P.T. Garuda Indonesia Ltd v Australian Competition & Consumer Commission

[2012] HCATrans 101

[2012] HCATrans 101

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S343 of 2011

B e t w e e n -

P.T. GARUDA INDONESIA LTD ARBN 000 861 165

Appellant

and

AUSTRALIAN COMPETITION & CONSUMER COMMISSION

Respondent

FRENCH CJ
GUMMOW J
HAYNE J
HEYDON J
CRENNAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON TUESDAY, 8 MAY 2012, AT 10.17 AM

Copyright in the High Court of Australia

MR J.T. GLEESON, SC:   May it please the Court, I appear with MR C.H. WITHERS for the appellant.  Mr Leeming sends his apologies.  He has a professional obligation in the Federal Court that he cannot evade.  (instructed by Norton White)

MR S.J. GAGELER, SC, Solicitor-General of the Commonwealth of Australia:   If the Court pleases, I appear with MR T.M. HOWE, QC and MR D.J. ROCHE for the respondent.  (instructed by Australian Government Solicitor)

FRENCH CJ:   Yes, Mr Gleeson.

MR GLEESON:   Your Honours, these proceedings have reached the stage where the appellant, P.T. Garuda Indonesia Limited, has been found now beyond challenged to be a separate entity of the Indonesian State within the Foreign States Immunities Act 1985 and as such, by reason of sections 9 and 22 working together, immune from the jurisdiction of the Federal Court in this proceeding, subject only to section 11.

FRENCH CJ:   What does the concept of immunity convey in our constitutional framework?

MR GLEESON:   It would mean that the jurisdiction which the Court otherwise has in the matter arising from section 76(2), being a subject matter jurisdiction, is one in answer to which a person by reason of that status is entitled to assert there is no matter.

FRENCH CJ:   Of course it extends beyond federal jurisdiction to the exercise of jurisdiction by State courts?

MR GLEESON:   Yes, as well.  I want to come shortly to the true character of the proceedings, including their constitutional and statutory underpinnings.  Just to identify that remaining question, it is essentially whether the trial judge, Justice Jacobson, in his obiter remarks concerning section 11 was correct in finding that the scope of the exception is limited to proceedings which seek to vindicate private law rights and obligations arising out of a commercial transaction.  We submit he was, and that the present proceedings have at least three features which take them outside section 11 properly understood.  The first feature is that the proceedings seek to inflict punishment and restraint upon what I will call for simplicity “the foreign State”.

GUMMOW J:   Well, and that they are at the suit of the common law.

MR GLEESON:   Yes, that was the second matter, that they are at the suit of the Commonwealth and ‑ ‑ ‑

GUMMOW J:   The ACCC being relevantly the Commonwealth.

MR GLEESON:   Being relevantly the Commonwealth.  So it is the Executive arm of the Commonwealth which, acting under legislation given down by the Chapter 1 arm of the Commonwealth, seeks to utilise the Chapter 3 arm of the Commonwealth to inflict punishment and restraint on a foreign State.  So compendiously that is the first broad matter.  The second which may be more a matter of emphasis or may be more important than that is that the subject matter of this punishment and restraint is the enforcement of a norm of conduct embodied in the federal statute, which norm has three interrelated elements.  The first is it is a mandatory law of the forum.  The second is it has a public order character and the third is that it operates extraterritorially. 

Your Honours, could I then immediately turn to flesh out the true character of these proceedings in the statutory and constitutional context?  Your Honours should have a version of the Trade Practices Act 1974, as in force in July 2001, immediately prior to the earliest of the conduct, and the matters we would emphasise, by reference to the Act and the appeal book, are these. Firstly, if your Honours could go to page 5 of the appeal book? The character of punishment is found in order 3, which is an order seeking a pecuniary penalty under section 76(1) of the Act, and the ACCC, under section 77, institutes the proceeding on behalf of the Commonwealth for recovery of that penalty.

The second matter arising from page 5 is that the injunction seeks to restrain the foreign State for a long‑term period, seven years, from engaging in certain conduct subject to, in particular under 2.3, an exception if the foreign State receives an authorisation under section 88. Under section 88 the ACCC has a power to grant authorisations to render lawful what would otherwise be unlawful, and as your Honours know the critical test for that authorisation under section 90(6) concerns net public benefit to Australia. So that what is sought is not only that Australia punishes relevantly Indonesia, but Australia issues an edict that Indonesia must not engage in defined conduct for seven years unless Indonesia comes to the Australian regulator and persuades it that there is a net public benefit to Australia.

The third aspect of the proceedings I wish to emphasise is that the primary subject matter arises under section 45(2)(a)(ii) and (b)(ii), and the subject matter jurisdiction would be whether the foreign State made or gave effect to an arrangement or understanding which contained a provision with the purpose or effect “of substantially lessening competition”. Under subsection (3) that is competition in a relevant market. Under section 4E, that is a market in Australia.

Your Honours will see from the application book at page 21 that the market in its most ambitious form is a worldwide market – paragraph 38 – which is asserted in paragraph 39 to be “a market in Australia within the meaning of section 4E”.  There are then narrower versions of the market suggested.  So that the effect of the claim is that conduct engaged in anywhere in the world which has a requisite effect on one of these markets is conduct which Australia can punish and restrain. 

Could I mention the extraterritorial aspect of the proceedings? Under section 5 of the Act subsection (1) gives Part IV an extraterritorial operation where relevantly the body corporate carries on business within Australia. There is no requirement that the conduct impugned under the Act is done as part of an Australian business, it is rather a connector. If Garuda carries on business in Australia, which it accepts it does as a foreign corporation, then its conduct anywhere in the world if otherwise caught by section 45 is impugned.

In the present case it appears from the pleading that there are no allegations that the relevant conduct occurred in Australia.  It appears tolerably clear that the proceedings intend to focus on conduct primarily in Indonesia or Hong Kong, for example, in respect to Indonesia, pages 30 and following of the appeal book plead certain alleged Indonesian arrangements, and the Hong Kong alleged arrangements appear from about page 43.

HEYDON J:   Those paragraphs do not actually assign a place where the arrangement was made.

MR GLEESON: No. That is why I put to your Honour first the negative, there is no allegation any conduct occurred in Australia. What does appear is a series of allegations which at least invite the proposition that it is conduct in Indonesia or Hong Kong, given the context perhaps from the previous page. At page 29, paragraph 65 referred to something called “the Air Cargo Representative Board – Indonesia”. Paragraph 66, Garuda was the chair, Garuda attended the meetings and so on. So I put it no higher than the proceedings appeared to invoke section 5 and certainly do not allege conduct confined to Australia.

Could I mention two other aspects about this part of the appeal book.  On page 30 your Honours will see in paragraph 70.2 that section 45A is invoked.  That occurs throughout the pleading.  The case being made is that this is a horizontal arrangement within section 45A which is deemed to have a purpose or effect of substantially lessening competition in an Australian market.  The other matter to just note is that if your Honours go to page 34, paragraph 81, for example, the giving effect to case is framed in terms of an imposition of fuel surcharges.  There is no pleading of the terms of specific contracts between Garuda and any customers.  Your Honours, with that background, the ‑ ‑ ‑

GUMMOW J:   What is the distinction between pecuniary penalties under section 76 of the Trade Practices Act and a so‑called civil action to recover them and a criminal proceeding under sections 78 and 79, the latter not being available in Part IV?  What is the force of these words “civil” and “criminal”?

MR GLEESON:   The present action being defined as only being civil and not criminal, it will pick up such protections as have developed in respect to civil penalty proceedings but will not carry with it the force of the criminal law either by way of sanction or by way of duties on the prosecution and the like. 

GUMMOW J:   What happens if they do not pay the penalty?

