Papua New Guinea v Sandline

IN THE SUPREME COURT
OF QUEENSLAND OS No. 10110 of 1998
Brisbane
Before Mr Justice Ambrose
[Papua New Guinea v. Sandline]
In the matter of the Commercial Arbitration Act 1990
And

In the matter of an application pursuant to Section 38 thereof by
THE INDEPENDENT STATE OF PAPUA NEW GUINEA against SANDLINE INTERNATIONAL INC

REASONS FOR JUDGMENT - B.W. AMBROSE J.
Delivered the 22nd day of December 1998

This is an application by Sandline International Inc (“Sandline”) for an order that Independent State of Papua New Guinea (“Papua New Guinea”) provide security in the sum of $70,600 for costs of an application which Papua New Guinea brings against Sandline under s.38(4) of the Commercial Arbitration Act 1990 (Qld) for leave to appeal to the Supreme Court of Queensland against an interim arbitral award made at Cairns on 15 October 1998 holding that Sandline was entitled to recover from Papua New Guinea the sum of US$18 million together with interest at the rate of 8% from 9 March 1997 to the date of the award and thereafter at the same rate until payment. There were other orders made in the award but it is unnecessary for the purpose of this application to refer to them.
It is convenient to state very briefly the history of events which have led finally to this application which has been staunchly resisted by Papua New Guinea. On 31 January 1997, Papua New Guinea and Sandline agreed that Sandline should provide within the territory of that state the manpower, equipment and services specified in the agreement under Clause 2.
Under Clause 3, Sandline undertook to train a Special Forces Unit which was part of the Military/Special Constable Forces of Papua New Guinea in military and other skills to assist the Armed Forces of Papua New Guinea to overcome by military means a group referred to in the agreement as “the illegal and unrecognised Bouganville Revolutionary Army”. Under Clause 2.2, Sandline was required to have all of its personnel involved in the performance of its obligations under the contract enrolled as “Special Constables” of Papua New Guinea who should then carry appropriate ID cards “in order to legally undertake their assigned roles”.
Under Clause 2.1(g) it was provided:
“(g)A project co-ordinator who together with the strike force commander and his senior intelligence officer shall maintain liaison with and provide strategic and operational briefings and advice to the Prime Minister, Defence Minister, NEC, NSC, the Commander of the PNG Defence Forces and his delegated officers as may from time to time be required or requested.”
Clause 4.2 provided:
“The State will ensure that full co-operation is provided from within its organisation and that of the PNG Defence Forces. The Commanders of the PNG Defence Forces and Sandline shall form a joint liaison and planning team for the duration of this agreement. The operational deployment of Sandline personnel and equipment is to be jointly determined by the Commander PNG Defence Forces and Sandline’s Commander taking account of their assessment of the risk and value thereof.”
Under Clause 5.1 Sandline’s “inclusive fee” under the agreement was US$36 million of which 50% was payable upon the making of the agreement (described as the “initial payment”) and the balance was payable within 30 days of Sandline’s deploying a 16 man Command Administration and Training Team (CATT) within the Territory of Papua New Guinea at the places specified in the agreement.
It emerges from the material that in fact the initial payment was made. However, subsequent to the deployment of the CATT by Sandline, events occurred within New Guinea which led to the expulsion of the members of CATT, together with the confiscation apparently of equipment and money which that team had taken to New Guinea upon its deployment there pursuant to the contract.
It would be unhelpful and it is unnecessary upon this application to further refer to events which followed upon the expulsion of the Sandline CATT personnel. It suffices to say that Sandline pursuant to Clause 6.2 of the agreement notified Papua New Guinea in writing of the dispute which had arisen concerning payment of the balance of the fee by Papua New Guinea to Sandline under the terms of the contract. Clause 6.2 provided:
“6.2 The aggrieved party shall notify the other by sending a Notice of Dispute in writing and where amicable settlement is not possible within 30 days thereafter refer the matter to arbitration in conformity with the UNCITRAL Rules applying thereto.”
Initially Papua New Guinea opposed the claim by Sandline on the basis that the contract between them had been frustrated by the events that had occurred in Papua New Guinea which resulted in the expulsion of the Sandline personnel. Cairns in the State of Queensland was selected as the site at which the arbitrators should sit. The arbitrators were the Rt. Hon. Sir Edward Summers, the Rt. Hon. Sir Michael Kerr and The Hon. Sir Daryl Dawson. Upon the first appearance before the arbitrators at Cairns, Papua New Guinea sought and obtained leave to amend its defence to raise illegality based essentially upon the provisions of the Constitution of Papua New Guinea and certain legislation within that State.
