexpressed premise of the argument that one can necessarily say not only that that would be a reason for restricting section 11 in its application to arbitrations, but it should be a reason for restricting section 11 in its application to any other type of procedure which is said to be analogous.

Just going back to what my learned friend, Mr Dick, said at one point, he referred to the TCL Air Conditioner Case. Now, there are significant differences between the enforcement of a foreign judgment and an arbitral award in a doctrinal sense and the key one is as stated in that judgment, that the enforcement of an arbitral award is the enforcement of a contractual obligation.

As analysed by the majority in that case, what happens is one has a contractual right or contractual rights against the other party, then there is an accord and satisfaction whereby, by a process of agreement, the parties agree that their contractual rights will be replaced by a further right in accordance with whatever award is given. But it is still contractual and you have still then got to convert it into a judgment and that is why you have to bring proceedings on it which are proceedings which then convert that contractual right, just the same as any other contractual pre-originating debt, into a judgment of the court.

Now, that is not the process that generally applies with the enforcement of foreign judgments, and certainly not with the procedure under section 6. For those reasons, we suggest section 17(2) is better understood as simply an individual or a separate regime which has been created for arbitration which may or may not overlap with other provisions in some circumstances or, indeed, in many circumstances.

I have already given the Court the references to it, so I will not repeat it, but if one goes back to the Law Reform Commission report, in our submission, it is just not open to doubt that that was why section 17 was created. It was because there were perceived to be complexities and difficulties associated with arbitration specifically which made it appropriate for there to be a comprehensive provision dealing with arbitration, and one does not from that derive any implication, in our submission, which would cut back on the meaning that one would otherwise give to section 11, especially in its application to the registration of a judgment.

As to section 21, could I ask the Court to go back to it very briefly? Section 21 is the provision which Mr Dick needs to rely upon to protect Part II from swallowing Part IV. The difficulty is that it contains the words at the very end - it is the last few words:

in so far as that other proceeding concerns that matter.

So what this posits is a proceeding - can I call that the original proceeding - and then one has a second proceeding which arises out of and relates to the first proceeding. What this provision does is it means that the second proceeding is also free from immunity, but only insofar as that other proceeding - that is, the second proceeding - concerns that matter.

Now, if one takes a narrow view of what “concerns” means, and one says the second proceeding concerns only the legal issues tendered in that second proceeding and nothing more, then this section will not work because the second proceeding will not concern the same matters; it will concern different matters. For instance, if it is an appeal, the first proceeding will concern what the substance of the parties’ relationship is, or the entitlements and their obligations.

The second proceeding, if, for instance, an appeal is stricto sensu, will concern whether there was error in the first proceeding, and on the arguments against us, nothing more. That is why I said earlier that section 21 supports our position rather than detracts from it.

Going back to our proposition 1.1, there was mention by my learned friend, Mr Dick, of section 7(4) of the Act in that regard. He challenged our submission that it was plainly a transitional provision. We should have given the reference early. The reference we would wish to give is to the ALRC report, Appendix A, page 131, which makes it quite clear that it is – just for completeness, the Court will see that is a discussion of the Bill.

The Bill is in exactly the same terms relevantly as the Act, and when one reads that and the reference to the report which is caught up by it, one sees that that was clearly what was intended. That is why we made that confident assertion in our written submissions.

KIEFEL J: In relation to section 9, do I take your earlier submissions to read section 9 to say a foreign state is immune from the jurisdiction of the courts of Australia in a proceeding to which this Act applies? I say that that is relevant to the Solicitor-General’s most recent submissions.

MR PARKER: I was going to – can I deal with that now? There are two things I want to say about it. If we found ourselves in the position that section 9 did not apply, the first question would be, is there any common law left. Having looked – we would submit – that if one looks at the ALRC report and one sees what its purpose was, this is a case – and I know I am using a term not in quite the context in which it is usually used, but this really was a case of covering the field. This was an attempt, as it were, to codify the common law.

KIEFEL J: But I think the premise is, if section 9 does not apply to a proceeding for a foreign judgment, it applies only to proceedings that you described at the outset, you would have a gap where common law might have to apply to - - -

MR PARKER: Well, if there was any common law left.

KIEFEL J: Well - - -

MR PARKER: If there was no common law left, section 9 would have nothing to say.

KIEFEL J: But by its nature, if this was the position, the Foreign State Immunities Act does not cover the field in that general sense, not in the constitutional sense.

MR PARKER: If section 9 does not apply and there is no common law left because the Act has in effect stated these are to be the rules of sovereign immunity and there are to be no other rules, implicitly, if that is what it is saying – that is what I mean by covering the field – then Part II just does not come into play, and we go straight to Part IV. It is as simple as that.

The other premise in my learned friend’s proposition or argument is that he said “and, therefore, we will go back to absolute immunity”. Well, no, we will not. We would go back to whatever the common law was. As I have been at pains to explain earlier, by the time this report was written, it was clear that the common law had moved away from the law of sovereign immunity so we would have simply to consider ourselves – well, absolute immunity, I should say – that discarded absolute immunity, that adopted a restrictive theory and we would then have to determine what the common law formulation of the restrictive theory was as it applied to the registration of judgments we suggest, perhaps, the International Court of Justice approach would be the one that one would come up with at common law. In that case, there would be no difficulty.

Can I now deal with just a couple of matters that arose out of what Mr Dick said on the third issue in the case? He rather suggested that in putting on the certificate in section 41, the Republic was only doing what it had to do. Can I just point out, section 41 certificate is facultative. It allows one to put on a certificate, but if you put on a certificate which is not of much evidentiary value, then that is your problem, not the other party’s.

Mr Dick’s argument came close to saying in terms of use that one used a bank account simply as a facility for collecting money. Now, if one thinks about that for a second, and one accepts that one uses money simply by putting it in a bank account, then that would make the entire discussion by the Law Reform Commission completely meaningless. Whatever else it is, you do not use money just by putting it in a bank account, unused.

The second thing is that he seemed to suggest that by putting it in a bank account one could say that it was set aside simply because it is in a bank account. Well, the same proposition follows. The same observation follows. It is quite clear when one reads the report – and I have taken the Court already to the detailed analysis of bank accounts and the like – that the Commission could not possibly have accepted or contemplated a possibility that simply by opening a bank account that one would be taken to have set it aside. Final - in relation to - - -

KIEFEL J: You almost said “finally”.

MR PARKER: Hopefully finally - 3.3, the aircraft leasing accounts. My learned friend relied on the distinction between the first account, which says where the money is repaid and the account is not being used, and the second one which says it is being used for the same purpose. That is just a sloppy way of saying we repeat what we have said above, and the fact that there was no difference between the accounts in that regard is emphasised by the cross-examination on the subject, which the Court will find at page 60 of the appeal book, should it find it necessary to consider the issue further. Now I can say “finally”. Those are our submissions in reply.

FRENCH CJ: Thank you, Mr Parker. The Court will reserve its decision. The Court adjourns until 10 o’clock tomorrow morning.

AT 4.13 PM THE MATTER WAS ADJOURNED