Category: Analysis

Elders’ Proposal for UN Reform

Editors Analysis, Articles

In Australia this year we have heard, and will continue to hear, about the centenary of the ANZAC landings at Gallipoli. But 2015 is also the 70th anniversary of the end of the Second World War and the 70th birthday of the United Nations.

On 7 February 2015, The Elders – an organisation founded by Nelson Mandela, chaired by Kofi Annan and made up of prominent elder statesmen and women from across the globe – marked this anniversary by releasing a statement calling for reform of the UN’s structure and processes. It is entitled ‘Strengthening the United Nations’ and is part of a wider push to make the UN ‘fit for purpose‘.

The Elders’ targets are the veto-wielding permanent members of the Security Council, who think of their special status ‘almost as their natural right, sometimes forgetting that it is above all a responsibility’. They present four proposals to strengthen the UN and make it ‘fit for purpose in the 21st century’.

A new category of members

The Elders address a common roadblock to reform of the Security Council: if there are to be new permanent members, who should they be and what powers should they have? The proposed solution is a compromise:

Let the states which aspire to permanent membership accept instead, at least for the time being, election to a new category of membership, which would give them a much longer term than the two years served by the non-permanent members, and to which they could be immediately re-elected when that term expires. This would enable them to become de facto permanent members, but in a more democratic way, since it would depend on them continuing to enjoy the confidence of other member states.

This is the most radical of the Elders’ proposals and the only one that would require amending the Charter of the United Nations (Charter).

A pledge by existing permanent members

As the first words of the Elders’ statement remind us, the UN was founded ‘to save succeeding generations from the scourge of war’ (from the preamble of the Charter). However, too often has the Security Council’s ability to properly address war and humanitarian crisis been deadlocked by the use of the veto one or more of the permanent members. To address these failings, the Elders call for a pledge from existing permanent members to use their veto in a more transparent and principled way:

States making this pledge will undertake not to use, or threaten to use, their veto in such crises without explaining, clearly and in public, what alternative course of action they propose, as a credible and efficient way to protect the populations in question. This explanation must refer to international peace and security, and not to the national interest of the state casting the veto, since any state casting a veto simply to protect its national interests is abusing the privilege of permanent membership.

And when one or more permanent members do feel obliged to cast a veto, and do provide such an explanation, the others must undertake not to abandon the search for common ground but to make even greater efforts to agree on an effective course of action.

A voice for those affected

The Elders want to open doors on the decision-making of the Great Powers, and ensure that the voices of those affected by their decisions are properly heard in Security Council deliberations. They suggest an expansion of the existing ‘Arria formula’, whereby Security Council members hold consultative meetings on an issue with civil society representatives. Whereas meetings under the Arria formula are usually only attended by minor functionaries, in the future they should be a crucial part of the decision-making process, so that the Council’s:

decisions are informed by full and clear knowledge of the conditions in the country or region concerned, and of the views of those most directly affected.

A new process for choosing the Secretary-General

Finally, the Elders call for the process for the election of the Secretary-General selection to become more open and transparent. Currently they say that ‘for 70 years the holder of this post has effectively been chosen by the five permanent members of the Security Council, who negotiate among themselves in almost total secrecy’. But the Charter gives the power of appointment to the General Assembly, not the Security Council (who merely recommend a candidate to the General Assembly).

They call for a new process, where multiple candidates are proposed by the Security Council, ignoring gender and regional origin. In order to implement this new process, they:

suggest that the next Secretary-General be appointed for a single, non-renewable term of seven years, in order to strengthen his or her independence and avoid the perception that he or she is guided by electoral concerns. She or he must not be under pressure, either before or after being appointed, to give posts in the Secretariat to people of any particular nationality in return for political support, since this is clearly contrary to the spirit of the Charter. This new process should be adopted without delay, so that the United Nations can make full use of it to choose the best person to assume the post in January 2017.

