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COURT OF APPEAL (Civil Division) [1995] 1 Lloyd's Rep 25 HEARING-DATES: 6, 7, 8, 12 July, 14, 21 October 1993 21 October 1993 CATCHWORDS: Conflict of laws — Sovereign immunity — Jurisdiction - Invasion of Kuwait by Iraq — Defendants instructed to bring Kuwaiti fleet to Iraq — Whether defendants immune from jurisdiction of English Courts — Whether immunity lost by submitting to jurisdiction — State Immunity Act, 1978 ss 2, 14(2). HEADNOTE: On Aug 2, 1990 Iraq invaded Kuwait. Between Aug 6 and 8 the first defendants (IAC), a corporation owned and controlled by the second defendants, at the directions of the Iraqi Minister of Transport and Communications arranged for IAC personnel to fly 10 civilian aircraft owned by the plaintiffs (KAC) from Kuwait Airport to Iraq. Six of the aircraft were flown to Iran where they were interned until August 1992 and the other four were destroyed in Iraq by United Nations aircraft. On Jan 11, 1991 KAC issued a writ against the defendants claiming, pursuant to s 3(2)(a) and (c) of the Torts (Interference with Goods) Act, 1977 and at common law, delivery of the surviving aircraft with consequential damages and in respect of those that had been destroyed payment of their value by way of damages. IAC applied for the action to be discontinued. They sought to rely on s 14(2) of the State Immunity Act, 1978 which provided inter alia: A separate entity is immune from the jurisdiction of the Courts of the United Kingdom if and only if (a) the proceedings relate to anything done by it in the exercise of sovereign immunity; (b) the circumstances are such that a state . . . would have been so immune. KAC contended that even if IAC were immune they had lost that immunity by submitting to the jurisdiction of the English Courts. Section 2 of the 1978 Act provided inter alia: (1) A State is not immune as respects proceedings in respect of which it has submitted to the jurisdiction of the Courts of the United Kingdom . . . (3) A State is deemed to have submitted . . . (b) subject to sub-section (4) . . . if it has intervened or taken any step in the proceedings (4) Sub-section (3)(b) above does not apply to intervention or any step taken for the purposes only of (a) claiming immunity . . . — Held, by EVANS, J that IAC was not immune from the jurisdiction of the English Courts and that the writ had not been validly served on Iraq. IAC appealed and KAC cross-appealed. — Held, by CA (NOURSE, LEGGATT and SIMON BROWN, LJJ), that (1) the allegations made against IAC were that it wrongfully interfered and had continued wrongfully to interfere with the aircraft by removing them from the airport, by accepting unlawful transfer of possession and control of them with the intention of incorporating them with the IAC fleet and using them for commercial purposes and by continuing wrongfully to interfere with them by unlawful possession and control of them; these allegations related to acts done by IAC jure imperii and an act jure imperii was one that could only be done by or at the behest of a sovereign state in the exercise of its sovereign authority; IAC was a dutiful accomplice of Iraq in the forcible confiscation of the aircraft; as clear an act jure imperii as could possibly be imagined (see p 29, cols 1 and 2; p 30, col 1; p 33, cols 1 and 2; p 36, col 2; p 37, cols 1 and 2); (2) s 2(4) was a relieving provision; there was no "intervention" by lAC and a defendant who did no more than claim immunity took no steps in the proceedings; on the facts lAC had not taken a step in the proceedings within s 2(3)(b) of the Act and it had not submitted nor was it deemed to have submitted to the jurisdiction of the English Courts; its immunity remained intact and the appeal would be allowed; the cross-appeal was dismissed (see p 31, col 2; p 32, cols 1 and 2; p 34, cols 1 and 2; p 38, cols 1 and 2). CASES-REF-TO: A Co Ltd v B Co Ltd and Republic of Z, Apr 1 1993 unreported; Alcom Ltd v Republic of Colombia, (HL) [1984] 2 Lloyd's Rep 24; [1984] AC 580; Arango v Guzman Travel Advisors Corporation and Others, (1980) 621 F 2d 1371; Buttes Gas and Oil Co v Hammer, (HL) [1982] AC 888; Claim against the Empire of Iran Case, (1963) 45 ILR 57; Eagle Star Insurance Co Ltd v Yuval Insurance Co Ltd, (CA) [1978] 1 Lloyd's Rep 357; Evans v Bartlam, (HL) [1937] AC 473; I Congreso del Partido, The (HL) [1981] 2 Lloyd's Rep 367; [1983] AC 244; United States of America and the Republic of France v Dollfus Mieg and the Bank of England, (HL) [1952] AC 582; Williams & Glyn's Bank Plc v Astro Dinamico Compania Naviera SA, (HL) [1984] 1 Lloyd's Rep 453; [1984] 1 WLR 438. This was an appeal by the defendants Iraqi Airways Corporation and a cross-appeal by the plaintiffs Kuwait Airways Corporation from the decision of Mr Justice Evans in which he held that IAC were not immune from the jurisdiction of the English Courts in the action brought by KAC against IAC for damages in respect of the aircraft taken by IAC when Iraq invaded Kuwait and that the writ had not been validly served on