No evidence was offered to support the defence of frustration. Having regard to the lateness of the amendment, the arbitral hearing was then adjourned from Cairns to London where eventually the defence of illegality was argued.
In their award published in Cairns on 15 October 1998, the arbitrators purporting to apply the Laws of England as the agreement required under Clause 6.3, rejected the defence of illegality.
It was in July 1997 that Sandline invoked the arbitration clause in the agreement it had with Papua New Guinea. The arbitrators published their award on 15 October 1998.
On 30 October 1998, Papua New Guinea brought its application for leave to appeal against the decision of the arbitrators pursuant to s. 38 of the Commercial Arbitration Act 1990 (Qld). It was set down for hearing for one day on 18 December 1998 - the last day of the legal year.
There is no contest as to the right of Papua New Guinea to seek leave of this Court to appeal against the award pursuant to s. 38(4) of the Commercial Arbitration Act 1990. However, leave under s. 38 may only be granted in limited circumstances.
Section 38(5) provides:
“(5)The Supreme Court shall not grant leave under sub-section (4)(b) unless it considers that -
(a)having regard to all the circumstances the determination of the question of law concerned could substantially affect the rights of one or more parties to the arbitration agreement; and
(b)there is -
(i)a manifest error of law on the face of the award; or
(ii)strong evidence that the arbitrator or umpire made an error of law and that the determination of the question may add or may be likely to add substantially to the certainty of commercial law.”
Sandline opposes the application of Papua New Guinea for leave to appeal on the basis that on the face of the award and on the facts to be canvassed upon the application for leave to appeal Papua New Guinea is unable to establish the matters required either under (5)(a) or (5)(b).
Consequently it is the case for Sandline that the prospects for the success of the application for leave to appeal are slight - essentially on the ground that the award of the arbitrators was clearly correct upon the application of English Law to the facts canvassed before them.
This, it is said, will place an almost insuperable hurdle to Papua New Guinea demonstrating “a manifest error of law” on the face of the award as required under s. 38(5)(b)(i) of the Act.
On 3 December 1998, Sandline applied by summons for an order that Papua New Guinea provide security for costs in the sum of approximately $70,000 in a form acceptable to the Registrar of this Court. There seemed little argument that an acceptable security would be perhaps a bank guarantee which could be procured at a charge of perhaps 8% or 9% per annum of the amount of the security provided.
Although the application for leave to appeal was listed for hearing for one day on 18 December 1998, the application for security was not made until 17 December 1998 by which time as the result of the late adducing of expert opinion on English Law relevant to the rejection by the arbitrators of the defence of illegality, it was agreed by both sides that the leave application could not conceivably conclude within one day. That application was therefore adjourned to the Callover List with the expectation that it will be listed for hearing for two or perhaps three days in March 1999.
Sandline also seeks an order that Papua New Guinea’s application for leave to appeal be stayed until the security sought has been provided.
Both Sandline and Papua New Guinea agree that this Court has a discretion to make the order for security sought. Sandline advances circumstances which favour the exercise of that discretion. Papua New Guinea advances circumstances which it contends should lead to a refusal of the application.
Undoubtedly the Court has a discretion to require that an appellant provide security for the costs incurred by a successful respondent to its appeal. I refer to R.S.C. O. 33 r. 23, Skinner v. Cribb(No. 2) [1878] 5 S.C.R. 141 and Stock & Anor v. Woods & Anor [1957] St.R.Qd. at p. 65 per Philp J.
Much time was spent canvassing these matters and it is convenient to state them briefly.
Circumstances upon which Sandline Relies:
(1)Papua New Guinea is a foreign State which has no assets in the State of Queensland - or for that matter in Australia.
(2)Papua New Guinea already owes Sandline $US150,000 pursuant to an earlier consultancy agreement and $US400,000 as a result of expropriation of that sum from the person in charge of the CATT Team in Papua New Guinea when the Sandline personnel were expelled after the deployment by Sandline men and equipment pursuant to the terms of the agreement.
(3)Because Papua New Guinea is a Sovereign State, it is entitled within its own jurisdiction for reasons of its political policy of the moment to refuse to honour promptly obligations imposed upon it by any judgment obtained by Sandline in this Court for costs in the event that Papua New Guinea fails in its application to obtain leave to appeal against the arbitral award.
(4)The risks involved in attempting to register any order for costs made in its favour in this Court and the constraints imposed upon enforcement of such an order by the Claims By and Against the State Act 1996 (P.N.G.) (Sovereign Risk).