This is a strong call to arms for reform of global governance at the highest level, and it comes from a group of men and women who have dedicated their lives to the project of global peace. Australia was a founding member of the UN in San Francisco, and Australians like H. V. Evatt were integral actors in its formation. Australia recently concluded a two-year term on the Security Council, during which it achieved important feats. If the time for reform of the UN is now, it is hoped that Australia will step up and exhibit the same leadership as it has at other key times in the UN’s history.

Children Forgotten in the Forgotten Children Report – Nina Gibson

Editors Analysis, Articles

The Australian Human Rights Commission’s (AHRC) Forgotten Children Report (Report) was tabled in Parliament on 11 February 2015. Whilst the Report has been the subject of significant political controversy, there has been limited discussion or analysis of its content.

This article seeks to highlight two important findings in the Report. First, Australia’s indefinite detention of asylum-seeking children and their families reveals a tension between our domestic legislation and our obligations to protect children under international law. Secondly, the indefinite or prolonged length of the detention of children gives rise to a multitude of harms, compounding the gravity of Australia’s violations of its international obligations.

The findings of the Report are startling. At the time of its publication, Australia held 800 children in mandatory closed immigration detention (including 186 children detained on Nauru) for indefinite periods, ‘with no pathway to protection or settlement’. Over 100 babies had been born in detention, with no experience of life outside detention centres. As at March 2014, children and their parents had been detained for an average of 413 days, with some children detained for over 27 months due to their parents having had adverse security assessments. In 2013, over 200 physical and sexual assaults involving children were reported in immigration detention centres. During a 15-month period from January 2013 to March 2014, 128 children in detention engaged in self-harm, whilst 34 per cent of detained children had developed serious mental health disorders. The Report also establishes clear correlations between the length for which children are detained and the deterioration of their mental health and development.

The detention of children under Australian law

Australia is the only country in the world that mandates the closed and indefinite detention of asylum-seeking children as a first action. Section 189 of the Migration Act 1958 (Cth) (Act) requires an officer to detain an ‘unlawful non-citizen’ in the ‘migration zone’. Under section 5AA of the Act, mandatory detention extends to ‘unauthorised maritime arrivals’ (which includes children) as well as the children of unauthorised maritime arrivals subsequently born in detention.

The Report notes that countries including Greece, Malaysia and the US detain children for immigration matters, however, unlike Australia, ‘detention … is not mandatory and does not occur as a matter of force’. Whilst Australia was one of the first states to sign and ratify the United Nations Convention on the Rights of the Child (CRC) in 1990, the CRC has not been incorporated into Australian law by legislation.

The High Court held in Al-Kateb vs Godwin that it is not contrary to Australian law to keep a person in immigration detention, even if the removal of that person from Australia would not occur in the foreseeable future. As a result of the decision, the Department of Immigration and Border Protection insists that ‘there is no time limit on the lawfulness of detention under Australian law’. Nonetheless, when considering the indefinite detention of children, the High Court confirmed in Teoh’s Case that, when making decisions that affect children, government officials should take into account the rights guaranteed by the CRC. As discussed below, the rights afforded to children under the CRC have been superseded by the indefinite nature of their detention.

Breaches of the United Nations Convention on the Rights of the Child

The Report argues that the detention of asylum-seeking children in Australia violates the basic protection provided to children under international law.

Pursuant to article 37(b) of the CRC, the detention of children is ‘only as a measure of last resort’ and must not be arbitrary. The detention of children will not be ‘arbitrary’ where it is ‘necessary and reasonable’ in all the circumstances of the child’s claims for asylum. Further, the detention of the child must be a proportionate means to achieving a legitimate aim.

The AHRC finds that, in the majority of cases, the detention of children has been arbitrary within the meaning of article 37(b). This is due to children being detained as a first action and held in detention irrespective of whether the child or their family poses an unacceptable risk to the Australian community. The finding underlines a serious failure to give effect to international human rights law in Australia’s domestic legislation, namely the above-mentioned sections of the Act.

