Australian appellate court upholds dismissal of United States as third-party defendant, finding that mutual cooperation agreement between U.S. and Nauru was mainly political not commercial, thus rendering U.S. immune from suit under Australian state immunity statute
Wells Fargo Bank Northwest, National Assn. (Fargo), a Utah company, filed suit in an Australian [provincial] court to repossess a Boeing 737-400 aircraft from the Nauru Aircraft Corporation (NAC). Fargo was acting as the security trustee for the mortgagee of the plane, the Export Import Bank (Eximbank), an agency of the U.S. Government. Victoria Aircraft Leasing Ltd. (VALL) had bought the plane relying on an Eximbank loan. When VALL defaulted, Eximbank carried out its guarantor's duty to pay the loan, thus putting itself in the lender's shoes.
NAC was using the aircraft in an airline called "Air Nauru". The Republic of Nauru (Nauru) guaranteed to Eximbank the due performance of the obligations of VALL as borrower. VALL and NAC are agencies of Nauru, a small independent island state in the central Pacific (collectively defendants). Fargo alleged that VALL failed to repay the loan and took part in other acts of mortgage default.
The defendants did not contest the debt owed to Eximbank or the mortgage but pleaded that the court lacked the power to enforce the obligations. They claimed that Nauru had orally agreed: (1) to help in the defection of a North Korean scientist to the U.S.; (2) to work with the U.S. to look into the possible involvement of Nauruan organizations in the transfer of money in support of international terrorism; and (3) to reform Nauru's laws so as to ban money laundering and the forgery of Nauruan passports.
Defendants also claimed that, if Nauru co-operated with the American agenda, the U.S. had agreed to: (a) ensure that Eximbank would give Nauru enough additional time to pay its debts to Eximbank to assure the operational viability of Air Nauru; (b) come up with enough money for Nauru to erase any problems Nauru might have in relation to re-payment of the Eximbank financing; and (c) prevent Eximbank from enforcing any strict contractual rights which it might otherwise have to seize and sell the aircraft.
Defendants alleged, inter alia, that the U.S. had agreed to have Nauru taken off a list of non-co-operative countries drawn up by the Financial Action Task Force, an arm of the Organization for Economic Cooperation and Development (OECD). Nauru's inclusion on the list was allegedly making it very hard for Nauruan companies to do business with U.S. and OECD banks. The U.S. had also assertedly agreed to provide substantial assistance, monetary and otherwise, to enable Nauru to set up a modern international banking facility.
It was further claimed that, relying on the U.S.'s representations and promises, Nauru had appointed representatives of the U.S. as diplomatic officials, had taken steps to reform its off-shore banking regime and had enacted laws to repress the misuse of Nauruan passports.
Entering a conditional appearance, the U.S. moved to dismiss on the ground that the U.S. was entitled to immunity pursuant to Section 9 of the Foreign States Immunities Act of 1985 (NSW) (the Act). It provides generally that a foreign State is immune from the jurisdiction of the Australian courts in a civil action except: "...as the proceeding concerns a commercial transaction."
Solely for the purposes of the motion, the U.S. assumed that the allegations contained in the third party statement of claim were true. It argued that it was entitled to immunity unless the arrangement between Nauru and the U.S. was a "commercial" transaction within the meaning of Section 11. The U.S. also contended that, even if the arrangement were a commercial transaction, Section 11(2)(a)(I) reinstated its immunity. It was submitted that the clear intention of this section was to preserve immunity where (as here) all the parties to a transaction were foreign states.
The first instance court granted the U.S.'s motion on the basis that, under the Act, the U.S. was not amenable to the jurisdiction of the Australian courts. The defendants appealed. The Victoria Supreme Court (Court of Appeal), however, dismisses the defendants' appeal.
The lead opinion explains. "In the United Kingdom, the State Immunity Act of 1978 supplanted the common law. Subject to a residual provision preserving the test of restrictive immunity, transactions were classified [as commercial] according to their objective effects, for example, contracts for the supply of services, transactions for the provision of finance. Immunity was conferred or withheld for each type of transaction. If a foreign state entered into a specified transaction, it was a commercial transaction whether or not the foreign state exercised sovereign authority."
"While I think there is some force in the contention that, despite its different structure, Section 11 of [our] Act was intended to "˜adopt the substance of the United Kingdom provision', it is not necessary to decide whether paras (a), (b) and (c) are qualified by an additional requirement of commerciality. In my view, the transaction entered into by Nauru and the United States did not meet any of the descriptions set out in the paragraphs."
"Paragraph (a) had no operation. Paragraph (b) contemplates a loan or like transaction. In my view it does not extend to a promise to influence the creditor to give his debtor extra time to pay or [to] refrain from exercising rights under a security. Nor do I think that the paragraph extends to a promise to pay money which could be used by the recipient to repay a debt to another. Paragraph (c) is concerned with a guarantee of the performance of another's obligation. I think that the indemnity with which it is coupled connotes the assumption of a primary liability whether or not another makes default. The paragraph does not embrace a promise to prevent a creditor [from] exercising rights under a security." [¶¶ 21-23]
"Each of the promises alleged to have been made by Nauru and each of the acts which it is alleged to have performed in reliance upon the representations said to have been made by the United States concerned governmental functions of Nauru. None of the promises or acts related to a contract for the supply of goods or services, an agreement for a loan or other transaction for, or in respect of, the provision of finance or a guarantee or indemnity in respect of a financial transaction."
"The actions to be undertaken by Nauru comprised activities relating to its diplomatic and foreign relations, national security, intelligence, terrorism and the reform of banking laws and passport abuse. The promises made by the United States did include an offer to assist Nauru to deal with its obligations to repay a loan and may have involved the provision of money to Nauru. The context in which that promise was made was that it was but one component in a number of measures answering the description of economic assistance to the government of Nauru."
"In my opinion the vagueness of the terms alleged ... tells against the contention that the transaction amounted to an agreement in respect of the provision of finance or a guarantee or indemnity in respect of a financial obligation. The additional time to pay which the United States was alleged to have promised was no more specific than the time sufficient to ensure the operational viability of Air Nauru. Neither the amount of the funds to be provided to Nauru nor the time when that provision was to be made was stated."
"[Moreover], the promises were somewhat inconsistent. Was the United States to pay the sums owing to Eximbank or was it to arrange time for Nauru to pay those sums? The obligations in commercial agreements are generally expressed in definite, quantifiable terms. The transaction between Nauru and the United States was expressed in terms more akin to political arrangements between states." [¶¶ 24-26]
"In my view, the promises by the United States to deal with Nauru's difficulties in meeting its obligations to Eximbank were not the most significant or substantial element in the United States' offer of assistance. In the third party statement of claim, those promises were alleged as the only consideration for the promises made by Nauru, and counsel for Nauru in his submissions described the promises as those regarded by Nauru as the most important component of the transaction. ... "
"Those promises were part of a package or program of assistance in return for political favours. In my opinion, the transaction taken as a whole is not be (sic) accurately described as one for, or in respect of, the provision of finance or as a guarantee or indemnity in respect of a financial obligation. For the foregoing reasons I am of the opinion that the trial judge correctly held that Section 11 of the Act did not apply, and thus the immunity conferred by Section 9 was not displaced." [¶¶ 27-29]
Citation: Victoria Aircraft Leasing, Ltd. v. United States, BC 200501898, 2005 V.S.C.A. 76 (Vict. Ct. App.).
USA visa and immigration information is available at www.immigrationtelevision.com.
|