(5)Papua New Guinea’s opposition to the application for provision of a modest sum on the ground inter alia of the “principle” or “policy” upon which its relied in seeking to set aside an order in the High Court in England on 24 November 1998 that Sandline be at liberty to enforce the interim award on the ground that it would be contrary to the public policy of Papua New Guinea to enforce the award on the ground identified in s. 103(3) of the Arbitration Act 1996 (Eng) i.e.
“(3)Recognition or enforcement of the award may also be refused if --- it would be contrary to public policy to recognise or enforce the award.”
Were the application of Papua New Guinea for leave to appeal against the arbitral award unsuccessful, one would think that this Court would, in the absence of very good reason to the contrary, order that Papua New Guinea pay the costs of Sandline upon that application. Should such an order be made then of course the costs would be taxed and eventually a judgment for the taxed costs would be obtained in this Court against Papua New Guinea. The only way in which that judgment could then be executed one would think in the circumstances of the case would be for Sandline to seek to register that judgment with the National Court of Justice in Papua New Guinea as a foreign judgment under s.3 of the Reciprocal Enforcement of Judgments Act (PNG).
Under s. 3(4) of that Act, it is provided:
“(4)Subject to subsection (5) -
(a)A registered judgment shall for the purposes of execution be of the same force and effect; and
(b)Proceedings may be taken on a registered judgment; and
(c)The sum for which a judgment is registered shall carry interest; and
(d)The registering court shall have the same control over the execution of the registered judgment,
as if the judgment had been a judgment originally given in the registering court and entered on the date of registration.”
(5)Execution shall not issue on the judgment so long as under this part and any Rules of Court made for the purposes of s. 4 it is competent for any party to make an application to have the registration of the judgment set aside or where such application is made until after the application has been finally determined.
(6)Where the sum payable under a judgment that is to be registered is expressed in a currency other than Papua New Guinea currency the judgment shall be registered as if it were a judgment for such sum in Papua New Guinea currency as, on the basis of the rate of exchange prevailing at the date of judgment of the original court is equivalent to the sum so payable.”
Under s.5(1)(a)(v) it is provided inter alia:
“(1)On an application duly made by any party against whom a registered judgment may be enforced, the registration of the judgment -
(a)shall be set aside if the registering court is satisfied that -
---
(v)the enforcement of the judgment would be contrary to public policy in the country of the registering court.”
It is interesting to note that on 29 October 1998 Sandline obtained leave in the High Court of Justice in England to enforce the interim award for $US18 million, Papua New Guinea being given liberty to apply to set aside that order.
An application was in fact made by Papua New Guinea for an order the effect of which was to stay execution pending the determination of any appeal instituted in this Court against the award. In support of that application however, the solicitors for Papua New Guinea filed an affidavit in which it was clearly asserted that it would be against the policy of Papua New Guinea to meet the judgment which had been registered in the High Court having regard to s. 103(3) of the Arbitration Act 1996 (Eng).
A judgment for costs obtained against Papua New Guinea is enforceable pursuant to the Claims By and Against the State Act 1996. Section 12 (2) of that Act provides:
“(2)Notwithstanding anything in the National Court Rules a court giving judgment against the State may not include any order as to time or method of payment for satisfaction of the judgment.”
Section 13 provides:
“13.No Execution Against The State
(1)In any suit, execution or attachment or process in the nature of execution or attachment may not be issued against the property or revenue of the State;
(2)Where a judgment is given against the State the registrar, clerk or other proper officer of the court by which the judgment is given shall issue a certificate in Form 1 to the party in whose favour the judgment is given.”
Section 14 provides:
“14.Satisfaction of Judgment Against The State
(1)The certificate referred to in s. 13(2) shall be served on the Solicitor General by:
(a)personal service; or
(b)leaving the document at the office of the Solicitor General
--- etc
(2)The Solicitor General shall within 60 days from the date of service upon him of the certificate under s. 13(2) endorse the certificate in Form 1;
(3)Upon receipt of the certificate of a judgment against the State bearing the Solicitor General’s endorsement that judgment may be satisfied, the Departmental Head responsible for finance matters shall within a reasonable time satisfy the judgment out of moneys legally available.
(4)Any payment in satisfaction of judgment may in the absolute discretion of the Departmental Head responsible for finance matters be made by instalments provided the judgment is thereby satisfied within a reasonable time.
(5)No action
(a)for or in the nature of mandamus; or
(b)for contempt of court;
or otherwise lies against the Solicitor General or the Departmental Head responsible for finance matters in respect of the satisfaction of a judgment
under this Act other than for failure to observe the requirements of subsection (2), (3) or (4) as the case may be, or unless other exceptional circumstances can be shown to the satisfaction of the court.”