The AHRC also determines that the indefinite detention of children undermines the ‘best interests’ principle enshrined in the CRC. Article 3(1) of the CRC stipulates that ‘in all actions concerning children … the best interests of the child shall be a primary consideration’. The Report provides a breakdown of the psychological, developmental and physical effects of immigration detention on children of varying ages and argues that current immigration law fails to address the particular vulnerabilities of those children. Further, it states that indefinite detention fails to consider the individual circumstances of children and does not address the best interests of the child as a primary consideration.

Importantly, the AHRC finds that the adverse effects of detention, such as instances of self-harm and abuse, mental health disorders and developmental delays have almost always been exacerbated by the length at which children are detained. Accordingly, the longer a child is held in detention the more serious the violation of their rights under the CRC becomes.

In the eyes of this author, it is uncontroversial that children are subject to specific vulnerabilities and, as such, should be afforded special protection under both domestic and international law.

And yet, the disparity between Australia’s domestic legislation and its international obligations, as well as the indefinite nature of immigration detention, illustrates that both sides of Australian politics have failed to recognise the vulnerabilities of asylum-seeker children and protect them from the multitude of harms arising from immigration detention.

Nina Gibson works in public international policy, having held positions at UN Women, the Australian Institute of International Affairs and the Extraordinary Chambers of the Courts of Cambodia. Nina holds a Bachelor of International Relations and a Masters of Law, Governance and Development, both from the ANU. The views in this article are solely her own.

Release of Human Rights Watch World Report 2015

Editors Analysis, Articles

On 29 January 2015, Human Rights Watch (HRW) – the international human rights advocacy organisation – released the 25th edition of its World Report (Report). The Report reviews notable human rights issues across 90 states and territories.

The Report’s chapter on Australia covers issues ranging from asylum seekers and refugees to disability rights to freedom of expression. The chapter recognises Australia’s record on human rights, calling up our ‘solid record of protecting civil and political rights, with robust institutions and a vibrant press and civil society that act as a check on government power’.

However, it then goes on to state:

The government’s failure to respect international standards protecting asylum seekers and refugees, however, continues to take a heavy human toll and undermines Australia’s ability to call for stronger human rights protections abroad.

This post canvasses the human rights issues raised in the Report, with a focus on those issues which are not heavily reported by Australian media.

Asylum Seekers and Refugees

Australia’s asylum and refugee policies receive the heaviest criticism. The Report observes that:

  • asylum claims are not processed in a fair, transparent, or expedient manner, with significant cost to detainees’ physical and mental harm;
  • gay asylum seekers in detention on Manus Island fear persecution, sexual assault and resettlement in Papua New Guinea, where homosexual relationships are criminalised;
  • 50 refugees have had adverse security assessments made against them and are consequently subject to indefinite detention; and
  • 3,500 asylum seekers have been processed via a screening system which permits no access to legal representation or right to appeal.

Indigenous People’s Rights

The Report notes the controversial establishment of an indigenous advisory council, whilst defunding the pre-existing Congress of Australia’s First Peoples. It also raises the continued disproportionate representation of indigenous Australians in prison and disparate life expectancy and infant mortality rates. Positively, the Report notes the steps that are being taken towards a referendum on indigenous recognition in the Constitution and the improvements in some health and socioeconomic indicators.

Disability Rights

The Report welcomes the continued rollout of the National Disability Insurance Scheme but criticises changes to the Disability Support Pension which will result in people with disabilities receiving appreciably lower welfare payments. As forty-five percent of people with a disability live near or below the poverty line, the cuts will have an adverse impact on the disability sufferers’ quality of life.

Sexual Orientation and Gender Identity

The section notes that Australian law restricts marriage to heterosexual relationships, despite increasing public support for same-sex marriage.

Freedom of Expression

According to HRW, threats to rights of freedom of expression in Australia include:

  • the revision of funding agreements with community legal centres to prohibit centres from using Commonwealth funds for law reform or advocacy;
  • counterterrorism laws targeting home-grown terrorism – including new offences for ‘advocating terrorism’; and
  • new offences for journalists who disclose information relating to Australian ‘special intelligence operations’.

