Wells Fargo Bank Northwest National Association v Victoria Aircraft Leasing Ltd

Wells Fargo Bank Northwest National Association, as the security trustee for the mortgagee bank, an agency of the United States of America, sought to exercise remedies in relation to aircraft owned and operated by Victoria Aircraft Leasing Ltd and another defendant, both agencies of the Republic of Nauru. The dispute was brought before the Federal Court of Australia, where the defendants raised a defence and counterclaim alleging an agreement or arrangement between the United States and Nauru. According to the defendants, the United States had promised to provide Nauru with funds or intervene to prevent the mortgagee from exercising its strict legal rights in relation to the aircraft in return for Nauru's cooperation with a specific agenda. This arrangement, referred to as "the Transaction," was alleged to have been the subject of a third-party notice served by the defendants on the United States.

The court was required to determine whether the third-party notice was liable to be set aside on the ground that the United States was immune from jurisdiction under section 9 of the Foreign States Immunity Act 1985 (Cth). Additionally, the court needed to decide whether immunity was lost under the "commercial transaction" exception in section 11(1) of the Act. The defendants argued that the Transaction was not a commercial transaction, but rather a political, governmental, or diplomatic one. The court found that the Transaction, when considered as a whole, was not a commercial transaction, even if it incorporated a subsidiary commercial element such as the provision of finance. The court further held that even if the Transaction was otherwise a commercial transaction within the terms of section 11(1), immunity would be restored under section 11(2)(a)(i) of the Act as all parties to the transaction were foreign states.

In reaching its decision, the court considered the relevance of the doctrines of non-justiciability and act of state, as well as various authorities such as the Foreign States Immunity Act 1985 (Cth), the Australian Law Reform Commission Report No. 24 on Foreign State Immunity 1985, Alcom Ltd v Republic of Colombia [1984] 2 All ER 6, Attorney-General (United Kingdom) v Heinemann Publishers Australia Pty Ltd (1988) 165 CLR 30, I Congreso del Partido [1983] 1 AC 244, Re The Canadian Labour Code (1992) 91 DLR (4th) 449, Controller and Auditor-General v Davison [1996] 2 NZLR 278, Mills v Meeking (1990) 91 ALR 16, and Kingston v Keprose Pty Ltd (1987) 11 NSWLR 404.

The court set aside the third-party notice served on the United States, finding that it was immune from jurisdiction under section 9 of the Foreign States Immunity Act 1985 (Cth). Immunity was not lost under the "commercial transaction" exception in section 11(1) of the Act, as the Transaction was not a commercial transaction. The court further held that even if the Transaction was otherwise a commercial transaction within the terms of section 11(1), immunity would be restored under section 11(2)(a)(i) of the Act as all parties to the transaction were foreign states. The court did not consider the relevance of the doctrines of non-justiciability and act of state in reaching its decision.