In an affidavit of Michael Newall Wilson, a solicitor and barrister in the National Court of Papua New Guinea, he deposes that “moneys legally available” within the meaning of s.14(3) of the Claims By And Against The State Act 1996 have been construed to mean in Papua New Guinea those moneys appropriated in the budget for the satisfaction of judgments entered against the State.
He deposes to the fact that two budgets delivered by Papua New Guinea during 1998 failed to make provision for payment of any judgment creditors of the State. According to Mr Wilson neither budget made any provision for moneys to be paid pursuant to the “Claims Against the State Vote” from which voted sum judgment creditors are paid.
In particular, he refers also to the fact that in the last two budgets no provision has been made for the payment of 48,000,000 kina to various judgment creditors referred to in an affidavit of Mr Bloemendal but in particular to National Stevedores a domestic judgment creditor which apparently obtained a judgment against the State for 25,000,000 kina.
Although strenuous objection was taken on behalf of Papua New Guinea to reference to the state of the public debt in Papua New Guinea, Mr Wilson merely refers to the content of Volume 1 of the Economic and Development Policies November 1998: Paragraph 2.7 Public Debt, which is part of the published Budget Papers. It would be unprofitable for me to refer to the whole of that extract. After referring to the effect of the declining exchange rate on the public debt, the Budget Paper, obviously published by the State, observes that the public debt during 1996 and 1997 had grown by 1093.8 million kina. It is observed:
“In 1998 under the projected fiscal program a further addition of K115.3 million (before exchange rate adjustments) is expected to be added to the stock of debt.
The declining kina poses grave ramifications for the kina equivalent of the stock of foreign debt. If the value of the kina at the end of 1998 is the assumed average of the 1998 budget of US$0.45 this will increase the kina value of the end - 1997 stock of debt by K1270.7 million.”
It is Sandline’s contention that when one looks at the level of public debt and the likelihood that it will increase as published by Papua New Guinea in its own Budget Papers in the context of its failure for whatever reason to meet or satisfy judgments already entered against it to the extent of millions of kina, and the ability of the State to control payment of its judgment debts by simply declining to make provision for moneys necessary to meet those judgments in its Budget so that there are no “moneys available” to meet them and when one keeps in mind the ability of a National Court to decline to register a judgment if the registering court is satisfied that the enforcement of the registered judgment would be contrary to public policy, in my view it is understandable that Sandline contends that it would be at risk of recovering any judgment for costs which it might obtain against Papua New Guinea if it were required to do so by means only of the Reciprocal Enforcement of Judgments Act having regard to the provisions of the Claims By and Against the State Act of 1996 to which I have referred.
There is no suggestion upon the material that there would be the slightest risk that Papua New Guinea’s application for leave to appeal against the arbitral award would be stifled if provision of the security sought is ordered. The only result of such an order being made should Papua New Guinea fail upon its application for leave to proceed, would be that Sandline would have a fund within the jurisdiction against which it could readily execute any judgment for costs it recovered upon that application.

The appeal which Papua New Guinea seeks to bring against the arbitral award delivered in October 1998 is not against any determination on the part of the arbitrators as to the legality and/or enforceability of that agreement under the law of Papua New Guinea or within that State. Indeed the arbitrators expressly refrained from embarking upon consideration of that question on the grounds that it was irrelevant on the facts of the case which required application of English law to resolve the dispute; they held that English law incorporated rules of International law and that at the end of the day even if a court in Papua New Guinea were to rule that the agreement was illegal having regard to the domestic legislation of that State (including its Constitution) upon the facts canvassed before it that would not for the reasons given at length in the arbitral award render the agreement unenforceable or illegal according to the law of England.
It is both unnecessary and undesirable for me to embark upon any consideration of that determination which is fully recorded in the award. There is some disputation between experts as to whether in fact the agreement and its performance was even arguably illegal under the domestic law of New Guinea and if it was, whether that fact would be determinative of the question whether the agreement would be unenforceable under English law.
It is unnecessary for me to embark upon consideration of the divergent views of such experts. For present purposes it suffices to say that on the material placed before me it could not be contended that the grounds of appeal based upon the determination of the arbitrators that the agreement was not unenforceable by reason of its illegality even had the laws of Papua New Guinea been adopted by the parties as the proper law of the contract it would have there been unenforceable upon proper construction of its domestic legislation. The arbitrators expressly refrained from embarking upon consideration of that point and simply determined that even assuming that it were so unenforceable in Papua New Guinea, that did not affect the enforceability of the contract under English law having regard to the fact that one of the parties to the contract was a Sovereign State and the other was a corporation foreign to that State and that both parties to the agreement had agreed that it should be the law of England which governed their contractual rights rather than that of Papua New Guinea where the agreement was in fact executed.