MR GLEESON:   Yes.  If they do not pay the penalty, it will be a civil judgment of the Federal Court which, subject to the application of the Foreign State Immunity Act, could lead to sequestration of the property of Garuda in Australia – would ordinarily lead to committal of senior officers of Garuda in Australia, but that is exempted by the Act, which I will come to in just a moment.  In the enforcement provisions of the Act, which commence in Part IV, the structure of the enforcement stage is – in section 30 a general immunity from enforcement is accorded in favour of a foreign State.  Section 32 gives an exception “in relation to commercial property” as defined.  Section 33 allows execution against “immoveable property”. 

Section 34 is the section I alluded to that indicates there cannot be penalties by way of final committal. However, in our case we would have to grapple with section 35 which is that theses protections apply in an attenuated sense where one is a separate entity. To be a separate entity and get these protections under section 35(2) you need to show you would otherwise have been immune and then you have submitted to jurisdiction, and that would probably not be the present case. The effect of that would seem to be, coming back to your Honour’s question, that a judgment against the separate entity could lead to the ordinary processes of enforcement of the Federal Court.

GUMMOW J:   What is the significance of this definition of “proceeding” in section 3 and to the word “prosecution”?

MR GLEESON:   A deliberate decision was taken that criminal matters reflected by the words ‑ ‑ ‑

GUMMOW J:   You keep using these words “criminal”.

MR GLEESON:   Yes, prosecution, “a prosecution for an offence” being the words exactly used.

GUMMOW J:   We have said on occasions in this Court there is not a bright line between these concepts of civil and criminal.

MR GLEESON:   No, but wherever the line is drawn, what was intended was that if you were in the area of prosecution for an offence, the Act would not apply and you would be simply in the area of the common law of foreign State immunity where your claims to immunity would be at their very highest as a foreign State because of the fact that the processes of the local State were being exercised directly over you.

GUMMOW J:   Do other jurisdictions with an equivalent of Part IV – starting with the United States, I suppose – do they have in their anti‑trust legislation similar distinction between civil penalties and prosecutions, civil penalties recoverable by the United States and prosecutions by the United States?

MR GLEESON:   Yes, traditionally the ‑ ‑ ‑

GUMMOW J:   I am asking you this because I just wonder whether this Act which has, so it is said, I think, some foreign antecedents, assumes distinctions that are observed elsewhere, but not here.

MR GLEESON:   Your Honour, a partial answer is that the Sherman Act traditionally was framed in terms of a criminal offence which had attached to it, particularly through the Clayton Act as well, the ability to pursue private remedies, including by way of treble damages.

GUMMOW J:   That is by a private party?

MR GLEESON:   That is by a private party.  That is not a complete answer to your Honour’s question, and I will need to just check whether there is any mechanism for a civil penalty.  I am not aware of any such mechanism under the Sherman Act or the Clayton Act or the parallel statutes in the United States.

HAYNE J:   Are civil penalty proceedings, as found in the former Trade Practices Act, et cetera, a distinctly Australian invention?

MR GLEESON:   I hesitate to give an unequivocal yes, your Honour.  There may be, with respect, force in your Honour’s observation.

HAYNE J:   I am not conscious of encountering an equivalent idea elsewhere, but that shows the limits of my reading, that is all.

FRENCH CJ:   What about in the European context?  There are large, I think they are called fines, imposed.  I am not sure whether they are in the character of criminal proceedings.

MR GLEESON:   Yes.

GUMMOW J:   You may need to look further at this, I suspect.

MR GLEESON:   We may.  What seems to have happened historically in Australia was around the bringing in of the Trade Practices Act, a decision was made to move away from what had been the model under the Australian Industries Preservation Act following the Sherman Act of a criminal offence in the fuller sense, together with a private action of treble damages to move to making these ones civil, but with punishment attached to it, and then making corresponding modifications to the private actions that have flown from it.  Under the most recent amendments to the current act the cartel provisions have now been fully criminalised again, so something of a circle has moved in that area. 

GUMMOW J:  With attachment to section 80 of the Constitution, I suppose?

MR GLEESON:   Yes.  What I would like to do ‑ ‑ ‑

FRENCH CJ:   The parties are on common ground in this appeal, as I understand it from paragraph 14 of your submission, that the action in this case is a proceeding within the meaning of the Act and that you are rather focusing upon concerns and commercial transaction.

MR GLEESON:   Yes, and the tenor of the submissions that we have offered ‑ ‑ ‑

GUMMOW J:   That may be a concession which is unacceptable.

MR GLEESON:   Which may not be – yes.

FRENCH CJ:   It may be that you cannot untangle one from the other.

MR GLEESON:   Yes.  The tenor of the submissions that we put in writing has been to try and give a meaning to the connector within in the composite phrase “proceedings concerning a commercial transaction”.

GUMMOW J:   You are really saying it is not concerned with commercial transaction because it is a quasi criminal proceeding.

MR GLEESON:   Yes.

FRENCH CJ:   Because of the scope of the relief.

GUMMOW J:   Because of the scope of the relief.

MR GLEESON:   Because of the scope of the relief and that the underpinning idea of not only section 11 but really of virtually the entirety of the exceptions was to recognise that in situations where the foreign State engages in dealings with other parties which are subject to the ordinary private law, then there will be a form of consent, as it were, imputed to the foreign State to subject itself to jurisdiction in respect to private law claims at the suit of other parties involved in the dealings.  Then none of that touches the present case where the proceedings have, as the moving party the State, and have as the remedy punishment and restraint upon the foreign State.

FRENCH CJ:   It is only the pursuit of the penalties that supports the characterisation of these proceedings as a penalty proceeding.  The ACCC could have just sought the declaratory and injunctive relief, could it not?

MR GLEESON:   Had they only sought the declaratory and injunctive relief, we submit there still would have been a problem under section 11 because of what I have called the restraint imposed by the injunction, namely, that Australia has issued an order to Indonesia for seven years not to engage in conduct ‑ ‑ ‑

FRENCH CJ:   This all feeds into concerns, does it not?

MR GLEESON:   Concerns.  It feeds into concerns, yes, your Honour.

GUMMOW J:   But the injunction is not protecting any proprietary right of anybody.  It is protecting a governmental interest manifested in the statute, is it not?

MR GLEESON:   It is protecting a governmental interest ‑ ‑ ‑

GUMMOW J:   It is a sui generis remedy actually called an injunction to make people feel comfortable.

MR GLEESON:  Yes. Under section 80 it is at the suit of the ACCC on behalf of the Commonwealth in order to vindicate a norm of public order which Australia sees fit to lay down in respect to conduct done anywhere in the world in order to protect Australian markets.

FRENCH CJ:   That argument is put even on the assumption that the arrangements and understandings asserted fall within the character of commercial transactions?

MR GLEESON:   Yes.  There are two levels of thinking about the possible commercial transactions in this case.  One level which appealed to two judges in the Federal Court that we submit is completely erroneous is to say that the proceedings concern contracts for the supply of freight services which might be made between Garuda or any other party to the alleged arrangement and individual customers or freight forwarders.  We say that is remote from the proceedings.  What is more in the frame is the alleged horizontal arrangement which is commercial in character.  You cannot dispute that.  It is allegedly about what will occur in commerce, but it is what are these proceedings seeking to vindicate in respect to that alleged arrangement which is where we have sought to argue that section 11 is not attracted.

Could we, in answer to your Honour’s questions concerning the historical origin of the pecuniary penalty and whether Australia really is on its own in that area, have the opportunity to research that, which I may not be able to do over lunch but we could do in the next day or so, in order to ensure we can give a complete answer to that question?

FRENCH CJ:   Yes, Mr Gleeson.