Foreign Policy

HRW condemns Australia’s foreign aid cuts of more than $600 million and appears to imply that foreign aid priorities are self-serving.

It also raises the government’s muted criticism of countries with histories of rights-abuses – including Sri Lanka and Cambodia – to win support for its refugee policies from those countries. For example, in 2014 it elected not to co-sponsor a UN Human Rights Council (Council) resolution establishing an international inquiry into human rights abuses in Sri Lanka as it had done in previous years. This is despite Australia’s bid for a seat on the Council in 2018.

International Economic Law Round-Up – Kyle Dickson-Smith

Editors Analysis, Articles

Deals Made, Transparency and Harmonisation

In the last several months there have been various developments in international economic law. Agreements have been made — both global and regional — of various scopes:

  • At the global level, the impasse that followed the World Trade Organization’s Bali Ministerial Conference has been lifted, yet questions remain;
  • Work has continued on the Trans-Pacific Partnership (TPP), though the politics of this trade agreement continue to be an obstacle to progress;
  • Australia recently completed a trio of free-trade agreements in East Asia, after finalising the content of a Chinese free-trade agreement; and
  • Public discussion on investor-state dispute settlement procedures (ISDS) has slowed early negotiations on an EU–US trade deal.

The lifting of the impasse over the Bali Accord

In November 2014, the WTO’s General Council signed off on a set of decisions (outlined below) that will resolve the impasse that had developed over the implementation of the ‘Bali Package’, which had been agreed in December 2013. Nonetheless, scepticism remains about the ultimate implementation of the Bali Package.

Significantly, the General Council decided to integrate the Trade Facilitation Agreement (TFA), arguably the core element of the Bali Package, into the overall WTO agreement. The TFA aims to lower customs barriers and expedite procedures at borders, and gives special allowances to developing countries. It is the first multilateral trade agreement under the WTO since its formation in 1995. A deadline for July this year was also set for completing a work programme on the remaining Doha Round issues, which include subsidy and market access reforms.

The WTO’s formal adoption of the TFA was the result of India and the US overcoming the deadlock caused by India’s veto in July 2014. The specifics of breakthrough are not public. India previously stipulated that it should be allowed to stockpile food without observing standard WTO rules on agricultural subsidies while it passed a food security law which expanded the class of citizens who could receive subsidised grain.

It is important to note that obligations of transparency, required under the original Bali Package, are still being maintained. As such, countries are required to provide other WTO members with detailed information about their farm subsidy programmes — including their food stockholding schemes — and to hold consultations with other countries on such programmes.

While progress has been made with the lift of the impasse, and optimism is renewed, there remain other outstanding contentious Doha Round issues that may yet jeopardise the extended July deadline.

Winding up the TPP: from Sydney to Washington

Last October, the 12-nation group of the Trans-Pacific Partnership (TPP) concluded a three-day meeting in Sydney. The Ministers cited ‘significant progress’ in their negotiations on both market access and trade and investment rules. Officials later advertised development in the difficult areas of intellectual property, environmental protection, and coverage for state-owned enterprises. Australian Trade Minister Andrew Robb went so far as to affirm that ‘we are working now to try and conclude this agreement by the end of this year [2014]’. However, that was not to be.

It seems that the political climate is driving the progress of the deal, particularly in the United States and Japan. The negotiations between the two countries (to reach a bilateral agreement on agricultural and automobile market access) have been widely blamed for slowing down the pace of the TPP negotiations. That is likely to change, however, with the re-election in December of Prime Minister Shinzo Abe in Japan and the promise by the US of legislative reform on trade (such as the renewal of the Trade Promotion Authority) that will expedite Congressional approval of the deal. While this marks the first time the Obama Administration has dealt with both legislative chambers dominated by the Republican Party, it is not anticipated that there will be great political clashes in the area of trade. Indeed, American and Japanese trade representatives began a new set of meetings in Tokyo in early January.

