Lighthouse Corporation Ltd v Timor Leste

[2019] VSC 278

59 VR 492

LIGHTHOUSE CORPORATION LTD and Another v REPUBLICA DEMOCRATICA DE TIMOR LESTE and Another Supreme Court of VictoriaAlmond J 20-21 June 2018, 02 May 2019[2019] VSC 278Practice and procedure — Jurisdiction — Contract — Foreign State — Act of state — Whether doctrine of act of state applicable — Forum non conveniens — Whether Victoria clearly inappropriate forum for determination of claim — Foreign States Immunities Act 1985 (Cth), ss 9, 11.

The plaintiffs alleged that they entered into a fuel supply agreement with the defendants and that the defendants had breached and repudiated the agreement. The defendants, the state of Timor Leste and a state-owned utility company, sought orders that the proceeding be set aside, dismissed, or otherwise permanently stayed. The application was made on the basis that the Court had no jurisdiction because the claims concerned Acts of State, or alternatively that Victoria was a clearly inappropriate forum for the resolution of the dispute.

Held, dismissing the application:

Act of State

• (1)

  The act of state doctrine was not engaged.

  • (a)

    The subject matter of the proceeding was a commercial transaction. A transaction did not become an act of state merely because a state was party to it or a member of the executive executed the transaction. Nor did it become an act of state merely because a public benefit was intended or received from it. [48]–[52].

    Moti v The Queen (2011) 245 CLR 456, 475, 476[50]–[52] applied.Underhill v Hernandez (1897) 168 US 250, 252; Habib v Commonwealth (2010) 183 FCR 62, 66, 77, 86 referred to.
  • (b)

    Even if the inquiry might incidentally expose that there had been an unlawful or inappropriate act by Timor Leste, that would only be incidental or preliminary to the determination of the question in this case. It would not offend the act of state doctrine. [53].

    Attorney General (UK) v Heinemann Publishers Australia Pty Ltd (1988) 165 CLR 30, 34; Moti v The Queen (2011) 245 CLR 456 applied.Belhaj v Straw [2017] AC 964, 1111–12, 1116, 1154 followed.
  • (c)

    The act of state doctrine could not operate in a way which negated the exception for commercial transactions in s 11 of the Foreign States Immunities Act 1985 (Cth). [56]–[57].

Forum

• (2)

  Victoria was not a clearly inappropriate forum for determination of the dispute. There were significant connecting factors to Victoria. Disputed questions as to whether the contract was made, and whether it included the term that the contract was to be governed by the law of Victoria, were matters for the law of the forum. [87].

doi: 10.25291/VR/59-VR-49259 VR 493

• (2)Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197, 225, 241, 242–4, 261; Voth v Manildra Flour Mills Pty Ltd(1990) 171 CLR 538, 554, 558 applied.

Application

This was an application to set aside, dismiss or permanently stay the proceeding. The facts are stated in the judgment.

M R Scott QC with C P Young for the plaintiffs. P H Solomon QC with J B Kay Hoyle for the defendants. Reserved judgment.ALMOND J 1In this proceeding it is alleged that the plaintiffs and the defendants entered into a fuel supply agreement with respect to the sale and supply of high speed diesel fuel and emergency power generators to the defendants and that the defendants breached and then repudiated the fuel supply agreement. The plaintiffs seek damages.2By summons dated 28 February 2018, the defendants seek orders that the proceeding be set aside, dismissed or otherwise permanently stayed. In substance, they contend that this Court:

• (a)

  has no jurisdiction as the claims concern acts of State; alternatively

• (b)

  is a clearly inappropriate forum for the resolution of the dispute between the parties.

3The defendants also seek an order pursuant to the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (the Rules) that the time for the filing of this application be extended up to and including 28 February 2018.14In support of the summons, the defendants rely on an affidavit of Mr Liam Prescott, affirmed on 30 April 2018 (first Prescott affidavit), an affidavit of Thomas Frederic Ritchie, affirmed on 4 May 2018 (first Ritchie affidavit) and an expert report of Dr Paulo Remedios (Remedios report) exhibited to the first Ritchie affidavit.5In opposition to the defendants’ application, the plaintiffs rely on an affidavit of Anthony Francis Johnson, sworn 1 June 2018 (Johnson affidavit), an affidavit of Albert Jacobs, affirmed 1 June 2018 (Jacobs affidavit) and an expert report of Professor Daniel Fitzpatrick, dated 1 June 2018 (Fitzpatrick report).6In reply, the defendants rely on a further affidavit of Liam Prescott, affirmed 14 June 2018 (second Prescott affidavit) a further affidavit of Thomas Frederic Ritchie, affirmed on 15 June 2018 (second Ritchie affidavit) and a supplementary expert report of Dr Paulo Remedios (supplementary Remedios 1

Defendants’ summons dated 28 February 2018. The defendants did not press paras [2] (regarding service), [3](d) (regarding foreign state immunity) or [5] (estoppel).