HEYDON J:   I just want to work out exactly what the heartland, as it were, of your submission is. If we leave penalty out of it and leave injunction out of it, do you say the Commission would not be able to – or, rather, if the Commission sought damages under section 87(1B) of the Act, which it can do on behalf of certain persons who consent to it doing so, does that leave Garuda with immunity?

MR GLEESON:   Your Honour, that hypothesis would remove some of the critical planks that I am relying upon, but not all of them.  It would remove some of the critical planks because we would no longer have punishment per se, we would no longer have the public order injunction.  We would be closer to the area of private law rights.

HEYDON J:   What if the individuals who were damaged did not bother about the Commission and just brought their own action?  They are still relying on a public order statute.

MR GLEESON:   Yes.  That again has removed a further plank from our argument and is closer to the area of ‑ ‑ ‑

HEYDON J:   I just want to see how much we jettison before we start swimming.

GUMMOW J:   The problem is this enormous complexity of remedy under Part VI.

MR GLEESON:   Yes.  What I was wanting to say positively in answer to Justice Heydon was that even the section 87 remedy is highly sui juris and has a combination of public order, public law components together with possibly private law remedial consequences.  One of the oddities of that section 87 – and this has been explored in a number of cases in the Federal Court in Queensland at the moment which are not yet for judgment – is what actually happens in section 87 in a two‑stage process?  It seems to say at stage one the Commission can try and get an injunction or an order or a declaration and then at stage two it opens up and turns that action into a compensation proceeding where it acts as a beneficial representative of persons who wish to come along.

Now, that is raising a serious number of difficulties conceptually as to how that is intended to work, but we would wish to submit that, even taking the extreme case your Honour has mentioned, a private action under section 82 by an individual for damages by reason of what is said to be a breach of Part IV – take that case as the furthest from the present – it would raise some issues as to precisely how it was framed.  It may well be in that case you are closer to a specific commercial transaction, namely, a contract between Garuda and a freight forwarder, so that would bring you closer to section 11, and the fact that you are seeking a remedy of damages might bring you closer to the private law.  There would, however, still be an important question whether what has been vindicated in that case is an Australian norm of conduct which it seeks to apply to persons anywhere in the world in order to protect our markets, and whether that was what was really envisaged by section 11 would be a very debateable matter.

HEYDON J:   Around the time that the Trade Practices Act was enacted there were common law decisions that persons who were not parties to a contract in restraint of trade could get a declaration that a contract between two other people was in restraint of trade.

MR GLEESON:   Yes.

HEYDON J:   There were, perhaps, rather skimpy but there were statements that you might be able to get damages.  Now, is Garuda immune in those circumstances?

MR GLEESON:   In that event, we are looking at a remedy provided under the common law of the land, not through any mandatory statutory norm, and a remedy which would be within the ordinary jurisdiction of the Australian court but subject to conflict of laws questions as to whether Australian law is applied to a restraint which occurred overseas and one would be much closer to a private rights battle either between the parties to the arrangement or between persons directly affected by the arrangement and so in that case it would be a much more difficult section 11 argument we would face.

HEYDON J:   Of course, if one is bound by a rule of the common law it can be just as unpleasant as being bound by a statutory law.  It is the Australian state that is speaking; it is the Australian commander, the uncommanded commander who is speaking.

MR GLEESON:   Yes.

FRENCH CJ: Might be arguing about the application of an implied statutory warrant if you were having a dispute with Garuda, implied by operation of, say, section 74 of the Trade Practices Act.

MR GLEESON:   Yes.  To the extent your Honours’ questions have focussed on the definition of proceeding itself, excluding a proceeding for an offence, we would wish to put as a general proposition that none of the exceptions in sections 11 through to 22 are designed to capture proceedings which have punishment as a character.

FRENCH CJ:   So, does that involve a withdrawal of the implied concession in paragraph 14, or a qualification of it?

MR GLEESON:   Yes, your Honour.  Where I would like to go next, if possible, is first to Lord Wilberforce’s judgment which underpinned or explained the common law basis for the commercial transactions exception.

GUMMOW J:   Is this the Philippine admiral?

MR GLEESON:   No.  In the Playa Larga v I Congreso del Partido [1983] AC 244 – I would like to go there first and then go to the text of section 11 and the remaining exceptions.

GUMMOW J:   Now, the trouble with this is, it may not be trouble, but this is in a jurisdiction with no written constitution, no Chapter 3.

MR GLEESON:   Yes.

GUMMOW J:   Do we get some help from Chief Justice Marshall?  Does he refer to ‑ ‑ ‑

MR GLEESON:   Yes.  Could I take your Honour to two places.  Firstly, on page 262, the passage between letters D to E, while at a level of generality, it is of assistance in that it explains that the move to restrictive immunity arose:

from the willingness of states to enter into commercial, or other private law, transactions with individuals.

We emphasise that –

It appears to have two main foundations:  (a) It is necessary in the interest of justice to individuals having such transactions with states to allow them to bring such transactions before the courts.

Then conversely, to require the State to answer such claims does not involve any significant challenge to their sovereignty or dignity.  Now, if that be the central focus of the move to restrictive immunity, the concern is very much on persons either dealing with the foreign State or perhaps, to take up your Honour’s Justice Heydon’s question, directly affected by some dealing the foreign State has entered being able to exercise the ordinary recourse to the courts and it being difficult for the foreign State to have much to complain of in that circumstance. 

Coming to the American context, at page 265 at letter F and following and after reference to the Tate letter, two decisions are mentioned.  The first is Victory Transport in 1964 at the federal appellate level where again it was a claim by someone dealing with the foreign State against the foreign State and at the foot of that page and over the page it is said that:

The purpose of the restrictive theory of sovereign immunity is to try to accommodate the interest of individuals doing business with foreign governments in having their legal rights determined by the courts, with the interest of foreign governments in being free to perform certain political acts without undergoing the embarrassment or hindrance of defending the propriety of such acts before foreign courts.

So the interest of individuals dealing with the foreign States was emphasised.  The next case mentioned is Alfred Dunhill in 1976 in the Supreme Court.  That was the case arising out of the Cuban transactions in 1960 and although the ‑ ‑ ‑

FRENCH CJ:   This was an act of State case.

MR GLEESON:   Although it was an act of State case, in the context of that the Supreme Court engaged in a fairly lengthy discussion of foreign State immunity and the restrictive theory and it was because of what they said on foreign State immunity that the majority reached their view on act of State.  What they essentially said was, if you are repudiating a commercial debt, you cannot complaint if you are called before the courts for the ordinary private law rights arising out of that transaction.  At about letter E the Court said to do otherwise would:

undermine the policy supporting the restrictive view of immunity, which is to assure those engaging in commercial transactions with foreign sovereignties that their rights will be determined in the courts whenever possible.

Now, in that context Lord Wilberforce then went on to quote from Chief Justice Marshall in the Bank of United States v Planters’ Bank of Georgia (1824) and then from a subsequent discussion in Ohio v Helvering (1934).  Now, part of the essential difference between the parties here is that Mr Gageler says, well, when you see these comments about if you go into the marketplace or into the field of trade you have just become an ordinary private citizen and you are subject to the law.  That is what he takes from these types of passages.

We would suggest their focus was a more confined one, that when you engage in those types of ordinary consensual dealings you subject yourself to the private law which is applicable to those dealings, not that you have somehow subjected yourself to any regulatory law which a foreign State might seek to impose upon your conduct.

FRENCH CJ:   What is happening here?  Is it that the court is qualifying a self‑imposed principle of judicial restraint in relation to foreign States?  Is that how the common law is working in developing the restrictive immunity principle?