The only evidence from an expert in the law of Papua New Guinea is to the effect that there are no compelling reasons on a factual basis or having regard to the terms of the agreement to assume that the agreement would not have been enforceable in Papua New Guinea at any material time. There is no evidence referred to upon this application at least by Papua New Guinea to explain the basis in fact for its contention that on its domestic legislation and Constitution the agreement is illegal.
I observe merely that on the basis that the application for leave to appeal would proceed on 18 December 1998, I obtained from both Papua New Guinea and Sandline extensive material with volumes of legal authority touching on the matter relevant to the determination of that application. I have had the opportunity of reading various opinions touching on the question of illegality and the observations of Mr Griffin as to the validity of the underlying assumptions upon which some opinion has been expressed that the agreement was invalid according to the domestic laws of Papua New Guinea.
It is quite unnecessary and indeed would be quite unhelpful for me to attempt to determine these issues upon an application of this kind. However, having considered all the material which was to be canvassed had the application for leave to appeal proceeded on 18 December 1998, as well as all the material that was read and canvassed upon the application for security for costs heard on 17 December 1998, I have come to the conclusion that there is at least some prospect of Papua New Guinea failing to obtain leave to appeal against the arbitral award - particularly since its application is opposed by Sandline. There is some prospect therefore of Sandline obtaining an order for its costs of opposing that application.
If Sandline is left to recover such costs by relying upon the Reciprocal Enforcement of Judgments Act of Papua New Guinea read with the Claims By and Against the Government Act of 1996 of that State, I conclude that there will be some risk, if not indeed an appreciable risk that Sandline may find it difficult to obtain an expeditious payment of any judgment for costs that it might obtain in this Court.
I propose to apply the long standing principle stated in Colbran “Security for Costs” 1993 at pp.136-7 that:
“When the sole plaintiff is resident -- out of the jurisdiction and whether such plaintiff is a Sovereign, a Sovereign State, a corporation or an individual any defendant may require the plaintiff -- to give security for costs.”
In Halsbury (4th Ed) Vol. 18 p.1559 it is observed:
“When a foreign State sues in an English court it must comply with the procedural rules of the court. Thus the foreign state may be required to furnish security for costs ---.”
It is not unusual for a court to order security to be given by a foreign party without assets within the jurisdiction who seeks to institute an appeal against an arbitral award - irrespective of which party to the dispute actually commenced the arbitration. In this respect I refer to the observations of Robert Goff J. in Mondial Trading Co. v. Gill et anor [1980] 2 L.L.R. 376 at 380; The Oinoussian Virtue (1981) 2 All E.R. 887 at 894(i) and The Wengiang (1981) 2 L.L.R. 308 at 315. Although those cases involved the imposition of provision of security for costs as a condition of the grant of leave to appeal, in my view they recognise a principle equally applicable upon applications of the kind before me.
Circumstances Upon Which Papua New Guinea Relies
(1)Papua New Guinea is a Sovereign State and this Court ought as a matter of general principle and as a matter of comity not require it to provide security for costs reasonably incurred by Sandline upon the application for leave to appeal.
(2)While there is no suggestion that its application for leave to appeal will be “stultified” if an order for security is made it would amount to an insult offered by this Court to a Sovereign State to require security to be provided before the application of Papua New Guinea will be heard.
(3)Because Papua New Guinea is a friendly Sovereign State vis á vis Australia with which it has statutory provision for reciprocal enforcement of judgments, this Court ought be “very slow on an application for security for costs to start to form views about the minutiae of enforcement of judgments against Papua New Guinea” in that State.
(4)Before embarking upon consideration of an application of the kind brought by Sandline this Court ought “seek the guidance of the Executive” with respect to matters involving “foreign affairs”.
(5)This Court ought be “very slow to form conclusions or express them about the conduct of a Sovereign friendly State in the context of an application such as this”.
(6)That an applicant for relief in this Court is a “friendly foreign State” is a factor which militates against the exercise of a discretion which would normally incline towards the requirement that a foreign applicant with no assets within the jurisdiction provide security for costs.
(7)This Court in Queensland is the only place to which Papua New Guinea may resort to seek leave to appeal against the arbitral award; this results from the agreement between the parties to the arbitration that the site of the arbitral hearing should be within the State of Queensland and the application which Papua New Guinea makes for leave to appeal ought not be dealt with as “a case of a foreigner resorting here in the normal way”.