59 VR 494report) exhibited to the second Ritchie affidavit.

BACKGROUND

7This proceeding has a previous iteration. In 2015, the plaintiffs (collectively Lighthouse) commenced an arbitration against the first defendant, Republica Democratica de Timor Leste (Timor Leste or government), pursuant to the Rules of Arbitration of the International Centre for Settlement of Investment Disputes (ICSID arbitration).8A three member Tribunal comprising Professor Gabrielle Kaufmann-Kohler, Professor Campbell McLachlan QC and Mr Stephen Jagusch QC (Tribunal) was appointed.9Mr Prescott deposes that the claims made by Lighthouse in the ICSID arbitration were that:

• (a)

  the government unlawfully repudiated the alleged fuel supply agreement;

• (b)

  additionally or alternatively, the government breached obligations owed to Lighthouse under Timor Leste’s foreign investment law (FIL); and

• (c)

  the government’s breach has caused Lighthouse to suffer loss.

10Mr Prescott deposes that Lighthouse requested the Tribunal, among other things, to:

• (a)

  declare that it had jurisdiction to determine Lighthouse’s claims;

• (b)

  declare that the government had unlawfully repudiated the fuel supply agreement and order that the government pay to Lighthouse damages including loss of profit and revenue resulting from the wrongful repudiation of the fuel supply agreement;

• (c)

  order that the government pay Lighthouse the expenses incurred with respect to the performance of their obligations under the fuel supply agreement;

• (d)

  declare that the government was obliged to compensate Lighthouse with respect to the consequential loss, including further sales of high speed diesel fuel to the Timor Leste government departments, which would have ensued had the government not wrongfully repudiated the fuel supply agreement; and

• (e)

  order that the government pay the costs of the arbitration and pre- and post-award interest.

11In the current proceedings Lighthouse alleges that:59 VR 495

• (a)

  the government unlawfully terminated (repudiated) the fuel supply agreement; and

• (b)

  Lighthouse lost the benefit of the fuel supply agreement and the revenue which would otherwise have been received, and thereby suffered loss and damage.2

12Lighthouse alleges loss and damage in the same amounts claimed in the ICSID arbitration, namely, loss of profits in the amount of USD$208,200,000; consequential losses in the amount of USD$119,400,000 and reliance damages in the amount of USD$739,856. Lighthouse also seeks interest, costs and such further or other orders as the Court deems appropriate.13In its supporting material, Timor Leste outlines the nature of the dispute as it had been outlined in the ICSID arbitration. Further, in lieu of filing any defence at this stage in this proceeding, Timor Leste outlines the nature of the matters which will be raised by Timor Leste in response. This material was initially objected to as inadmissible hearsay, commentary and submission, but the objection was not pressed on the basis that the material would be admitted for the limited purpose of enabling Timor Leste to identify to the Court the field of controversy to assist in the determination of this application, but not for the purpose of establishing underlying facts.14It is convenient to elaborate on some background matters.315In December 2009 Mr Albert Jacobs, a director of Lighthouse, was contacted by a Mr Salvatore Mancuso, an advisor to Lighthouse. Mr Mancuso asked Mr Jacobs to meet Mr Sean Magee, the chairman of the Timor East company Zebra Fuels, about a potential deal to supply fuel to Timor Leste.16During the meeting Mr Magee put forward a proposal for Lighthouse to assist Zebra Fuels to supply the government with fuel on a long term basis. Mr Jacobs was informed that Zebra fuels had been granted a concession to rehabilitate dilapidated port facilities at Port Caravela in Timor Leste, and that Zebra Fuels wanted to develop the port.17In March 2010 Mr Jacobs submitted a proposal to Zebra Fuels for the supply of approximately seven million litres of fuel per month over a minimum period of five years, with a view to Timor Leste paying Zebra Fuels and Lighthouse market rates plus a fixed margin.18Encouraging negotiations occurred between March 2010 and June 2010, 2

In the ICSID arbitration, Lighthouse sought a declaration that the government had unlawfully expropriated the fuel supply agreement and sought an order that the government pay Lighthouse fair and prompt compensation, and also sought a declaration that the government breached its obligations to pay for two power generation units provided by Lighthouse. These claims have not been pursued in this proceeding.

3

This summary is derived from the Defendants’ outline of submissions dated 4 May 2018, the first Prescott affidavit and Lighthouse’s memorial on the merits dated 14 March 2016 and prepared for the ICSID arbitration.