MR GLEESON:   I pause slightly on restraint.  The court under the absolute immunity theory was regarding it as a principle of international law which had been incorporated into domestic law, that it did not have jurisdiction over the person of the sovereign in certain matters ‑ ‑ ‑

FRENCH CJ:   As a principle of customary international law incorporated into the common law.

MR GLEESON:   Yes, which was then modified to be a rule with exceptions at the common law level.

GUMMOW J:   How does it find its way into Article 3 in the United States?  A problem Lord Wilberforce did not have to grapple with but it has exercised their minds, has it not?  Do they not talk about no subject, no jurisdiction, without perhaps explaining why?

MR GLEESON:   The court would retain subject matter jurisdiction in the matter by reason of the definition of the allegations.  It is the in personam jurisdiction over that particular person arising by reason of the person’s status and the person’s objection to the jurisdiction of the court which is what qualifies the Article 3 result.  It is an immunity which can be waived and in that sense the objection to in personam jurisdiction is one that can be given up, but if the immunity is asserted then the court’s jurisdiction does not extend to the person. 

Your Honours, from there I wish to go, if I could, to the Act itself and to look at section 11 and some of the following exceptions. Just before I do that, I probably should deal with a point in Mr Gageler’s outline which concerns the true character of section 9 itself. What he intends to proffer is that this Act operates by way of what he calls a repeal of a jurisdiction conferred by the Trade Practices Act, if the circumstances of the Act are attracted.  We would oppose the concept ‑ ‑ ‑

GUMMOW J:   Sorry, which paragraph?

MR GLEESON:   It is in paragraph 1, in the last sentence:

The Foreign State Immunities Act 1985 (Cth) (FSIA) repealed that express conferral of jurisdiction only if, and to the extent that, an implication to that effect “appears clearly and unmistakably”.

That, we submit, is an erroneous way of understanding the interrelation between the two Acts in part for the reason exposed by your Honour Justice Gummow’s question.  The jurisdiction which the Trade Practices Act provides is a subject matter jurisdiction and it contains within its own limit under section 77 a definition of the court’s power to find remedies at the suit of some persons against other persons.  It is not a case of this Act repealing that jurisdiction.  It is a case of this Act saying that in respect to all proceedings at a federal or State level across the polity, persons who have a defined status are entitled to assert that the court cannot exercise in personam jurisdiction over them and then they can waive that if they wish. 

So it is not a case of repeal and it is not a case of – as Mr Gageler says – finding implications that appear clearly and unmistakably. It is a law intended to govern all exercise of jurisdiction by courts, whether federal or State jurisdiction, across the nation. So section 9 of the Act, when expressed in those terms, has that breadth and, indeed, your Honours will see from the definition of “court” that it is broadly defined in section 3(1) to include any body exercising powers that are judicial or similar to judicial functions.

GUMMOW J:   Why is this not a matter both under 76(2) and under 75(3), 75(3) being the more important because it is entrenched?

MR GLEESON:   Yes, it is also 75(3), your Honour. 

GUMMOW J:   But Mr Gageler is saying that the matter is relevantly contracted for the purpose of 75(3), I think.

MR GLEESON:   Contracted through a notion, he says, of repeal.  We do not embrace the word “repeal”, but certainly contracted.  Contracted we embrace that in the sense that the federal statute, the Immunities Act, operates in respect to proceedings which would otherwise be at federal or State level and in that sense is capable of contracting the matter.

HAYNE J:   If there is a confinement, is not the confinement worked by confining jurisdiction over the party?

MR GLEESON:   Yes.  Could I then come to section 11, and the primary position we have put in the written submissions in‑chief and reply is that the nature of the connection involved by the word “concerns” is a connection which picks up a proceeding vindicating private law rights and obligations arising from, in this case, a commercial transaction.  That meaning of “concerns” is one which is apposite to operate through the balance of the exceptions, we would submit, your Honours.  It functions equally well in respect to section 12(1) and so on.  That is the first textual submission.

The second is that your Honours will see in at least two of the exceptions ‑ section 12(2) is the first one – a deliberate decision to expand the connector.  In section 12(2) the proceeding concerning employment is expanded:

to a proceeding concerning:

(a)a right or obligation conferred or imposed by a law of Australia on a person as employer or employee ‑

A similar expansion appears in the taxation exception which is section 20.  In other words, where the Parliament intended that the proceedings could have a broader connecting reach and that there really was a desire to ensure that all obligations imposed by Australian law arising out of a particular matter were the subject of the exception, they said so, and no such language appears, we observe, within section 11.

Your Honours, the third textual submission concerns section 11(2), and these matters I am going to, I will come back to the ALRC report which bears them out as well. What this does is to provide for two exceptions to the exception in section 11(1). Can I deal with the second first? The second is that you can contract out of the commercial transaction exception back into the primary immunity, and the persons who can do that are the parties to the proceeding.

What that contemplates is that the parties have agreed in writing that in respect to an identified commercial transaction, the prima facie immunity will apply.  The breadth of that exception to the exception very much tends to emphasise that section 11 is concerned with the private law rights and obligations arising out of the commercial transaction.  It is not possible to contemplate with a regulatory proceeding that the ACCC is able to contract out of the Part IV Trade Practices Act claim with a prospective respondent.

FRENCH CJ:   It does not cover the position of State governments, does it?

MR GLEESON: No. Coming then to the other exception, which is subparagraph (a)(i), that exception, your Honours will see from section 22, does not apply to separate entities but does apply to the foreign State at its highest level. What lies behind this is, and it is explained in the ALRC report, was that there was a concern that where ‑ let us take the Commonwealth and a foreign State enter what is a commercial private law transaction, there will often be a range of dispute resolution mechanisms other than resort to the courts for ordinary private law remedies, and so because the transaction is at the very highest level, State to State, the prima facie rule in section 11(1) would be reversed. The mere fact that you enter a commercial transaction at the highest level does not impute a waiver of the immunity. The position is the reverse – you keep your immunity unless you, as States, agree not to have it.

What seems to have been done was to take a view that if one drops down a fraction to the separate entity, that assumption that States might have other recourse to dispute resolution mechanisms should not be the automatic rule, therefore, for this purpose, they will be treated the same as other proceedings and so they drop back down into (ii).  The net effect of that is that – if I could come to the crunch of it – if the ACCC sought to bring this proceeding against an airline which was the foreign State itself, for instance, an organ of government, then it would be expressly excluded by (i).

We would say you never get to this section at all, but the oddity of their case is that if Garuda chose through the Indonesian structures to operate as a direct arm of government, it would be immune from this proceeding, but if it does it as a separate entity, it is not immune.  That distinction, which necessarily would follow if their case were correct, is one that has little sense or logic to it, and is one we say is not reflected by these provisions.  I mentioned ‑ ‑ ‑

HEYDON J:   I am not sure that I am initially fully attracted to that argument.  There is a difference between the government and, if you like, a sort of subsidiary of the government or a body over which the government has influence.  There are many different forms of such creatures in Australian statutory law.  Does not the granting of greater freedom – let me start again.  If you are the government, there is no doubt something repugnant to traditional thinking in one government being hauled before the judicial arm of another government.  It is not so repugnant if what is hauled before the judicial arm is not really the government at all but something related to the government.

MR GLEESON:   I would say no to that.  There is still something prima facie repugnant to a separate entity, as defined, because what a separate entity is, it is something which is still an agency or an instrumentality of the foreign State – that is under the definition – so it still has that intimate connection with the foreign State and it is being called before the courts here to be punished and restrained for its conduct.  But perhaps I should at this point, given your Honour’s question, ask the Court to go to the ALRC Report No 24, which you should have, Foreign States Immunity because it directly deals with this provision.  It is in paragraph 93 of the report.  The second bullet point deals with “Contracting Out” which has become section 11(2)(a)(ii), and what is stated is:

It is recommended that the general approach taken by the proposed legislation should be one of allowing freedom of contract into or out of the jurisdiction.  Therefore it should be stated that the commercial transaction provision applies subject to any agreement to the contrary by the parties to the transaction.