The China-Australia FTA

Closer to home, Australia has essentially completed its free trade agreement with China (ChAFTA). Since the Liberal government was elected in 2013, Australia has signed a trade agreement with South Korea (which is now in force) and finalised one with Japan (also now in force). Now an agreement with China has been completed in principle, with the standard legal vetting left to be completed.

While the exact terms of ChAFTA have not been released to the public, it is known that the agreement reduces (or in certain cases removes entirely) tariffs on Australian dairy, beef, sheep products and coal, as well as manufactured goods and pharmaceuticals. Better market access has also been predicted for various service sectors, including legal and financial services and extractive industries.

It is also known that the China-Australia FTA has included a mechanism for ISDS. As a consequence of this inclusion, the Japan–Australia trade agreement will need to be revisited, since that deal stipulated that Japan expects an ISDS process to be implemented should one be incorporated into any deal with China.

Moving forward, it would be useful to solicit the views of members of the national judiciaries throughout treaty negotiations, particularly the views on the selection and scope of ISDS provisions. Given the potential for arbitral decisions to be challenged in these states, advance consultation would promote harmonisation of the international and domestic dispute processes. Indeed, in Australia Chief Justice French recently stated that the judiciary ‘has not had any significant collective input into the formulation of ISDS clauses in relation to their possible effects upon the authority and finality of decisions of Australian domestic courts’.

Harmonisation of the TTIP with WTO Law?

While the Transatlantic Trade and Investment Partnership (TTIP) between the EU and the US is in a relatively infant stage of negotiation, various aspects of the agreement have become subject to public debate. In particular, the European Commission has stated that a decision on ISDS has been suspended until the final phase of the negotiations, following an ‘unprecedented public interest’ in the investment protection part of the agreement.

In an unprecedented move, the EU has now published a series of negotiating documents with its proposals for legal texts, which include areas of technical barriers to trade (TBT), state-to-state dispute settlement and customs issues. One interesting provision on state-to-state dispute settlement stipulates that the arbitration panel must ‘take into account’ WTO Dispute Settlement Body rulings. What is unclear, however, is the weight and effect that such rulings will have in the determinations made under the TTIP.

Regardless, the refreshing message from the EU is clear: it is committed to having a public and transparent discussion on the ramifications of an ISDS in its trade agreement with the US. The European Council recently stated that the EU and US ‘should make all efforts to conclude negotiations on an ambitious, comprehensive and mutually beneficial TTIP by the end of 2015’, but only time will tell.

Kyle Dickson-Smith, FCIArb. is an international lawyer and arbitration counsel at Appleton & Associates International Lawyers, who specialises in trade law and investment treaty disputes, such as the NAFTA. The views expressed in this article are those of Kyle Dickson-Smith and are not attributable to Appleton & Associates.

Legal Mechanisms to De-escalate Tension in the South China Sea – Hitoshi Nasu

Editors Analysis, Articles

The recent tension over the South China Sea, involving multiple parties in Southeast Asia, has raised concerns for the potential outbreak of an ‘inadvertent war’. As the claimants attempt to consolidate their claims, bolster their strategic position and exploit energy resources in disputed areas, there is potential for maritime incidents to recur, with the associated risks of escalation into a major outbreak of warfare. The United States Secretary of Defense, Chuck Hagel, highlighted this risk at the May 2014 Shangri-La Dialogue when he stated that:

in recent months, China has undertaken destabilizing, unilateral actions asserting its claims in the South China Sea. It has restricted access to Scarborough Reef, put pressure on the long-standing Philippine presence at the Second Thomas Shoal, begun land reclamation activities at multiple locations, and moved an oil rig into disputed waters near the Paracel Islands.

Arbitral proceedings, commenced by the Philippines against the People’s Republic of China (PRC), are unlikely to result in any form of settlement, given the PRC’s outright refusal to participate in the proceedings. Rather, they have the potential to exacerbate the dispute, depending on how the arbitration tribunal handles the proceedings.