59 VR 496including a letter of intent to the effect that the government intended to purchase an initial shipment of 7.5 million litres from Zebra Fuel and that it was anticipated that the contract would be extended to include supply to the Electricity Department of Timor Leste (EDTL). Despite these communications, the government decided not to go ahead with the first proposal. Instead, in mid-July 2010, Mr Magee learned that a fuel supply contract had been awarded to another Timorese company, Esperanca Timor Oan Ltd (ETO). That contract was for the supply of fuel by ETO to the government for the period from 30 August 2010 until February 2011.19Subsequently, Mr Jacobs received a joint note from Mr  Magee, one of the directors of Zebra, and Mr Abel Gutteras, the Ambassador Designate to Australia, analysing the government’s decision. In the note, Mr Magee and Ambassador Gutteras remarked that the Prime Minister of Timor Leste was very happy with the Zebra/Lighthouse proposal, especially the fuel supply formula it presented, noting that the proposal ‘would have been spot on if it had been submitted during the Tendering process’.20In September 2010, discussions occurred between Mr Jacobs and Ambassador Gutteras about submitting a revised proposal to the government which would include the supply of fuel and the provision of power generators to assist in the supply of power to a new shopping centre then being built in Dili. Mr Jacobs then set about preparing a revised proposal which included the provision of power generators and sourced a supplier of power generators.21By the end of September 2010 Lighthouse had finalised the revised proposal to the government for the supply of fuel, together with the supply of power generation equipment. This proposal was given to Ambassador Gutteras on 1 October 2010. From this point on negotiations for a fuel supply agreement proceeded reasonably quickly.22On 15 October 2010, in response to a request for information from the Hon Mr Januario da Costa Pereira, the secretary of EDTL, Lighthouse provided further information.23On the same day, Lighthouse provided Prime Minister Gusmao with a copy of the correspondence with Mr Pereira, as well as Lighthouse’s proposal for the supply of fuel and power generation infrastructure, and proposed a meeting to discuss a potential transaction.24By letter dated 18 October 2010 Prime Minister Gusmao wrote to Mr Jacobs and said that the government had a strong interest in Lighthouse’s proposal and invited Mr Jacobs to travel to Dili to meet with him on 20 October 2010 along with representatives of Zebra Fuels to discuss the proposal in more depth.25Mr Jacobs travelled to Dili on 20 October 2010 and attended a meeting with Prime Minister Gusmao that afternoon, together with Mr Pereira and one of 59 VR 497the directors of Zebra Fuels, Mr Carlos Oliviera, who was present to facilitate introductions. Mr Oliviera was not actively involved in the discussions. In his witness statement in the arbitration proceeding Mr Jacobs said that he brought to the meeting a blue folder containing the proposed contractual documents, including the ‘Standard Terms and Conditions Applying to the Sale of Goods’, the ‘Supply for Allocation and Contract’, and the ‘10.16 MW Diesel Generator Infrastructure Contribution Summary’. Mr Jacobs said that he handed the folder to the Prime Minister and discussed the proposed fuel supply agreement. Mr Jacobs said the Prime Minister was very receptive and also expressed interest in the supply of solar energy, as he did not want Timor Leste to be too dependent on diesel energy. At the conclusion of that meeting it was agreed that the Lighthouse entities would supply solar panels immediately and would tender for the supply of diesel fuel in March 2011.26The next day, 21 October 2010, Mr Jacobs and Mr Magee met with Prime Minister Gusmao and Mr Pereira. At that meeting the government informed Lighthouse that it would not proceed with the proposal for the supply of solar energy but the Prime Minister said he wanted to go ahead with the fuel supply agreement.27On 22 October 2010 Mr Jacobs forwarded to Prime Minister Gusmao an agreement entitled ‘Supply for Allocation and Contract’ and an associated agreement entitled ‘10.16 MW Diesel Generator Infrastructure Contribution Summary’ (collectively Fuel Supply Agreement).28The Fuel Supply Agreement was executed by Prime Minister Gusmao and Mr Pereira (in his capacity as secretary of EDTL) on behalf of Timor Leste, Mr Carlos Oliveira for Zebra Fuels and Mr Jacobs on behalf of Lighthouse.29In or about November 2010 further documents were signed by Prime Minister Gusmao, Mr Pereira, Lighthouse and Zebra Fuels in order to take account of:

• (a)

  the supply of barges by Lighthouse to store the supplied fuel pending the construction of the storage facility in Port Caravela being a document entitled ‘Floating Storage Addendum and Nomination’; and

• (b)

  the construction of a fuel storage facility at Port Caravela by Zebra Fuels being documents entitled ‘Addendum, Nomination and Variation’ and ‘Special Conditions of Contract’.

30The Fuel Supply Agreement provided for the supply of emergency power generators by Lighthouse to Timor Leste, subject to certain conditions including that the fuel used in the generators was to be exclusively supplied by Lighthouse and that Timor Leste would issue letters of credit to the value of the first two months’ fuel supply 20 days prior to the first scheduled delivery of diesel fuel. The supply of generators is referred to in the Fuel Supply Agreement as an ‘investment contribution’ and is valued at between US$7.5 million and US$8 million.59 VR 49831After the further documents were signed, Lighthouse and Zebra Fuels sought to perform the agreement and requested the government to provide a letter of credit in favour of Lighthouse. This request was made on the basis that the agreement was binding and obliged to the government to take delivery of 7 million litres of fuel per month and the generators. The government refused to provide the requested letter of credit and Lighthouse did not supply any fuel or generators at that time.32In early 2011, following an order placed by Lighthouse with Cummins South Pacific (Cummins), two generators were supplied to Timor Leste. Cummins charged Lighthouse for the supply of the generators and Lighthouse invoiced the government for an amount exceeding the cost price for the two generators by 200%. The government subsequently paid the cost price for the generators to Cummins directly. During the first half of 2011 Lighthouse continued to press the government to provide the requested letter of credit and the government continued to refuse to do so. In due course, the government wrote to Lighthouse terminating their arrangements.