That supports, I would submit, what I have said, that the concept of this contracting out is that the types of claims we are dealing with are claims arising between parties to the transaction under private law.  The next bullet point deals directly with the matter Justice Heydon raised.  It is what should happen where you have dealings between governments.  The report says:

States have other avenues for resolving differences amongst themselves.  Even where they contract in private law form they should not be taken to be subject to Australian courts unless the contract specifically so provides.

So the concern was not that an action of punishment and restraint might be permissible provided it is against a lower tier of the foreign State but impermissible against the State at the highest level.  The concern is rather this view that if there are dealings, indeed contractual dealings, between governments at the highest level, we will not impute from the dealing any agreement to submit to the jurisdiction of the court but we will leave it to those governments whether to positively submit to jurisdiction.  Then the final two sentences say:

there is no reason to treat state‑trading and other separate entities of foreign states as foreign states in this particular context.

The context being, whether there are other dispute mechanisms available.

CRENNAN J:   Is there any consideration anywhere given to proceedings brought by a public regulatory body?

MR GLEESON: Our submission, reading the entirety of this report, is that nowhere does it contemplate in any sense that a proceeding by a public regulatory body would be one where any of the exceptions would be activated. Mr Gageler’s outline has referred to a couple of paragraphs and perhaps the most direct one in answer to your Honour’s questions would be paragraph 161, but, on analysis, he does not deal with the point. Paragraph 161 is a provision in respect to the subject of criminal proceedings and the report notes that all the recent overseas legislation ‑ ‑ ‑

GUMMOW J:   We do not have 161.

HAYNE J:   We do not have 161.

GUMMOW J:   As usual, we are given bits and pieces.

MR GLEESON:   I am sorry, your Honours.

FRENCH CJ: Paragraph 161 relates to the exclusion of criminal proceedings.

MR GLEESON:   Yes.  In answer to your Honour Justice Crennan’s question, that is the closest anything gets but it does not deal with this point.  The critical sentence that Mr Gageler apparently relies upon is this:

Problems arising with the application of penal or regulatory legislation to foreign states cannot be resolved through the application of any general formula, but depend on the particular legislation in question.

I should wait until your Honours have got that.

GUMMOW J:   Was a Professor Crawford involved in this report?

MR GLEESON:   Yes.

FRENCH CJ:   I notice that footnote 41 gives some explanation for the exclusion of the Australian States and the Northern Territory from the operation of section 11(2).

MR GLEESON:   Was that paragraph 41, your Honour?

FRENCH CJ:   Footnote 41, page 54 under paragraph 93.

MR GLEESON: Yes. So, I went only to paragraph 161 to deal in advance with what apparently is a submission to be made that that reflects some deliberate decision that penal or regulatory legislation will be ‑ not resolved through any general formula will depend on the particular legislation, and thus it seems to be said you would need to find something in the Trade Practices Act excluding it in order to get the immunity, and that, we submit, is a misreading of both this paragraph and the whole purpose of the report.

GUMMOW J:   Which paragraph are you referring to?

MR GLEESON: Paragraph 161. Indeed, what really seems to flow from 161 in the last sentence is these are matters which do not directly affect civil rights and which have to be resolved primarily between the relevant governments or agencies and the foreign States in question. It really tends to confirm that the scope of the immunity, and of the exceptions, is to deal with civil rights, what we have called private law rights, and it is really giving no encouragement to a notion that the exceptions are a means to bring penal or regulatory actions against foreign States.

HAYNE J:   It seems to be proceeding from the assumption that the litigious world can be divided rigidly between civil one side and criminal the other, does it not?

MR GLEESON:   Yes.

GUMMOW J:   Which is not the lesson of life and experience.

MR GLEESON:   No, and it may be bear upon your Honours’ questions concerning the meaning of “proceedings”, but the assumption seemed to be that ‑ ‑ ‑

HAYNE J:   As to which, if you would be good enough to take account of references in my judgment in Labrador Liquor 216 CLR 161 at 197, to comparisons between Customs prosecutions in Australia which can lead to conviction and Customs proceedings in the United States which apparently yield monetary remedies to the United States but without conviction.

MR GLEESON:   If your Honour pleases.  While your Honours have the Law Reform Commission Report, it might be convenient just to mention a couple of other critical passages.  The first is commencing in Chapter 3 with paragraphs 35 through to 45.  There is an identification of a range of considerations which underlie the principle of immunity plus any exceptions that are to be recognised to it.  Within that list of considerations, those in paragraphs 37, 38, 39 and 40, amongst others, would strongly point against the exceptions being construed to permit penal or regulatory proceedings. 

By contrast, 43 does conform to the private law limitation we seek to put on the exceptions.  If you are in the area where the dispute with the foreign State really has a similar character to a dispute arising between private litigants and it is otherwise appropriately within jurisdiction, then Australia is entitled to assert its view that the courts are proper bodies to deal with the dispute and related to that is 44.  It would be unfair to the private litigant to be denied an avenue for redressing such case.  Now, 43 and 44 are essentially picking up the theme of Lord Wilberforce and they, we submit, underpin the exceptions.  The second that I wish to ‑ ‑ ‑

HAYNE J:   Just before you part from that, if you then look at paragraph 48 where there are identified some difficulties with applying a single criterion – reference is made to Brownlie’s work – and in the last line under half, that author points out that distinctions of the kind there considered depend on value judgement resting on political assumptions as to the proper sphere of State activity.  Now, in the context of separate entities controlled by a foreign State, pursuit of profit for that separate entity may loom rather larger than considerations of competitive markets in what for that entity are foreign jurisdictions, and one is left making value judgements of a kind about the proper sphere of State activity.

MR GLEESON:   I am not sure this answers or addresses your Honour’s question, but our submission on the exceptions is that they were intended to specifically, working together, define the resolution of the various value judgments that had to be made with a deliberate decision to move away from the American model which was much more to leave it to the courts on a case by case basis to resolve the value judgment matters.  Our broad submission is that you do not see anywhere in any of the exceptions scope for a value judgment to be made as to whether punishment against the foreign State, perhaps at the lesser level, is something which is appropriate for the Australian courts to do.

Your Honours see that over the page at paragraph 52 at the bottom where there is a recognition – this is halfway down – of a variety of considerations which are involved, and at the foot of that paragraph the balancing is to be done ultimately, the report says, not “by the courts on a case‑by‑case basis” but “by the legislature”. 

The next matter I had wished to go to was Chapter 7 itself which commences at paragraph 88.  This takes off from the same point that there will not be a simple distinction between private acts on the one hand and government acts on the other but, rather, there will be a series of provisions which will reflect the balance.  Indeed, about the middle of that paragraph it says:

For Australian purposes the Commission takes the view that, despite these arguments, it would be better to subdivide the category of ‘commercial activity’.  A series of provisions can reflect more precisely the various considerations governing whether immunity is to be withheld.

Then it goes on a little further to say for that reason broadly the UK model will be followed rather than the US or the Canadian model, and the UK Act has separate divisions governing a series of matters, Australia will add bills of exchange and then, really, in a discrete category are regarded “torts, property within the jurisdiction and admiralty matters”.  Now, continuing then within the commercial transaction discussion which commences at paragraph 90, the basic principle is stated in the first sentence at a level of generality and the report notes that it is easy to state it at that level but may be difficult to apply to facts.