The regional efforts to manage the dispute have focused upon negotiations towards the adoption of a legally binding Code of Conduct. Indeed, the ASEAN Foreign Ministers once again agreed in August 2014 on the need for a legally binding Code of Conduct in the South China Sea. While adopting such an instrument may have political significance, does the legally binding status of an agreement make any difference in preventing an ‘inadvertent war’ in the region?

A mutual undertaking of restraint by the disputing parties has already been agreed upon at the policy level — expressly provided in the Declaration on the Conduct of Parties in the South China Sea (DOC) adopted in 2002 — between ASEAN member states and the PRC. It confirms in paragraph 4 that ‘[t]he Parties concerned undertake to resolve their territorial and jurisdictional disputes by peaceful means, without resorting to the threat or use of force’, which is merely re-affirming their existing legal obligations under articles 2(3) and 2(4) of the UN Charter.

While the DOC also refers to the Parties’ commitment to ‘exercise self-restraint in the conduct of activities that would complicate or escalate disputes’ in paragraph 5, it does not clearly set out what conduct is considered to constitute an activity that would complicate or escalate disputes. In the absence of a clear, mutual understanding of prohibited conduct through practical guidelines for example, the disputing parties may simply engage in ‘lawfare’ by justifying their military action with reference to legal concepts favourable to their position, such as sovereignty, the right of self-defence and freedom of navigation. Although scholars and policy makers appear to consider that the adoption of a legally binding Code of Conduct will somehow improve the situation, it is doubtful whether any concrete set of practical guidelines can be produced through political and diplomatic processes.

In this respect, the new Code for Unplanned Encounters at Sea (CUES), adopted at the 14th Western Pacific Naval Symposium held in Tsingtao in April 2014, could be of greater significance. Based on the Convention on the International Regulations for Preventing Collisions at Sea, CUES offers safety measures and procedures, a basic communications plan and manoeuvring instructions for when naval ships and aircraft encounter each other unexpectedly. They are expected to provide a much needed de-escalation mechanism.

CUES is limited in its ability to prevent maritime incidents in situations where, for example, one navy deliberately chooses to act in a way that irritates or threatens another: a destroyer locks its fire control radar on another, or one navy vessel observes the military exercises of another. Nevertheless, the successful adoption of CUES amidst rising tensions in the Asia-Pacific signifies room for negotiations towards a wider range of mutual understandings of prohibited conduct in the South China Sea, designed to avoid misunderstanding as to what might be considered as a threat or a hostile act and intent in manoeuvring vessels in the area.

The best way forward to deal with such highly politicised disputes is to remove political actors as much as possible from the negotiating tables in producing a concrete set of practical guidelines on prohibited conduct in the South China Sea.

Hitoshi Nasu is Senior Lecturer, ANU College of Law, and Co-Director, Center for Military and Security Law (CMSL) and Australian Network for Japanese Law (ANJeL)

International Law and the Domestic Practitioner: Australian International Islamic College Board v Kingdom of Saudi Arabia – Peter Willis

Editors Analysis, Articles

Questions of public international law do not, alas, arise regularly in the daily legal practice of most Australian lawyers. One must join the Government or an international organisation in order to be served with a sustaining diet of international law. International arbitration for investor-state disputes might be one exception, but the case-load in Australia, or involving Australian counsel and solicitors, is still developing in this field.

Therefore, when a public international law case comes along it is worth noting, the more so when it reaches the doors of the High Court of Australia, as did Australian International Islamic College Board Inc v Kingdom of Saudi Arabia [2014] 2 Qd R 1; (2013) 298 ALR 655; [2013] QCA 129 (International Islamic College).

The case concerned the most commonly occurring of this uncommon species: a question of sovereign immunity. At a high level, the case involved a school suing a foreign government to enforce a promise of funding for its operations.