Proposed Defences

33In the first Prescott affidavit, Mr Prescott provides a summary of the legal contentions that it is anticipated the government will pursue in defence of Lighthouse’s claims as currently pleaded. The government will contend that:

• (a)

  there was never any binding contract between it and Lighthouse and Zebra Fuels;

• (b)

  it was induced to enter into a negotiation process with Lighthouse and Zebra Fuels and sign documents on the basis of fraudulent misrepresentations of Lighthouse;

• (c)

  in order for the government to enter into any contract with Lighthouse and Zebra Fuels the Prime Minister was required to follow certain processes mandated by the constitution of Timor Leste, and more generally under Timorese law; none of these processes were undertaken because the government considered that the arrangements with Lighthouse and Zebra Fuels were preliminary and provisional;

• (d)

  at no stage did Lighthouse follow the government’s guidelines on the procurement in relation to any of the proposals or make any approach to the government’s agencies and departments as advised;

• (e)

  although Lighthouse claimed to be a majority shareholder in Zebra Fuels it did not carry out any of the necessary steps under Timorese law to become a shareholder in Zebra Fuels, thereby making it unable to perform a significant aspect of the final proposal concerning the development at Port Caravela;

59 VR 499

• (f)

  representations made by Lighthouse to the government (in relation to its experience, its financial standing, and an exclusive agency with Cummins) were false and misleading and were known by Lighthouse to be false and misleading;

• (g)

  in reliance on the representations made by Lighthouse the government received and considered the Lighthouse and Zebra Fuels proposal and entered into the arrangements on the basis that they were provisional in nature and subject to a tendering process to be conducted in the first half of 2011; and

• (h)

  had the government known that the representations were false and misleading and that Lighthouse, among other things, did not have the necessary experience, financial standing, size or an exclusive agency with Cummins then the government would not have had any dealings with Lighthouse and would not have entered into any provisional arrangements for the proposed supply of fuel or generators or the arrangements reflected in the documents signed at about the end of November 2010.

ACT OF STATE

34The act of state doctrine is a rule of domestic law that, in certain circumstances, holds a national court incompetent to adjudicate upon the lawfulness of the sovereign acts of a foreign state.435Whilst it is accepted that the doctrine forms part of the common law of Australia,5 there is some debate as to its scope and the extent of its application. As a starting point, there is the frequently cited dictum of Fuller CJ in Underhill v Hernandez6 that ‘the courts of one country will not sit in judgment on the acts of the government of another, done within its own territory’.7 Relevantly, in Australia, in Attorney General (United Kingdom) v Heinemann Publishers Australia Pty Ltd 8 the Court observed:

in general, courts will not adjudicate upon the validity of acts and transactions of a foreign sovereign State within that sovereign’s own territory.9

36More recently, in Moti v The Queen,10 the majority of the High Court said:

[N]either what was said in the Spycatcher Case nor the decision of Fuller CJ in Underhill should be understood as establishing as a general and universally applicable rule that Australian courts may not be required (or do not have or may not exercise jurisdiction) to form a view about the lawfulness of conduct that occurred outside Australia by reference to foreign law.

4

R v Bow Street Metropolitan Stipendary Magistrate, Ex parte Pinochet Ugarte (No 3)[2000] 1 AC 147, 269 (Lord Millett).

5

Habib v Commonwealth(2010) 183 FCR 62, 66[5] (Black CJ), 77[38] (Perram J), 86[72] (Jago J).

6

(1897) 168 US 250.

7

Ibid 252.

8

(1988) 165 CLR 30 (Spycatcher).

9

Ibid 40 (Mason CJ, Wilson, Deane, Dawson, Toohey and Gaudron JJ).

10

(2011) 245 CLR 456 (Moti).

59 VR 500

...

The dictum of Fuller CJ was stated in absolute and universal terms. It is a dictum often associated with the expression “act of State”. But both the dictum, and the phrase “act of State”, must not be permitted to distract attention from the need to identify the issues that arise in each case at a more particular level than is achieved by applying a single, all embracing formula.11

37Further, in Moti, the majority endorsed the statement of F A Mann in ‘The Sacrosanctity of the Foreign Act of State’ who observed:

[T]he Courts are free to consider and pronounce an opinion upon the exercises of sovereign power by a foreign Government, if the consideration of those acts of a foreign Government only constitutes a preliminary to the decision of a question... which in itself is subject to the competency of the Court of law.12

38Following the above quote from Mann, the majority in Moti observed that ‘[t]he fact that a decision of a foreign official is called into question does not of itself prevent the courts from considering the issue.1339That said, in Belhaj v Straw,14 Lord Neuberger (with whom Lord Wilson, Baroness Hale and Lord Clarke agreed) reviewed relevant domestic (ie UK) cases and identified three or possibly four rules in relation to the act of state doctrine:

The first rule is that the courts of this country will recognise, and will not question, the effect of a foreign state’s legislation or other laws in relation to any acts which take place or take effect within the territory of that state.

The second rule is that the courts of this country will recognise, and will not question, the effect of an act of a foreign state’s executive in relation to any acts which take place or take effect within the territory of that state.

The third rule has more than one component, but each component involves issues which are inappropriate for the courts of the United Kingdom to resolve because they involve a challenge to the lawfulness of the act of a foreign state which is of such a nature that a municipal judge cannot or ought not rule on it [eg involving the making of war and peace, making treaties with foreign sovereigns, annexations of territory and the legality of acts of a foreign government in the conduct of foreign affairs].15

A possible fourth rule was described by Rix LJ in a judgment on behalf of the Court of Appeal in Yukos Capital SARL v OJSC Rosneft Oil Co (No 2) ... as being that “the courts will not investigate acts of a foreign state where such an investigation would embarrass the government of our own country: but that this doctrine only arises as a result of a communication from our own Foreign Office”.16

11

Ibid 475[50]–[52] (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ).