What is then discussed is that the UK Act, which the Court should have, the State Immunity Act 1978, in section 3(3) offered a definition of “commercial transaction” where paragraphs (a) and (b) identify objectively three types of commercial transactions and then paragraph (c) opens a more general catch‑all. The report in dealing with that at paragraph 90 says:

Nor can it be argued that the provision is difficult to apply, operating as it does by simple objective criteria.

At that point it is speaking about section 3(3)(a) and (b). The report continues:

In these respects the provision satisfies the interests of private parties dealing with foreign states.

Your Honours see at footnote 11 that in particular:

the definition dealing with loans and guarantees was in fact drafted to meet the wishes of solicitors in the City of London to protect the interests of those having financial dealings with foreign states.

So that very much the approach was that “commercial transaction” would be defined in a way which ‑ ‑ ‑

GUMMOW J:   Well, Herbert Smith had some trouble with Carl Zeiss in East Germany, remember, in this period?

MR GLEESON:   Yes, and defined to meet those interests of private parties.  That concept of protecting legitimate interests of private parties your Honours will also see over the page near the end of that paragraph 90.  It is for that reason, namely, to have certainty, to protect the interests of private parties who do not know about motives, that one of the two critical changes was made in moving from the UK version to our version, and the critical change was that the rider at the end of paragraph (c) of the UK definition was not picked up in Australia.

Apart from that, our definition of “commercial transaction” is essentially a reordering of the UK definition where the generality of (c) has become the primary statement and (a) and (b) become examples which follow it.  One of the things that Justice Rares held was that the UK provision was of little assistance because it was drafted very differently.  We would submit that Justice Jacobson was correct and it is the forerunner in the model, save only for the specific point where a difference has emerged.

GUMMOW J:   What is the relationship between the UK Act and the US provision, which was two years earlier, was it not?  It was 1976, was it not, the US?

MR GLEESON:   Yes, 1976.  The structural relationship, your Honour?

GUMMOW J:   Yes.

MR GLEESON:   The US adopted a broader model which did not as specifically and precisely define each of the exceptions, leaving it more to the courts to develop on a case-by-case basis what would be the balance between and the divide between governmental and private activity, and Australia deliberately chose to move away from that model and follow the UK model.

GUMMOW J:   It is presently found in Title 28 of the Code.

FRENCH CJ:   Yes, 1605(a)(2), I think.

MR GLEESON:   Yes, and the definition of “commercial activity” is 1603(d).

GUMMOW J:   Yes, that is what I was after, actually. 

MR GLEESON:   The other aspect of the report I wish to go to concerned remedies, which is commencing with paragraph 136.  The paragraph commences by saying:

Remedies other than Seizure of Property.  So far it has been assumed that the successful plaintiff in an action against a foreign state would seek damages –

Again, the assumption appears to be ones in the realm of private law remedies arising out of the transaction between parties dealing with each other.  There is then a reference to courts having granted a broader range of:

remedies such as injunctions, including interlocutory and Mareva injunctions, specific performance, and orders for the recovery of property, should be available against foreign states.  There is a complete absence of discussion or decisions in civil law systems –

on whether to extend the exceptions to immunity to those remedies.  The United States legislation does not deal with the point.  In the UK there is a specific provision:

. . . that remedies of a personal nature like injunctions or orders for specific performance are not appropriate against States.  The ultimate sanction for such orders lies in contempt.  Clearly the processes for punishing contempt cannot be used against a foreign state.

So there is a specific exclusion of any of those private law equitable remedies in the UK model.  The Commission then took a broader view in paragraph 137, which was that remedies of an equitable character, such as injunctions or specific performance, would not be precluded even though the only means of enforcement might be “damages in default”.  And the reason they give is:

The basic principle is that, if jurisdiction is permissible, it should in the absence of special circumstances be possible to make it effective.

Now, we would submit that notwithstanding that broader view has been taken in Australia the availability of these remedies is again in a private law context, namely, that the rights arising from, for instance, the commercial transaction are not limited solely to damages but could include injunctions or specific performance.  That would be consistent with the provisional view your Honour Justice Hayne took in the Nauru Case, without having to decide the matter that a beneficiary might be able to obtain the injunction to restrain a trustee engaging in a commercial transaction which was in breach of trust.

What we do not see in this section, and this does come back to your Honour Justice Crennan’s earlier question, is any suggestion that it was contemplated that public law, public order sui juris type injunctions, in order to protect the workings of the Australian market were in any way contemplated by the exceptions.

GUMMOW J:   The Australian Act follows the UK Act in using your phrase “relating to a commercial transaction”.  Article 1605 in the United States talks about a case which has a special meaning for them, a case:

(2)in which the action is based upon a commercial activity –

MR GLEESON:   Yes.

GUMMOW J:   If our Act used that language, you would be in a much immediately happy position, would you not?

MR GLEESON:   Yes.

GUMMOW J:   You talk about a case based upon it suggests that that is how it is pleaded, as it were.

MR GLEESON:   Yes.  But essentially we are arguing for a meaning of concerns which, throughout this series of exceptions, identifies a case which seeks to vindicate private law rights arising out of a relevant transaction.  Your Honours, in terms of our outline, I have covered essentially the matters on pages 1 and 2.

FRENCH CJ:   Incidentally, at the time that the Commission brought out its report, were those provisions in the Trade Practices Act which allowed the ACCC to recover damages for individuals and also to establish findings of fact which can be relied upon by individuals in private actions?

MR GLEESON:   I will need to check that question, your Honour, if I could.

FRENCH CJ:   Yes.

HAYNE J:   Would section 13 of the Act have anything to say at all about such private actions?  That is 13 of the Foreign States Act.  I notice that the State is not immune for loss of or damage to tangible property.

MR GLEESON:   Yes.  We would be contending for a similar form of connection between the proceeding and that subject matter, tangible property.  Intangible property is in part dealt with in section 15 where certain copyright, design and trade mark proceedings do not attract the immunity and that, we submit, is consistent with a private law focus.  Interesting under subsection (2) where the alleged activity is limited to either importation or use, then there is a further limitation that the exception will only apply if there is an underlying commercial transaction.

In a similar sense, if one thinks of section 16, the underlying idea appears to be that if you have become a member of a corporation which has a relevant Australian link, then there is no offence to sovereignty if the ordinary rights arising between members are enforced by the court. The other section which hangs off commercial transaction is section 19 which is where suits on a bill of exchange will lead to immunity only where the underlying matter is a commercial transaction again. Your Honours, could I come to page 3 of our outline and then deal with two slightly broader matters of context that I have not touched on to date.

HEYDON J:   What is the international law you refer to in 5(a),line 4?

MR GLEESON:   That, in general, matters of punishment are local.  That principle, summarily expressed, is reflected in various ways.  We have given your Honours Huntington [1983] AC 150. The relevant passage commences at the foot of page 155.

GUMMOW J:   A lot of water has flowed under the bridge since Huntington v Attrill.

MR GLEESON:   Of course it has, your Honour, but as an underlying proposition that to take one aspect, penal judgments of foreign countries are not enforced or recognised in Australia either at common law or under the statute.  Under the Foreign Judgments Act 1991 judgments for a penalty are excluded from the scope of money judgments which are capable of being enforced here. So that, in general, the concept of punishment is something that is treated as local and the notion of punishment against a foreign State would have gone to the very heart of interference with its sovereignty and dignity and if that had been the purpose of the Act, one would have expected far clearer language.

Your Honours, the second matter of context we want to note which may be of assistance is this.  The Foreign Proceedings (Excess of Jurisdiction) Act was passed in Australia in 1984.  Your Honours should have ‑ ‑ ‑

FRENCH CJ:   This was in response to the Westinghouse litigation.

