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.

ILA Committee Update: Committee on International Cultural Heritage Law – Patrick J. O’Keefe and Lyndel V. Prott

Editors Articles, ILA Updates 1 Comment

The Committee on International Cultural Heritage Law (Committee) was established by the Executive Council of the International Law Association (ILA) at the 63rd Conference in Warsaw in 1988. The previous year, we had written to the then Chairman of the Australian Branch, Rodney Purvis, proposing the creation of the Committee. Rodney supported the idea wholeheartedly and went through the necessary steps to have it placed on the agenda for the Warsaw meeting. At that meeting, Patrick was going down in the lift at the conference hotel when Ian Brownlie, then Director of Studies, entered and announced that the Executive Council had recommended establishment of the Committee and that he, Patrick, had been nominated as Chairman. He asked for a recommendation of Rapporteur – to which Patrick suggested Jim Nafziger of Willamette University in Oregon – and a topic – to which Patrick proposed the preparation of a Draft Convention on the Protection of the Underwater Cultural Heritage. Both proposals were endorsed by the ILA in due course.

Patrick and Jim began work on the Draft Convention at the same time as the Committee was being formed. The Committee worked hard for the next four years, engaging with subject matter which was very controversial and involved complex issues of public and private international law. The United Nations Law of the Sea Convention contained two provisions – Articles 149 and 303 – relating to archaeological and historical objects at land and sea which were generally considered confused and inadequate. The Committee had to find solutions more effective than these. For example, it proposed that there be a “Charter” – developed by the International Council on Monuments and Sites (ICOMOS) – to govern archaeological investigations. The Charter would be attached to the Draft Convention and enforced by states using nationality and port-state jurisdiction. Provisions on the movement of unlawfully excavated material were included. The Draft Convention was adopted by the 66th Conference at Buenos Aires in 1994.

The ILA has consultative status with UNESCO, the major international organisation with responsibility for cultural matters. The Draft Convention was forwarded for consideration to UNESCO which had just decided to make protection of underwater cultural heritage a priority topic. UNESCO and the United Nations Division of Ocean Affairs and Law of the Sea took the Draft Convention and used it as a basis for their own working document. This was debated by states during four negotiating sessions in Paris before being adopted as the Convention on the Protection of Underwater Cultural Heritage in 2001 with 87 states in favour, four against and 15 abstentions. As at January 2015, there were 48 States Parties. Patrick attended all negotiating sessions as an observer and Jim was frequently present, when he could leave his post in Oregon. Without the work of the ILA there may not have been a UNESCO Convention on the subject.

Following work on the Draft Convention, the Committee has undertaken a number of significant projects. One was a Blueprint’ to guide research, progressive development and codification of the cultural heritage law. It was felt that when a problem arose a state often tried to devise a solution without looking to see what other states had done in similar circumstances. Comparative studies might not provide a solution but they could give guidance. In particular they could assist the development of law in a logical manner rather than a series of ad hoc decisions as a reaction to particular crises. The studies were published as a symposium in (2004) 9 Art Antiquity & Law. They do not form a single blueprint for action, but provide a set of suggestions and designs for reform and development of international cultural heritage law in the early years of the twenty-first century.

Patrick resigned as Chairman in 2002. Jim was appointed in his place and Bob Paterson from the University of British Columbia in Vancouver became Rapporteur. The Committee continued with its work.

In times of great disaster people often want to keep their national treasures free from harm, even if this means sending them to a foreign country. Famous examples from around the time of World War II include the Crown and regalia of St. Stephen of Hungary (sent to USA); the tapestries from Cracow Castle in Poland (sent to Canada) and Picasso’s Guernica (sent to USA before the War but kept there at Picasso’s request as long as General Franco remained in power). In all these cases there was conflict over when and how the objects should be returned. More recently, the rise of the Taliban in Afghanistan brought to the fore fears concerning the safety of Afghan cultural heritage in foreign countries. There were moves to acquire these objects and keep them in a secure place until they could be safely returned to responsible authorities in the country. The great danger with this approach is that it could encourage illicit traffic in such objects if those responsible know they have a market.