12

F A Mann, ‘The Sacrosanctity of the Foreign Act of State’, in F A Mann, Studies in International Law (Oxford University Press, 1973), 420, 433–4, quoting von Bar, Das Internationale Privat- und Strafrecht (1889), vol 2, 685.

13

Moti(2011) 245 CLR 456, 476[52].

14

[2017] AC 964 (Belhaj).

15

[Added passage summarised].

16

Belhaj[2017] AC 964, 1111–12[121]–[124] (citations omitted). See also the reasons of Lord Mance, 1061 [11] and Lord Sumption, 1147–49 [225]–[229].

59 VR 50140Significantly for present purposes, both Lord Neuberger and Lord Sumption referred to limits of the doctrine. Lord Neuberger said:

Further, it does not appear to me that the common law regards it as inappropriate for an English court to decide whether a foreign state’s executive action infringed the law of that state, at least where that is not the purpose of the proceedings.17

41Similarly, Lord Sumption said:

The act of state doctrine does not apply ... simply by reason of the fact that the subject matter may incidentally disclose that a state has acted unlawfully. It applies only where the invalidity or unlawfulness of the state’s sovereign acts is a part of the very subject matter of the action in the sense that the issue cannot be resolved without determining it.18

42This is not dissimilar to the approach alluded to by the majority of the High Court in Moti, to the effect that the court considers itself free to consider and express opinions upon the exercise of sovereign power when consideration of the relevant act only constitutes ‘a preliminary to the decision of a question’.19

Timor Leste submissions — act of state

43Timor Leste submits that there is a prohibition on curial review of the executive and legislative acts of a foreign state within its own territory.44Timor Leste submits that in 2010 the government of Timor Leste had a pressing need to address electricity shortages and had entered into contractual arrangements to build and develop a national grid infrastructure with ‘another entity’; that it entered into a fuel supply contract with a company called ETO and a further tender for a new supply contract was due to take place in March 2011. Timor Leste submits that it was in that context that consideration was given to the supply by Lighthouse of eight free generators which (so Timor Leste asserts) Lighthouse represented was with the backing of Cummins, a generator manufacturer.45Further, Timor Leste submits that:

• (a)

  at the time when the document entitled the ‘Supply for Allocation and Contract’ was signed, the government had a procurement office or an office of finance which would supervise the terms of contracts for procurement;

• (b)

  in signing the document entitled the ‘Supply for Allocation and Contract’, the Prime Minister’s powers were referable to, amongst others, the following:

  • (i)

    the requirements of the Timor Leste procurement law;

  • (ii)

    sections 115, 116 and 117 of the Timor Leste Constitution;

17

Ibid 1116[140].

18

Ibid 1154[240].

19

See [37] above.

59 VR 502

• • (iii)

    section 6 of the Government Organic Law, being Decree-Law No 7/2007;

  • (iv)

    the powers of the Council of Ministers; and

  • (v)

    the powers of the relevant government departments responsible for the infrastructure and electricity supply;

• (c)

  the contours and constraints of the Prime Minister’s contracting powers and the valid exercise of those powers involve issues regarding the legitimacy of executive and legislative actions of the Timorese state and in order to assess the questions that arise for determination in respect of the alleged Fuel Supply Agreement, it would be necessary for the Court to determine or adjudicate upon the executive actions of the Prime Minister and the legislative and other acts of the Council of Ministers; and

• (d)

  those actions, taking place in Timor Leste, are referable to the operation of domestic law in Timor Leste on the actions of the state and its government and are quintessentially foreign acts of state that should not be determined by this Court.

Lighthouse submissions — act of state

46For its part, Lighthouse submits that:

• (a)

  there is a difference between challenging the validity of a foreign state’s law in a domestic court and applying that law; the former being impermissible whereas the latter is routine;

• (b)

  the factual issues to be addressed in this proceeding will not involve assessing the character or significance of sovereign acts;

• (c)

  specifically, in this case, there is a challenge to capacity to contract which is a question which may arise regardless of the standing or office of the person who manifests contractual intent by executing a document;

• (d)

  the fact that the integers of capacity vary depending upon the standing or office held by the person is beside the point and does not change the character of the act of execution;

• (e)

  the highest any inquiry into the exercise of sovereign power arises is preliminary to the decision of the ultimate question of the effect of any such exercise (citing Moti);

• (f)

  the act of state doctrine could not operate in a way which negates ss 10 and 11 of the Foreign States Immunities Act;

• (g)

  an issue estoppel arises from the finding made by the ICSID Tribunal that there was an agreement between parties;20 and

20

International Centre for Settlement of Investment Disputes Award dated 22 December 2017[238].

59 VR 503

• (h)

  the defendants have not proven the scope and effect of a foreign law, with the consequence that the Court cannot know or be satisfied that the transactions at issue in this case fall within those laws, let alone have act of state level concerns.

