Academic journal article Australian International Law Journal

The Ring of Fire: Foreign State Immunity in Firebird Global Master Fund II Ltd V Republic of Nauru

Academic journal article Australian International Law Journal

The Ring of Fire: Foreign State Immunity in Firebird Global Master Fund II Ltd V Republic of Nauru

Article excerpt

I Introduction and Background

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

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

Background to State Immunity in Australia

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

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

Background to the Dispute

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

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

Relevant Statutory Provisions

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

Except as provided by or under this Act, a foreign State is immune from
the jurisdiction of the courts of Australia in a proceeding.
A major exception to this immunity is provided by s 11:
A foreign State is not immune in a proceeding in so far as the
proceeding concerns a commercial transaction. (10)

As the registration of judgment occurred without Nauru present, it was necessary for the High Court to consider s 27:

A judgment in default of appearance shall not be entered against a
foreign State unless:

(a) It is proved that service of the initiating process was effected in accordance with this Act and that the time fot appearance has expired; and

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

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