(8)This Court ought be reluctant “to grant security in favour of a party which is the “commercial aggressor” in the proceedings. In effect Papua New Guinea ought be considered to be a “defendant” because Sandline sought relief under the terms of the agreement it had with Papua New Guinea which resulted in the arbitral award made against Papua New Guinea for the payment of $US18 million. Because defendants are never required to provide security for costs it would be unjust to require Papua New Guinea to give security for costs of its application for leave to appeal.
(9)To the extent that any security for costs ought be given it should be limited to the costs of registering in Papua New Guinea any order for costs that might be made against Papua New Guinea should it fail in its application for leave to appeal.
(10)It would be incorrect to pay any regard to the prospects of success or lack of them for Papua New Guinea upon its application for leave to appeal.
(11)Very little, if any weight ought be given to any difficulties that might arise in the enforcement of any order for costs made by this Court against Papua New Guinea in the National Court of Papua New Guinea.
(12)To order that Papua New Guinea provide security for costs recovered by Sandline upon the application for leave to appeal would be to “advantage” Sandline against “a friendly foreign State”.
(13)The application for leave to appeal ought not be regarded as an appellate procedure upon which Papua New Guinea has embarked but rather as a “de novo application” in which Papua New Guinea ought be characterized as a defendant.
(14)While Papua New Guinea would have the power to oppose registration of any order for costs made against it in this Court on the basis that it was contrary to public policy, nevertheless the legal representatives of Papua New Guinea have been instructed to inform the Court that it would pay the amount of any judgment or order for costs registered in Papua New Guinea. Presumably this undertaking would be subject to compliance with the provisions of the Claims By and Against the Government Act of 1996 to which I have referred.
(15)While the arbitrators did not pronounce upon the validity of the agreement in accordance with the laws of Papua New Guinea but assuming that it was illegal under the domestic laws of that state rejected that as a valid defence, nevertheless Sandline seeks to canvass the validity of the agreement under the law of Papua New Guinea as being relevant to the matter arising for consideration under s. 38(5)(a).
No authority was cited to support the proposition that the circumstances 1 to 7 or 12 to 14 have ever been held to be relevant to the exercise of a discretion upon an application by a foreign respondent for security for costs of an application brought by a foreign state in this Court. The only authorities cited which seem to relate to such matters suggest that they are not relevant. I refer to Otto, King of Greece v. Wright [1837] Q.B. Dowl Pract. Cas. 695, 725 at 726 per Littledale J; Imperial Majesty Don Pedro the Second Emperor of Brazil v. Robinson & Ors [1837] K.B. 6 Ad & El 802; 112 E.R. 308 per Ld Denman Ch. J. and Republic of Costa Rica v. Erlanger [1876] 3 Ch.D. 62 at p. 68-69 per James and Mellish L.J.J.
With respect to the contention by Papua New Guinea that evidence of a lawyer in practice in Papua New Guinea as to the necessity for a budget appropriation of funds to meet a judgment given against Papua New Guinea, is inadmissible and “scandalous”, it is contended on behalf of Sandline that that opinion is clearly supported in the judgment of Sir Owen Dixon in New South Wales v. Bardolf (1934) 52 C.L.R. 455 where in considering similar legislation His Honour commented upon the manner in which a certificate of judgment issued against the State of New South Wales was satisfied by a Parliamentary appropriation upon the issue of a certificate of judgment upon receipt of which the Treasurer satisfied that judgment out of moneys which had become “legally available” upon that appropriation. He observed at p. 506-7:
“These provisions serve to measure the liability to which the Crown may be adjudged. It is not absolute but to pay out of moneys made available under the law of the state. They “recognise the principle that the liability of the Crown in right of the States are subject to parliamentary appropriation of funds.”
The funds became “legally available” (presumably as they still do in Papua New Guinea) upon and after budgetary appropriation of a kind similar to that constituted by the “Claims Against the State Vote” to which Mr Wilson referred in his affidavit.
In Aeronave S.P.A. v. Westland Charterers (1971) 1 W.L.R. 1445 at 1449 Denning L.J. considering a case where there was no provision for the reciprocal enforcement of foreign judgments in the country of a foreign litigant observed that even if there were, that would not be a ground for refusing to require foreigners commencing action in England to give security for the defendants costs. His Lordship observed:
“Many arbitration agreements provide for arbitration in England: but that has never been considered to be a ground for refusing to order security for costs in an action to be brought in England.”