Analysis — act of state

47I am not persuaded by the defendants’ submissions based on the act of state doctrine.48First and foremost, the subject matter of the proceeding is a commercial transaction involving the supply of diesel fuel and generators, design and engineering, arrangements for the storage and transport of fuel and banking facilities.2149This is apparent not only from a perusal of the Amended Statement of Claim but from Timor Leste’s Preliminary Objection to Jurisdiction, relied upon by Timor Leste during the ICSID arbitration.50In the ICSID arbitration Timor Leste sought to characterise the nature of arrangements between the parties to rebut an argument put by Lighthouse that the transaction entered into constituted an ‘investment’ for the purposes of the ICSID convention.2251In so doing, Timor Leste stated that:

• (a)

  the references in the Fuel Supply Agreement reinforce the conclusion that the generators were supplied as commercial goods for purchase;23

• (b)

  the Floating Storage Agreement (described) is entirely consistent with the Fuel Supply Agreement being a commercial supply transaction;24

• (c)

  the nature of the transaction on its face involved merely an exchange of goods and services for payment;25

• (d)

  the essential characteristic of the contractual arrangements in this case, properly analysed, is as an ordinary commercial transaction: the Claimants offered to sell goods (fuel and generators) and services (storage on barges) in return for payment;26

• (e)

  the transactions had no notable feature that took them beyond the

21

This is evident from the Amended Statement of Claim [5]–[9].

22

Timor Leste Preliminary Objection to Jurisdiction for ICSID Arbitration dated 19 May 2016, [34]–[39] (Timor Leste preliminary objection).

23

Timor Leste preliminary objection [114] (emphasis added in each of [51](a)–(f)).

24

Ibid[115].

25

Ibid [120].

26

Ibid [135].

59 VR 504

• (e)

  ordinary commercial sphere of a sale of goods;27

• (f)

  the Claimants promised to supply goods sold for profit in an ordinary commercial cross-border transaction. It just so happens that the buyer was a sovereign nation ...28

52Most telling is the statement made on behalf of Timor Leste (referred to in [51](f) above), ‘it just so happens that the buyer was a sovereign nation’. Lighthouse submits, and I accept, that a transaction does not become an act of state merely because a state is party to it or a member of the executive executes the transaction. Nor does it become an act of state merely because a public benefit is intended or received from it. More than a commercial act is required. Lighthouse does not purport to challenge the validity of any foreign legislation and evaluating the effect of a commercial arrangement, including an executive act under applicable foreign law, does not, it seems to me, offend the act of state doctrine.53Further, given the qualifications by Lord Neuberger and Lord Sumption in Belhaj and the High Court in Moti referred to above, even if the inquiry as to whether the Fuel Supply Agreement is binding may incidentally disclose that there has been an unlawful or inappropriate act, this would only be incidental or preliminary to the determination of the question in this case. This would not offend the act of state doctrine.54In the first Prescott affidavit, Mr Prescott summarises the apprehended legal issues based on his experience as the principal solicitor in the ICSID arbitration and lists various subject matters of governing law. These include the public procurement laws of Timor Leste as at 2009 and 2010 and the laws of Timor Leste as at 2009 and 2010 concerning infrastructure concessions; the scope of emergency powers exercisable by a prime minister under the Constitution of Timor Leste; and the laws of Timor Leste regarding the conduct of foreign corporations conducting business in Timor Leste (amongst others).55In my view, these generalised references fall far short of establishing to any reasonable state of satisfaction precisely how the transactions in issue in this case fall within the purview of the relevant laws, let alone attract act of state concerns.56Further, there are the provisions of the Foreign States Immunities Act1985 (Cth) (the Act) to consider. Relevantly, the Act provides:

• 9

  General immunity from jurisdiction

Except as provided by or under this Act, a foreign state is immune from the jurisdiction of the courts of Australia in a proceeding.

• ...

• 11

  Commercial transactions

27

Ibid [170].

28

Timor Leste preliminary objection[172].

59 VR 505

• • (1)

    A foreign State is not immune in a proceeding in so far as the proceeding concerns a commercial transaction.

    ...

  • (3)

    In this section, commercial transaction means 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 and, without limiting the generality of the foregoing, includes:

    • (a)

      a contract for the supply of goods or services;

      ...

57I accept the plaintiffs’ submissions that the act of state doctrine could not operate in a way which negates the exception for commercial transactions in s 11 of the Act. Yet this would be the result if the defendants’ act of state submissions were upheld.58I am satisfied that the dispute in substance and in its terms is a commercial transaction essentially of a private law character. I am not satisfied that the act of state doctrine is engaged. No embarrassment could be caused by the circumstances being considered by this Court.59For completeness, I note that I have not determined whether an issue estoppel arises from the findings made by the Tribunal that there was an agreement made between the parties. For present purposes, I have assumed, without deciding, that whether there is a binding contract was contested, based on several indications in Timor Leste’s preliminary objection in the ICSID arbitration. It is at least arguable that Timor Leste reserved its position as to the correctness of matters alleged by Lighthouse, including whether the arrangements had contractual force.29

FORUM NON CONVENIENS

Applicable principles

60A party who has regularly invoked the jurisdiction of a competent court has a prima facie right to insist upon the exercise of the jurisdiction and have the claim heard and determined.3061This prima facie right may be displaced when it can be demonstrated that the local forum is a clearly inappropriate forum for the determination of the claim.62Jurisdiction to stay or dismiss a proceeding should only be exercised ‘with great care’ or ‘extreme caution’.3163The power to stay proceedings which have been regularly commenced on inappropriate forum grounds is to be exercised in accordance with ‘the 29

Timor Leste’s preliminary objection [31], [33], and [52](d)(v).

