In brief

The High Court has confirmed the decisions of the NSW Supreme Court and Court of Appeal, that attempts in Australia to wind up the national flag-carrier airline of the Republic of Indonesia, PT Garuda Indonesia Limited (Garuda), cannot proceed. The airline is a “separate entity” of the Indonesian government. As such, it successfully relied on its arguments to assert foreign state immunity in this case.

Whilst similar provisions exist in other legislation, including in the United Kingdom and Singapore, to date courts in other countries have not been asked to consider the scope of the exception. The decision therefore has the potential to set a significant global precedent.

Key Takeaway

Foreign state immunity is a long standing protection, recognised by Courts in common law jurisdictions, that foreign governments and their “separate entities” will not be subject to court processes of foreign courts unless they choose to submit to those courts. The principle sets boundaries between foreign states and domestic judicial powers.

That original principle evolved away from “absolute” immunity, to one now limited by recognised exceptions (“restrictive immunity”). In Australia these exceptions are now set by the Foreign States Immunities Act 1985 (Cth) (FSIA).

An exception to that general protection for foreign governments and their separate entities in the FSIA relating to “a proceeding in so far as the proceeding concerns … bankruptcy, insolvency or the winding up of a body corporate” has now been held not to cover an application to wind a company up that is a separate entity of a foreign State. Instead, the purpose of that exception is to ensure when a winding up has been started all creditors or other stakeholders in it are treated in a similar manner in any court proceedings about the liquidation.

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Partner, Brisbane
Email: Ian Innes