I find the observations of Gaudron J. in Dillon v. Baltic Shipping (1991) 65 A.L.J.R. 647 at 649 (Col. 1-2) and those of McHugh J. in P.S. Chillarom & Co. v. China Odeon Shipping Co. (1991) 65 A.L.J.R 642 at 643 (Col. 1 C-D) as to the weight to be given to the possibility of that recovery of costs against a foreign appellant might entail difficulties not ordinarily encountered of more assistance than I do the observations of Young J. in the Classic Ceramic case (1994) 13 A.C.S.R. 263 at 265-266 as to the characterisation of one party in commercial litigation as “an aggressor”. The nature of the litigation in that case and the cases referred to in it is quite different from the nature of the application which Papua New Guinea pursues in this Court.
In Kent Heating Ltd. v. Cook-on Gas Products Pty. Ltd. (1984) 58 A.L.R. 277 at 279 l. 40-45 Sheppard J. referred to the possibility of difficulty in getting money out of a foreign country upon registration of a reciprocal judgment because of “exchange considerations” as being a matter for consideration.
In Energy Drilling Inc. v. Petroz N.L. & Ors (1989) A.T.P.R. 40-954 Gummow J. at 50-422 applied Kent Heating Ltd. v. Cook-on Gas Products Pty. Ltd. & Anor and observed:
“The purpose of ordinary security for costs against an applicant ordinarily resident outside the jurisdiction is to ensure that a successful respondent will have a fund within the jurisdiction of this Court against which it can enforce the judgment for costs, so that the respondent does not bear the risk as to the certainty of enforcement in the foreign country and as to the time and complexity of the action there which might be necessary to effect enforcement.”
In Thune v. London Properties Ltd. (1990) 1 W.C.R. 562 Bingham L.J. (with whom Taylor and Farquherson L.J.J. agreed) observed at p. 573 C-D:
“Thus the defendants are put to the very great cost of defending this expensive litigation with the risk however small that if they are ultimately successful they will be unable to recover their taxed costs despite the ease of procedural enforcement in Norway --- this is a risk to which the defendants should not be put --- and security should be given ---”.
I observe on the facts of the present case merely that the content of the Budget Papers to which I have already referred records some apprehension as to the possible effects on the Kina Exchange Rate as the result of the matters analysed. It is interesting to observe that the Exchange Rate applied in the enforcement of foreign judgments registered in Papua New Guinea is that applicable at the time the foreign judgment or order was made and not at the time when it is eventually registered or when there are sufficient “funds available” as the result of a budgetary appropriation effected by a “Claims Against the State Vote” to permit its lawful satisfaction by the State.
Sandline refers to affidavit evidence adduced on behalf of Papua New Guinea in the High Court in England where that State opposed the enforcement of the award made in favour of Sandline upon the arbitration on the ground that it would be “contrary to public policy” to permit it to be so enforced.
In the course of the hearing counsel for Papua New Guinea recorded that it had made:
“an open offer to pay $5,000 security for costs based upon the principle that in circumstances like the present the most that they would be entitled to would be the additional costs which might be incurred in registering a judgment in Papua New Guinea - the initial costs of registering a judgment for costs of this Court in Papua New Guinea. In other words, if in the end result on the substantive application this Court dismisses our application and orders costs to be paid then in that event that is a judgment of this Court which can be enforced - registered in Papua New Guinea and enforced according to the laws of that country”.
This offer made on behalf of Papua New Guinea was obviously made in the light of orders made in Connop v. Verena Pty. Ltd. (1984) 1 N.S.W.L.R. 71 and Barton v. Minister for Foreign Affairs (1984) 54 A.L.R. 586 and particularly at pp. 592-593 per Morling J.
I gain no assistance from the observations in those cases which seem to have been directed at least to some extent to the plight of impecunious plaintiffs who were “natural persons” who were ordinarily resident outside the jurisdiction. This application involves a foreign state and a foreign corporation. The only reason Papua New Guinea seeks leave to appeal to this Court pursuant to s.38(4) of the Commercial Arbitration Act (1990) (Qld) is that it persuaded the arbitrators to make Cairns the seat of the arbitration. A circumstance in the present case not apparently present in either of the two authorities upon which Papua New Guinea relies is not the difficulty or expense in registering a judgment against Papua New Guinea in one of the courts of that State but rather the discretion which presumably officers of the State have to apply to have such registration set aside on the ground that its enforcement would be contrary to public policy of Papua New Guinea under s. 5(1)(v) of the Reciprocal Enforcement of Judgments Act (P.N.G.). I have regard to the intimation from a public officer of Papua New Guinea that it will meet any judgment for costs given against it upon this application for leave to appeal. Accepting that that officer speaks with the authority of the present Government of that State, the fact remains that a change in composition of the Legislature and/or Government may lead to a change in attitude. Even if it does not, it may be thought that politically there are more pressing demands on the available financial resources of the State than the satisfaction of judgment for costs recovered by Sandline. There are other large judgment debts which financial strictures have presumably influenced the Legislature to refrain from voting moneys in the last couple of Budgets to be “available” to satisfy those judgment debts of the State.