30

Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197, 241, 243 (Deane J) (Oceanic).

31

Ibid 244 (Deane J); Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538, 554 (Mason CJ, Deane, Dawson and Gaudron JJ) (Voth).

59 VR 506general principle empowering a court to dismiss or stay proceedings which are vexatious or oppressive or an abuse of process’.3264Further, ‘[t]he mere fact that the balance of convenience favours another jurisdiction or that some other jurisdiction would provide a more appropriate forum does not justify the dismissal of the action or the grant of a stay’.3365As the plurality observed in Voth:

the ‘clearly inappropriate forum’ test is similar to and, for that reason, is likely to yield the same result as the ‘more appropriate forum’ [Spiliada] test in the majority of cases. The difference between the two tests will be of critical significance only in those cases ... in which it is held that an available foreign tribunal is the natural or more appropriate forum but in which it cannot be said that the local tribunal is a clearly inappropriate one.34

66The availability of relief in a foreign forum will always be a relevant factor in deciding whether or not the local forum is a clearly inappropriate one. A decision on this question does not turn upon an assessment of the comparative procedural or other claims of the foreign forum, nor does it require ‘the formation of subjective views about either the merits of that forum’s legal system or the standards and impartiality of those who administer it’.3567As to the proper approach to be taken in dealing with forum non conveniens applications, the majority of the High Court in Voth said that the judge should consider the materials, the law and submissions in the quiet of judicial chambers without expense to the parties, and that ordinarily it would be unnecessary to do more than briefly indicate that having examined the material in evidence and having taken account of the competing written and oral submissions, the primary judge is of the view that the proceedings should or should not be stayed on forum non conveniens grounds.36 I propose to adopt that approach in this case.68To that end, I shall briefly consider the factors relevant to the exercise of the discretion whether to order that the proceeding be stayed.

Timor Leste submissions — forum non conveniens

69The defendants note, correctly, that the plaintiffs’ pleaded case asserts that the Fuel Supply Agreement is governed by Victorian law based on incorporation by reference of certain standard terms.70The defendants submit that Victorian law does not apply because the Fuel Supply Agreement is insufficiently certain to form a binding contract; that 32

Oceanic(1988) 165 CLR 197, 242; see also Voth(1990) 171 CLR 538, 554.

33

Voth(1990) 171 CLR 538, 554; Oceanic(1988) 165 CLR 197, 248 (Deane J) (cf. Spiliada Maritime Corp v Cansulex Ltd [1987] 1 AC 460, 478 (Spiliada).

34

Voth(1990) 171 CLR 538, 558.

35

Ibid.

36

Ibid 565, citing the advice contained in the speech of Lord Templeman in Spiliada [1987] 1 AC 460.

59 VR 507the standard terms were not incorporated, either because the defendants did not receive a copy of the standard terms or the documents are uncertain or the standard terms were never clearly identified; and that there were fraudulent misrepresentations made by Mr Jacobs or Lighthouse to Timorese officials (including the Prime Minister), in conversations and in meetings which took place in Timor-Leste.71The defendants submit that in the circumstances, Timorese law would govern the issue of whether those representations were fraudulent.72The defendants submit that if the dispute were to proceed to a hearing it is probable that eleven Timorese witnesses would be called, ten of whom reside in Timor Leste, one of whom principally resides in Canberra; of these witnesses one is a former Prime Minister, one was a member of the government, one is an ambassador and six of them are government officials.73Further, it will be necessary to adduce evidence about Timor Leste’s public procurement system, the process by which the government entered into contracts and the Prime Minister’s powers to contract on behalf of the government; expert evidence would also be required from witnesses expert in Timorese commercial government practice and Timorese law.

74The defendants submit that they are resident in Timor Leste; that one of the plaintiffs is a resident in the Seychelles and one in Victoria; and that most of the witnesses who reside in Timor Leste would require the use of interpreters.75The location of the majority of the documents likely to be required to be produced is in Timor Leste.76Finally, the defendants submit that the plaintiffs would be able to pursue their claims in the courts of Timor Leste and that no undue difficulty arises from the government being a defendant in the proceedings.37 The defendants emphasise that Timorese courts accord procedural fairness, including a process of appeal.38

Lighthouse submissions — forum non conveniens

77For its part, Lighthouse submits that there was a binding contract which incorporated standard terms and conditions which provide that any dispute arising from the contract was to be governed by the laws of Victoria.78Lighthouse submits that there were meetings with Mr Magee of Zebra Fuels (a potential witness for Lighthouse) which took place in Australia; and that there were a number of meetings in Melbourne between Ambassador Guterras, then based in Canberra, and Mr Jacobs.39 Ambassador Guterras 37

Remedios report [17]–[18].

38

Ibid [9]–[10].

39

In or about the beginning of May 2010, Mr Gutteras was appointed as the Timor Leste Ambassador to Australia.