The ILA Committee proceeded to draft a set of Guidelines for the Establishment and Conduct of Safe Havens for Cultural Material, including a Safe Haven Model Contract (adopted at the 73rd Conference, Rio de Janeiro, 2008). It covers not only the Afghan type of situation but also those where cultural material has been removed from its normal location due to natural disasters such as earthquake. Under the Guidelines, a safe haven ‘shall not engage in any activity the result of which would be to stimulate illegal trafficking in cultural material or other threats to it.’ Material is to be returned when there is a bona fide request. However, and this is a controversial clause, the safe haven must be satisfied that the entity making the request is capable of fulfilling ‘conditions for safekeeping and preserving the material.’ In the three cases from World War II specifically mentioned above, return was controversial because of the political persuasion of the requesting state. The Guidelines are intended to be incorporated into the operating rules of international organisations, ranging from the World Bank to museums and other relevant entities.

Another international convention is in the making with the Draft Convention on Immunity from Suit and Seizure for Cultural Objects Temporarily Abroad for Cultural, Educational or Scientific Purposes. This was adopted by the ILA at the 76th Conference, Washington, April 2014. The Draft was to be distributed to, inter alia, the United Nations, UNESCO, the Hague Conference on Private International Law, the European Union and the Council of Europe.

This topic raises complex political and legal issues. Many cultural objects have a disputed ownership history. People have had their prized possessions lost or seized as a result of war, social unrest or societal change. The owner (or his or her heirs) later finds the object in a foreign state and begins legal proceedings for its return. Complexities arise when the object of concern is on public display in the foreign state. The Preamble to the Draft Convention states that cultural objects ‘in light of their special importance, should be treated differently under international law from other objects.’ In particular, rules on immunity from seizure should apply to facilitate ‘the mobility of cultural objects’ and overcome ‘the reluctance of lenders to send their cultural objects into a foreign jurisdiction where they might be subject to some form of judicial seizure.’ The Draft Convention had to balance protecting the security of loans against the need to guard against assisting illicit traffic. It attempts to do this by emphasising that the object must be only temporarily in the receiving state. This is defined as not more than five years from the time the object enters the state. During this time no order can be issued preventing its return. Moreover, its presence in the state shall not form the basis for any legal process.

The Committee has long been interested in the legal rules governing the transfer of cultural objects. For example, it produced a set of Principles for Cooperation in the Mutual Protection and Transfer of Cultural Material which was adopted by the ILA in 2006 at the 72nd General Conference. This emphasised what the Committee saw as the ‘need for a collaborative approach to requests for transfer of cultural material, in order to establish a more productive relationship between and among parties.’

In 2014, Jim Nafziger and Bob Paterson edited a volume entitled Handbook on the Law of Cultural Heritage and International Trade, published by Edward Elgar. This contains 20 specialised state reports by local experts (Craig Forrest wrote the one on Australia) plus a general chapter on international trade; one on human rights and export controls; another on export controls on objects of foreign origin and finally one setting out a ‘legal pluralist approach to international trade in cultural objects’.

The Committee’s newest project is to prepare a set of guidelines or recommendations on landscapes as cultural heritage pertaining to indigenous groups. The project will involve a series of detailed examples of landscapes significant to indigenous cultures and an identification of issues related to those landscapes in the context of corresponding indigenous understandings and national legal systems.

The original concept of the Committee was that of a body which produced high quality research into particular subjects, but also used the results to advance selected areas of international law through publications, guidelines and draft conventions. This would seem to have been achieved. The challenge continues to be delivering the Committee’s work to those with the means and the enthusiasm to implement it.

Patrick J. O’Keefe and Lyndel V. Prott are members of the Committee on International Cultural Heritage Law. Patrick was founding Chairman of the Committee, and is former Adjunct-Professor of law at ANU. Lyndell is former Director of UNESCO’s Division of Cultural Heritage and former Professor of Cultural Heritage Law at the University of Sydney.

The key documents of the Committee can be found here.