The exercise of discretion in a case like the present calls for a balancing of the considerations advanced by each of Sandline and Papua New Guinea. On balance I conclude that I ought exercise my discretion in favour of Sandline and direct that Papua New Guinea give security for the costs of Sandline in opposing the application by Papua New Guinea for leave to appeal against the interim arbitral award made in Cairns on 15 October 1998.
I have examined the material from both sides relating to the likely costs that will be incurred by Sandline if it is successful in its opposition to the application for leave to appeal by Papua New Guinea.

I am generally familiar with the issues involved upon the application having been provided with all the material so far assembled for use in argument. I have regard to the affidavit evidence relating to costs from the solicitors for each party in that context.
I order that Papua New Guinea within 28 days give security for Sandline’s costs of the application for leave to appeal in the sum of $70,000. That security should be of a kind which meets the requirements of the Registrar.
Under R.S.C. O.33 r. 20, the application for leave to appeal will be stayed until the security is given.
I make no order pursuant to R.S.C. O.33 r. 20 but give each party liberty to apply in the event that such security is not provided within 28 days.
IN THE SUPREME COURT
OF QUEENSLAND  OS No. 10110 of 1998
Brisbane
Before Mr Justice Ambrose
[Papua New Guinea v. Sandline]
In the matter of the Commercial   Arbitration Act 1990
And
In the matter of an application pursuant to Section 38 thereof by
THE INDEPENDENT STATE OF   PAPUA NEW GUINEA against   SANDLINE INTERNATIONAL   INC
REASONS FOR JUDGMENT - B.W. AMBROSE J.
Delivered the 22nd day of December 1998
CATCHWORDS:     COSTS - Security for - Application by respondent against applicant for   security for costs - Whether applicant should have to provide security when it is a friendly foreign state - Whether comity of nations is a relevant consideration when determining security for costs - Consideration of Sovereign Risk - Consideration as to the likely effect of Claims By and Against the State Act 1996 (P.N.G.) and Reciprocal Enforcement of Judgments Act (P.N.G.) on a successful costs order.
Skinner v. Cribb(No. 2) [1878] 5 S.C.R. 141
Stock & Anor v. Woods & Anor [1957] St.R.Qd. 65
Mondial Trading Co. v. Gill et anor [1980] 2 L.L.R. 376
The Oinoussian Virtue (1981) 2 All E.R. 887
The Wengiang (1981) 2 L.L.R. 308 at 315
Otto, King of Greece v. Wright [1837] Q.B. Dowl Pract. Cas. 695
Imperial Majesty Don Pedro the Second Emperor of Brazil v. Robinson   & Ors [1837] K.B. 6 Ad & El 802; 112 E.R. 308.
Republic of Costa Rica v. Erlanger [1876] 3 Ch.D. 62
New South Wales v. Bardolf (1934) 52 C.L.R. 455
Aeronave S.P.A,. v. Westland Charterers (1971) 1 W.L.R. 1445 Dillon v. Baltic Shipping (1991) 65 A.L.J.R. 647
P.S. Chillarom & Co. v. China Odeon Shipping Co. (1991) 65 A.L.J.R   Classic Ceramic case (1994) 13 A.C.S.R. 263
Kent Heating Ltd. v. Cook-on Gas Products Pty. Ltd. (1984) 58 A.L.R. 277
Energy Drilling Inc. v. Petroz N.L. & Ors (1989) A.T.P.R. 40-954
Thune v London Properties Ltd. (1990) 1 W.C.R. 562
Connop v. Verena Pty. Ltd. (1984) 1 N.S.W.L.R. 71
Barton v. Minister for Foreign Affairs (1984) 54 A.L.R. 586
Commercial Arbitration Act 1990
Claims By and Against the State Act 1996 (P.N.G.)
Reciprocal Enforcement of Judgments Act (P.N.G.)
Arbitration Act 1996 (Eng)
Counsel:  Mr R. Gyles Q.C., with him Mr D. Hammerschlag for the applicant
Mr P. Keane Q.C., with him Mr J. Mckenna for the respondent
Solicitors:  Ebsworth & Ebsworth as Town Agents for Holding Redlich for the   applicant
Clayton Utz as Town Agents for S.J. Werwin & Co for the respondent
Hearing Date: 17 December 1998

[1998] QSC 298

22 December 1998