Australians are used to suing the Government in federal courts, and so we may lose sight of the fact that this is a departure from the historical position at international law that a sovereign is immune from suit in a court in its jurisdiction (unless the sovereign willingly submits). Australia (Queensland, in fact) led the common law world in removing this immunity: Professor Paul Finn has traced the history of the initiative to a newly elected backbencher from Maryborough in 1865 who introduced the first Claims Against the Government Act 1866 (Qld), the progenitor of ss 56-58 and 64 of the  Judiciary Act 1903 (Cth), and state Crown Proceedings Acts (see ‘Claims Against the Government Legislation’ in Finn (ed) Essays on Law and Government (Lawbook, 1996)).

At the domestic level, there are three inter-linked immunities which have been abolished or curtailed by this legislation – the exposure of the Government to substantive claims (so permitting it to be sued in tort or contract etc); procedural immunities (so requiring discovery etc); and immunity from execution or enforcement measures. In addition there are related principles of statutory interpretation which have been modified or removed – whether the Government is bound by statute (see, eg, Bropho v Western Australia [1990] HCA 24) and the separate question of whether a statute evinces an intention of exposing the Government to criminal prosecution and punishment (see Cain v Doyle [1946] HCA 38; Wurridjal v The Commonwealth [2009] HCA 2 at 380-1 [164]).

In the international sphere, analogous forms of immunity were extended to foreign sovereigns as an act of comity or mutual respect. The consistency of this practice at the international level resulted in foreign government immunity in domestic courts emerging as a principle of customary international law (although the International Law Association prepared the Montreal Draft Convention on State Immunity in 1982 and the Institute of International Law and International Law Commission worked on proposals for a treaty in the 1990s). In the Anglo-Australian common law, classical statements of the original doctrine (the absolute theory of sovereign immunity) were expounded in The Cristina [1938] AC 485, Rahimtoola v Nizam of Hyderabad [1958] AC 379 and in the US Supreme Court in The Schooner Exchange v McFaddon 7 Cranch 116 (1812).

With the increasing involvement of states, both directly and through state-owned instrumentalities and organisations, in international trade and activity, the rule of absolute immunity became increasingly questioned during the second half of the twentieth century, commencing in the US and then in the UK (see, eg, Trendtex Trading Corporation v Central Bank of Nigeria [1977] QB 529).

National legislatures then intervened to establish a restrictive doctrine of sovereign immunity, under which there is no immunity for commercial activities of a state (subject to prescribed exceptions). The legislation is broadly similar: see, for example, Foreign Sovereign Immunities Act 1976 (US), State Immunities Act 1978 (UK), State Immunity Act Cap 313 1979 (Singapore) and State Immunity Act 1985 (Canada).

Australia followed suit with the Foreign States Immunities Act 1985 (Cth) (the Act), adopting the recommendations of the Australian Law Reform Commission Report No. 24 (ALRC Report 24) prepared by Professor James Crawford. It was this Act, aided by reference to the ALRC Report, which fell to be construed in International Islamic College. As with many such cases, the outcome turns on a nice question of characterisation of the underlying transaction: was it a commercial transaction, for which there is no immunity, or was it one of the exceptions for which immunity is preserved?

A commercial transaction is defined in s 11(3) of the Act to mean ‘a commercial, trading, business, professional or industrial or like transaction into which the foreign State has entered or a like activity in which the State has engaged.’ Without limitation, it expressly includes a contract for the supply of goods or services; an agreement for a loan or some other transaction for or in respect of the provision of finance; and a guarantee or indemnity in respect of a financial obligation. On the other hand, a commercial transaction does not include a contract of employment (dealt with in s 12) or a bill of exchange (dealt with in s 19) and, critically, immunity is not waived ‘in so far as the proceeding concerns a payment in respect of a grant, a scholarship, a pension or a payment of a like kind’(s 11(2)(b)).

The critical question framed by the parties was whether the transactions concerned a payment ‘in respect of a scholarship.’

The College alleged that Saudi Arabia entered into two agreements with the College: first, to pay it the fees of recipients of Saudi scholarships; and secondly, to provide the school with funds necessary to repay the Australian Government for grants wrongly received.