MR GLEESON:   In response to the Westinghouse Case. Your Honours should have the Act, and what it demonstrates is a series of provisions designed to ensure that long arm antitrust jurisdiction exercised overseas did not cause relevant harm to persons within the proper concern of Australia. The Act starts in section 3(1) with a definition of an antitrust law and then there are a raft of measures.

Firstly, under section 7 and following, the Attorney‑General can prohibit “production in a foreign court” of evidence in respect of such proceedings in appropriate circumstances, and that can lead to injunctions under section 8. Under section 9, the Attorney‑General can, if appropriately satisfied, prevent the enforcement of foreign antitrust judgments. That is backed by section 10, the recovery back provision of any excess moneys paid and costs provisions in section 11. Perhaps most significantly in sections 13 and 14, in a case that is really the direct reverse of the present:

Where:

(a)       under a law of a country other than Australia –

regulating trade and commerce action is taken by the government of that country or by an agency of it imposing obligations on persons carrying on business in Australia to do things in Australia, then the Attorney‑General has a power, if satisfied, to “prohibit the performance” of those obligations in Australia.

Likewise under section 14, the Attorney‑General can “prohibit compliance with foreign judgments” of that effect, backed up by offences in section 18.  What we take from that, and we have provided your Honours with the Second Reading Speech by Mr Bowen, is that in that particular context of the Westinghouse litigation relations between Australia and the United States had dramatically deteriorated.  They had been somewhat patched up by the antitrust co‑operation agreement of 1982 but it was felt important to pass this Act to provide what is described as a complete arsenal of defences to be used as a last resort where conflict could not otherwise be resolved.

Now, against that background we would submit that is unlikely in the extreme that Parliament in 1985 was intending to permit Australian regulators to do the very sort of thing, not just against overseas parties, but against overseas States themselves at the highest level, which had provoked this degree of very considerable tension.  Your Honours, that leaves me with two final matters, point 6 speaks for itself.

In relation to the judgments below, Justice Jacobson dealt with the subject between pages 105 and 109.  We would commend that reasoning to the Court.  The one matter which has advanced since his Honour’s judgment is that on page 107 when he refers at paragraph 122 to the judgment of Justice Burnton, that is the matter that has now been decided by the House of Lords in the NML Capital decision, but it is to the same effect, namely, the same distinction was being drawn that a proceeding to enforce a foreign judgment is not a proceeding in relation to a commercial transaction.

HAYNE J:   But whether or not there is some other form of immunity applicable in criminal proceedings, we begin, do we not, from the observation that this Act does not speak at all to criminal proceedings?

MR GLEESON: Yes, I accept that. For that reason, we dispute his concept that the 1985 Act can only operate by way of repeal, it can operate within its own field and once it is enacted, as your Honour the Chief Justice put to Mr Gageler, clearly enough, it governs proceedings in courts and tribunals, federal and State, and the grant of the immunity in section 9 is broad and general in its terms. The approach taken in paragraph 7 of the ALRC report with Mr Gageler questioned as to the utilisation of federal jurisdiction, we would submit, has more support to it than he put.

The reason it has support is that once one is in a relevant proceeding, whether otherwise in federal or State jurisdiction, where there is an arguable issue of immunity, the federal Act does cut in and bind the court or the tribunal in a number of ways.  One of them, for example, is section 27 which imposes a constraint upon the court that it cannot enter default judgment unless it forms a positive satisfaction that the foreign State is not immune.  Chief Justice Spigelman relied upon that provision in the Zhang litigation that we have given the reference to to say that this immunity operates without a foreign State even having to invoke it.  The court is bound to abide by it if it arises on the facts of the case. 

For that reason, we would submit that there is force in the proposition that in any case where the immunity is arguably available, any court or tribunal is bound to apply this federal law and therefore the proceedings are in federal jurisdiction even if the end result is I must not exercise jurisdiction any further.

FRENCH CJ:   If it is proceedings before an administrative tribunal, it is not in federal jurisdiction.

MR GLEESON:  Save for that issue, your Honour, yes. Now, Mr Gageler said the resolution of those questions may be unnecessary to this appeal. He did, however, hint at a proposition that because of his argument, the Court would reject our appeal because there is insufficiently clear language in section 11 to give it the limitation we contend for. That, we submit, is the wrong approach. Section 9 has granted the immunity in the clearest of terms and section 11, as an exception, can be given, we submit, the meaning we have contended for. That is the first matter I wish to address.

The second concerned the status of separate entities as opposed to the foreign State in its full glory. There was a hint of a submission that separate entities are second‑class citizens under this scheme and, indeed, are second‑class citizens in the United Kingdom and that, therefore, there might be a legislative intent that regulatory penal proceedings can proceed against them but not against the foreign State itself. That, we would submit, mistakes the role separate entities are given. The separate entity, by reason of section 22, has the same prima facie immunity as the foreign State itself, under section 9 and the exceptions are defined in precisely the same terms, save for the three carve‑outs.

So far we have addressed one of those three carve‑outs, but the three of them taken as a whole – that is, section 11(2)(a)(i), 16(1)(a) and 17(3) – your Honours will see are all of the same character.  That is identifying certain cases where there is a dealing solely between foreign States or between the Commonwealth and foreign States where, as the ALRC said, there was a desire to preserve the ability for alternative dispute resolution.  So that there is nothing evinced in the structure of the exceptions to create a notion that regulatory proceedings were intended to be contemplated against separate entities but not against foreign States themselves.

HAYNE J:   You describe these proceedings as regulatory proceedings.  What is the point of the attachment of the epithet?  Assume it to be a valid attachment, an apposite attachment, what is the point that you say follows from attaching it?

MR GLEESON:   That these proceedings concern not a commercial transaction, but a prohibition imposed by Australia on a species of commercial conduct and as regulatory proceedings they seek to establish the reach of that prohibition, they seek to penalise non‑conformance with it in the past and they seek to restrain non‑conformance with it in the future.

HAYNE J:   Be it so, so what?

MR GLEESON:   So what, that that proceeding ‑ ‑ ‑

HAYNE J:   Because the hypothesis is, is it not, that these are proceedings as defined?

MR GLEESON:   Yes.  That a proceeding of that character is not one which concerns a commercial transaction within section 11 because its focus is to vindicate a prohibition imposed by Australian law in that fashion and had it been the intention to bring such proceedings within the exception, there would have needed to have been language in one of the exceptions squarely focusing upon proceedings concerning prohibitions imposed by law.  I took your Honours to the only places where there is a reference in the exception to obligations imposed by Australian law and that is section 12(2) and section 20 and there is no equivalent language within section 11.

FRENCH CJ:   Just coming back to that term “regulatory” that Justice Hayne was discussing with you, you exclude from the class of proceeding which concerns a commercial transaction a proceeding for relief in respect of a contravention of the Act effected by a commercial transaction?

MR GLEESON:   Yes.

FRENCH CJ:   Now, does it matter to you whether that proceeding is brought by a public authority or by a private party?

MR GLEESON:   Our case is clearest because it is brought by a public authority, because what that discloses is that the purpose of the proceeding is to utilise the forces of one State to have declared through the courts that the conduct of another State is in breach of our law so as to lead to remedies of a public character, the public character being punishment raising issues of deterrence and injunction raising issues of restraint.  That is the case at its clearest and its best.

FRENCH CJ:   It is coming back to the jettisoning discussion we had with Justice Heydon.

MR GLEESON:   Yes.

FRENCH CJ:   An action by a private party for a declaration and perhaps injunctive relief and damages arising out of a contravention of a provision of the Act, be it Part IV or Part V, attracts the same argument so far as you are concerned?

MR GLEESON:   Primarily attracts the same arguments, but it does not have the full force of the public law nature of the proceeding, because it is possible that in the action by a private party, the focus of the court will be upon a particular commercial transaction which that party entered, the terms of that transaction, there might be an order under section 87 to vary the terms of the transaction, and it is much easier to accommodate that within the possibility of the rights recognised by the dealings between those particular parties.