59 VR 508now resides in Sydney.79Lighthouse submits that Ambassador Guterras sent correspondence in Australia to Lighthouse and flew to Melbourne to discuss the changes the government wanted to the Lighthouse proposal. Negotiations and discussions occurred between June and October and occurred within Australia.80Lighthouse submits that in December 2010, Ambassador Guterras toured the Cummins South Pacific site in Laverton in Victoria and that any witnesses called by Timor Leste as relevant witnesses in relation to that tour will likely be Australian residents.81Lighthouse submits that the loss and damage is suffered in Australia, including loss of reputation and standing in the fuel supply industry for damaged relationships with corporate partners; loss of profits and loss of opportunity to secure further fuel supply contracts; as well as losses for wrongful repudiation of the agreement.82Lighthouse submits that, of the seven witnesses in addition to Mr Jacobs, some will give evidence about quantum, but mostly the evidence will be about aspects of performance and elements of negotiations, including with Cummins and related aspects of financing. Lighthouse submits that negotiations leading to the Fuel Supply Agreement are likely to be critical because of the contention by Timor Leste that the arrangements amounted only to a proposal.83Lighthouse submits that it is not enough to provide references to foreign legislation or procedures that would or could be applicable to establish a connecting factor of material weight; the defendants would need to demonstrate with some particularity how the foreign law would apply.

Analysis — forum non conveniens

84It is apparent that the key meetings between the parties occurred in Dili and that the key documents signed by Prime Minister Gusmao were signed in Dili. Accordingly, the fact that there will be local witnesses, interpreters and reference to local laws may provide a basis for the view that Timor Leste is the more appropriate forum. However, that is not the test to be applied. I must determine whether Victoria is a clearly inappropriate forum for determination of the dispute.85In Oceanic, there was a dispute as to whether a contract contained an exclusive foreign jurisdiction clause. As Brennan J observed, the system of law by reference to which that question must be answered cannot be identified by assuming that the contract contained the clause:

The question whether a contract has been made depends on whether there has been a consensus ad idem and the terms of the contract, if made, are the subject of that consensus. At all events, those are the issues which an Australian court

59 VR 509

necessarily addresses when it seeks to determine the existence of what the municipal law of this country classifies as a contract. Classification is, of course, a matter for the law of the forum. In deciding whether a contract has been made, the court has regard to all the circumstances of the case including any foreign system of law which the parties have incorporated into their communications, but it refers to the municipal law to determine whether, in those circumstances, the parties reached a consensus ad idem and what the consensus was ... There is no system other than the municipal law to which reference can be made for the purpose of answering the preliminary questions whether a contract has been made and its terms.40

86To the same effect, in Oceanic, Gaudron J said: ‘questions as to the existence, construction and validity of terms bearing upon determination of the parties’ agreement as to the proper law’ are determined by the law of the forum.4187Likewise for present purposes, the disputed questions as to whether the contract has been made and whether it includes the term that the contract is to be governed by the law of Victoria is are matters for the law of the forum. In my view, this is a major impediment to the defendants’ argument that the current forum is ‘clearly inappropriate’. But this is not the only reason. Having considered the material and the respective submissions of each party, there are significant connecting factors to Victoria. In the circumstances, I am not satisfied that Victoria is clearly an inappropriate forum in which to permit the action to proceed. In this regard, I have taken into account the expert evidence to the effect that courts in Timor Leste could hear and determine the proceeding and would accord procedural fairness to the parties.

EX PARTE APPLICATION

88In view of my findings I propose to say very little about the evidence of October 2016, when the first defendant approached the court on 28 October 2016 seeking ex parte relief. I propose to make an order extending the time for filing this application pursuant to r 8.08(4) of the Rules, up to and including 28 February 2018 (pursuant to r 3.02 of the Rules), so as to allow the defendants to challenge the jurisdiction of the Court on the act of state ground.89Whilst the defendants submitted to the jurisdiction of the Court on 28 October 2016 for the limited purpose of seeking an order (on an interim basis) that the contents of the court file in this proceeding not be inspected except by order of a judge and that there be no publication of the contents of the court file, it does not follow, it seems to me, that the defendants have thereby lost the opportunity to challenge jurisdiction. At the time of the ex parte application Timor Leste reserved its position as to whether the Supreme 40

Oceanic(1988) 165 CLR 197, 225 (Brennan J) (citations omitted).

41

Ibid 261; see also M Davies, A S Bell and P L G Brereton (eds), Nygh’s Conflict of Laws in Australia, (LexisNexis Butterworths, 9th ed, 2014), 7.11.

59 VR 510Court of Victoria would have jurisdiction were the case to proceed, although this statement was made to the Court after counsel for the government had given the Court the usual undertaking as to damages.90In my view, the defendants submitted to the inherent jurisdiction of the Court for the limited purpose of the exercise of the Court’s inherent jurisdiction to make an interim non-publication order. It seems to me there is a logical difficulty in finding that the defendants thereby submitted to jurisdiction in relation to this proceeding before being served with any process, and therefore before they were in a position to file a conditional appearance.

CONCLUSION

91In view of my findings on both the act of state and forum non conveniens grounds, the defendants’ summons must be dismissed.Summons dismissedSolicitors for the applicants: Johnson Winter & Slattery. Solicitors for the second respondent: DLA Piper. T FARHALLBARRISTER-AT-LAW

[An application by the defendants for leave to appeal to the Court of Appeal was dismissed: [2019] VSCA 290. The High Court of Australia then refused an application for special leave to appeal on the issue of forum: [2020] HCA Trans 63