Saudi Arabia brought an application for orders that, for want of jurisdiction under the Act, the proceeding had not been properly started, or alternatively, that the plaintiff’s claim had not been properly served in accordance with the requirements of the Act. At first instance, Martin J ([2012] QSC 259) upheld the primary application on the ground that the first contract fell within the exclusion, as ‘a payment in respect of a grant, a scholarship or a payment of a like kind.’

With respect to the second alleged agreement, Saudi Arabia disputed whether it was an agreement at all and argued that, if made, it was not commercial in character but was to avoid diplomatic embarrassment. After considering the High Court’s discussion of the meaning of a ‘commercial transaction’ in P T Garuda Indonesia Ltd v Australian Competition and Consumer Commission (2012) 247 CLR 240, [2012] HCA 33 at [37] – [42], Martin J could not exclude the agreement from being a commercial transaction, but again he found the transaction as falling within the scholarships exception (relying on the breadth of the introductory words of the exclusion ‘in respect of’).

The Queensland Court of Appeal (Holmes, White JJA and Atkinson J) reversed the decision: [2013] QCA 129. In her leading judgment, Holmes JA limited the scholarship exception to cases between a foreign state as grantor and individual award recipients. She characterised the first transaction as a payment in respect of the provision of a service by the College to Saudi Arabia (the service being the education of scholarship holders), not a payment in respect of a scholarship or grant to a selected scholar.

By a notice of contention, Saudi Arabia brought forward additional three additional grounds to uphold Martin J’s decision. It was pleaded that the first agreement was ambiguously drafted (which seems, to this commentator, a fair description) and was too vague to be commercial. It was further submitted that the second agreement was a policy decision in which there was no commercial element. This is a tension inherent in the ‘nature’ of a transaction that goes back to the first great case on restrictive immunity, the Primero Congresso del Partido [1983] 1 AC 244 (Congresso del Partido). In that case, the Cuban government diverted a shipload of sugar from Chile to Vietnam in retribution for a coup in Chile which removed the friendly Allende government. This raised a question which divided the Court, namely whether the diversion was an immune diplomatic decision or an actionable breach of a commercial contract. The second ground was that there was no agreement. The third ground was that what was needed to attract immunity was an arguable case. This was based on the contention that ‘it would destroy the effect of the statutory immunity to require the State claiming it to disprove the existence of a commercial transaction’.

While these were compelling arguments, they found no favour with the Court. As to the first contention, the vagueness of the pleaded agreement was held to be not relevant to its character, while the commercial ‘nature’ of the second alleged transaction trumped the motivation for it (following the verdict in Congresso del Partido). The Court also brushed aside the second contention, holding that ‘the focus must be on whether the proceeding concerned commercial transactions, not whether the terms of the transactions pleaded were such as to give rise to enforceable rights.’ The definition of ‘commercial transaction’ in the Act was wide enough to capture what was alleged to have occurred in the present case. The Court provided that the Act ‘deals with the nature of the transaction which is the subject matter of the proceeding, rather than whether that transaction can be proved’ and if the pleading was truly deficient, the sovereign could move to have it struck out. On the last contention, authority requires that the claimant of immunity must produce sufficient evidence to show that its claim is not merely illusory, without proving the case. This threshold was not met in the present case.

Sadly for international law scholars, the High Court dismissed Saudi Arabia’s application for special leave to appeal on the papers: [2014] HCASL 37 (Kiefel and Keane JJ). Reciting the most common bases for refusing special leave to appeal, the Court ruled that the case did not raise a question of law of general importance sufficient to require consideration by the High Court. It was also held that the appeal did not enjoy sufficient prospects of success.

Peter Willis is a barrister practising in Melbourne. He is also an Executive Committee member of ILA (Victoria) and Australian representative on the ILA’s International Securities Regulation Committee of experts. Prior to coming to the Bar, Peter was a partner of Mallesons Stephen Jaques.