Your Honours, to give an example from section 52, the Court has said many times that section 52 can be regarded in one sense as a norm of conduct which opens up what we would call public order remedies under section 80, for instance, and in other cases the contravention of section 52 becomes an element of what is truly a private cause of action for damages under section 82. Now, in that second case, it is much easier to see that as falling comfortably within the sphere of rights arising between parties engaged in a dealing, but in the first case it is closer to the situation we are dealing with here.

Another example, your Honour Justice Hayne mentioned your discussion in Labrador, where your Honour referred to – 216 CLR 161 at paragraph 114. Your Honour referred to civil penalty proceedings under two areas of Australian law; the present area and under the relevant companies legislation as having characteristics of both civil and criminal proceedings, and noting that:

The purposes of those proceedings include purposes of deterrence, and the consequences can be large and punishing.

It would be a logic of our argument that proceedings brought by ASIC on behalf of the Commonwealth for pecuniary penalties for contraventions of the Corporations Act would not be proceedings within section 11, and that result sits quite comfortably with all of the exceptions taken as a whole because the one exception specifically dealing with corporations is section 16, and it is concerned with the rights inter se arising between members of corporations not concerned with the public order penal proceedings which might be launched under the Corporations Act.

GUMMOW J:   I am still not quite sure of the sense in which this word jurisdiction has been used in the Trade Practices Act.  You may get some help from Laurie v Carroll 98 CLR 310 at page 323 where the Court referred to what Lord Haldane had said in one case and Justice Holmes had said in another, that “The foundation of the jurisdiction” in fact is, as Justice Holmes put it, “physical power” and he said:

No doubt there may be some extension of the means of acquiring jurisdiction beyond service or appearance but the foundation –

of physical power should not be overlooked because there has to be a compulsion of submission to the decree that is made.  You cannot, I think, physically compel foreign sovereigns without making war on them.

MR GLEESON:   Yes, and even if their representative happens to be within the jurisdiction and you otherwise attempt the personal service, which in the case of an ordinary citizen would be the exercise of power, there are particular differences with the character and status as a foreign State or its entity so that ‑ ‑ ‑

GUMMOW J:   The problem then is when we get into these entities, that sort of reasoning, the separate entity idea seems to involve some splitting off of those notions because they are just ordinary foreign corporations then.

MR GLEESON:   What we would submit is that, in fact, close and separate attention has been given within Parts 2, 3 and 4 to the three different aspects of exercise of power, the first being jurisdiction in the suit, that is Part II, the second being that the service and judgments, Part III ‑ ‑ ‑

HAYNE J:   Is it jurisdiction in the suit or is it conferral of an immunity, an immunity in a proceeding, that is, immunity in the sense of something that attaches to an identified personal class of persons and it is an immunity in a proceeding, a particular proceeding instituted by one party against another, and the Trade Practices Act provisions conferring jurisdiction are concerned with subject matter jurisdiction and the like, but this is, if we must use the metaphor, abstracting by way of immunity which is particularised.

MR GLEESON:   Yes, I would accept that, your Honour, and within that sphere, which is Part II, my submission is that the separate entity has almost for all purposes been treated as having the complete immunity and privilege of the foreign State itself.  The limitations are the minor ones I mentioned.

HAYNE J: Again might I just tease out one aspect of that. Is not section 11(2)(a) critically important in its distinguishing through section 22 between the foreign State itself and the separate entity? The bare fact that the party is a foreign State takes you outside the exception of 11(1), pitches you back into 9 and the general immunity, but the separate entity treated differently, see section 22.

MR GLEESON:   Yes, and the explanation we have proffered for that, as per the paragraph in the ALRC, was this notion.  If you are the foreign State per se and if the only parties to this particular proceeding concern persons of your level, that is other foreign States and/or the Commonwealth, the fact that you have engaged in what otherwise looks, smells and feels like a commercial transaction which will otherwise be, in effect, an imputed consent to the ordinary jurisdiction of the court, is deprived of that character of imputed consent. 

However, if you nevertheless wish, as part of that bargain, to be subject to the jurisdiction of the court, and you may wish to or need to by force of bargaining power, then section 10 will operate because you can always agree to submit to the jurisdiction of the court, including at the time of the original transaction. So that the theory seems simply to be where the dealing is between solely foreign States at the highest level, notwithstanding the transaction is otherwise commercial, you will retain your section 9 immunity unless you specifically bargain it away.

If you are one level down, which is the separate entity, you will, in such a case, be put in the flip or reverse position where you will prima facie lose your immunity by reason of choosing, electing to deal in a commercial transaction, but you can always, to use ugly language, contract back into your immunity by an agreement in writing.  You can always, through the process of agreement, place yourself in the same position that the foreign State is prima facie in.  The difference has been drawn clearly enough, but the difference seems to be really at the level of imputed consent through the statute that in the case of the separate entity, if you are engaging in the commercial transaction, you must bargain for the immunity which will be available to you.  If you are the foreign State, you will have it unless you bargain it away.

Now, what we draw from that is that, yes, a distinction has been drawn but in the area of freedom of contract, as the report puts it, that the freedom of contract is being respected at two different levels for two different types of entities.  What is not at all apparent from that is that some different notion is being drawn, that we intend to expose separate entities to regulatory or penal proceedings, whereas we do not do that to the foreign State itself and, as I submitted in‑chief, the concept of the otherwise agree in writing is one that simply does not make sense if the whole of section 11 moves beyond its true purpose which is, to put to summarily, to vindicate the obligations arising from the consensus expressed in a commercial transaction.

HAYNE J:   I am not sure that is right.  If you take, for example, the foreign State that issues bonds on the Australian market without a submission to jurisdiction, what happens when ASIC or somebody says there has been a touch of the misleading or deceptive?  So, yes, the Act reflects the way in which commerce operates, but where do we go from there?

MR GLEESON:   That the primary difference between the parties is that we seek to give a meaning to the connector in section 11 which we submit is consistent with the background common law development which is consistent with protecting rights of private parties which the ALRC was referring to, and in a circumstance where no party has identified any decision in any of the relevant jurisdictions in 1985 or since then where this type of exception invites penal proceedings.

None of the US antitrust proceedings referred to by Mr Gageler, as your Honour the Chief Justice asked him, referred to this type of proceeding.  They are private suits for a remedy.  In the end, it comes down to section 11 performing its particular role within a schemer of exceptions, and that being that where the foreign State or the entity has engaged in a particular commercial transaction and the proceedings seek to vindicate rights or obligations arising from that transaction in favour of other parties, then it is deemed that the offence to the dignity and sovereignty of the foreign State is not so great as to accord it immunity.

Your Honours, in terms of the note we wish to provide on the question this morning, could we have perhaps seven days for that?

FRENCH CJ:   Yes, very well.  If there is any response necessary, Mr Gageler, you can do likewise.

MR GLEESON:   May it please the Court.

FRENCH CJ:   Yes.

HEYDON J:   Is there some agreement about costs, Mr Gleeson?

GUMMOW J:   I am not sure it has been sought.

FRENCH CJ:   I think there is an order for costs, order 204, is there not, in the appeal notice?

HEYDON J:   Yes, but Mr Gageler, what if he wins?

MR GAGELER:   We seek costs, your Honour.

HEYDON J:   You do seek costs.

MR GAGELER:   Yes.

MR GLEESON:   We seek the order at page 199 in the event ....., your Honour.

FRENCH CJ:   The Court will reserve its decision.  The Court adjourns until 10.15 tomorrow morning.

AT 3.24 PM THE MATTER WAS ADJOURNED