Iraq. INTRODUCTION: The further facts are stated in the judgment of Lord Justice Nourse. COUNSEL: M Beloff QC, R Plender, QC and S Nathan QC for IAC; N Chambers, QC Professor R Higgins QC and Smouha, for KAC. JUDGMENT-READ: Judgment was reserved Thursday Oct 21, 1993 PANEL: NOURSE, LEGGATT, SIMON BROWN LJJ JUDGMENTBY-1: NOURSE LJ JUDGMENT-1: NOURSE LJ: Introduction On Aug 2, 1990 Iraq invaded Kuwait. Between Aug 6 and 8 Iraqi Airways Corporation ("IAC"), a corporation owned and controlled by the Republic of Iraq, at the direction of the Iraqi Minister of Transport and Communications, arranged for IAC personnel to fly 10 civilian aircraft owned by Kuwait Airways Corporation ("KAC") from Kuwait airport to Iraq, six of them later being flown to Iran, where they were interned until August, 1992, and the other four being later destroyed in Iraq by United Nations aircraft. On Jan 11, 1991 KAC issued the writ in this action against IAC and the Republic of Iraq claiming, pursuant to s 3(2)(a) and (c) of the Torts (Interference with Goods) Act, 1977 and at common law, delivery of the surviving aircraft with consequential damages and, in respect of those that had been destroyed, payment of their value by way of damages. The procedural history to date is complicated. At this point it is enough to say that no defences have yet been served. We are primarily concerned with IAC, which objects to the continuation of the action against it on a number of grounds. In the Court below Mr Justice Evans, although he did not decide every point adversely to IAC, allowed the action to proceed against it. On the other side, he held that the writ had not been validly served on Iraq. With the leave of the Judge, IAC has appealed to this Court and KAC has entered a cross-appeal against Iraq. By appeal, cross-appeal and respondent's notices in each, all the questions were again put in issue by one side or the other. However, after hearing argument on questions of immunity and submission to the jurisdiction, we informed the parties that the views we had formed on them were determinative of the appeal and cross-appeal in favour of IAC and Iraq respectively. We now give judgment on those questions. The first main question is whether IAC, admittedly a "separate entity" for the purposes of the State Immunity Act, 1978 ("the Act"), is immune from the jurisdiction of the English Courts by virtue of s 14(2), which, so far as material, provides: A separate entity is immune from the jurisdiction of the courts of the United Kingdom if, and only if, — (a) the proceedings relate to anything done by it in the exercise of sovereign authority; (b) the circumstances are such that a state . . . would have been so immune. The second main question is whether, if IAC was immune, it has lost its immunity by submitting to the jurisdiction of the English Courts. The facts The facts on which the questions of immunity depend are in part matters of record about which there has been no dispute and in part facts found by the learned Judge after hearing oral evidence. The matters in the first category are these. The military occupation of Kuwait Airport was completed by Aug 5 at the latest. Among the aircraft there were 15 owned by KAC, five of which were removed from Kuwait to Iraq by the Iraqi Air Force. The remaining 10, being those removed between Aug 6 and 8, consisted of two Boeing 767s and eight Airbuses. On Aug 8 and 9 the Revolutionary Command Council of Iraq ("the RCC") published Decrees numbered 313 and 312 respectively proclaiming the integration of Kuwait with Iraq. By a presidential decree made on Aug 26 Kuwait was later designated to be a Governate forming part of Iraq. After the 10 aircraft had been removed to Iraq they remained in the custody of IAC. By a further Decree of the RCC numbered 369, which was made on Sept 9 and took effect on Sept 17, KAC was dissolved and all of its movable and immovable assets, rights and obligations were transferred to IAC. The material facts found by the Judge are as follows. After Sept 17, IAC made what use of the aircraft it could in the prevailing circumstances, but that use was limited by the almost complete cessation of international flights to and from Iraq. Two of the aircraft were overpainted in IAC livery and one was used for certain internal flights. At p 33 of the core bundle, the Judge stated the clear general picture that had emerged from the evidence: By Aug 6 the Iraqi authorities regarded the occupation as complete, hence the broadcast to the Kuwaiti people that they should return to work and the Decrees (dated 8th/9th August) claiming the integration of Kuwait as a province of Iraq and as a triumph for Arab nationalism. On that day the Minister of Transport and Communications, as the Minister responsible for Civil Aviation, directed Mr Saffi as the Director General of the national airline, IAC, to arrange for the KAC fleet of Airbuses and Boeing 767s to be brought to Iraq. Mr Saffi gave the necessary instructions to his Chief Pilot and to Mr Abbo [the Assistant Director General (Technical) of IAC], and soon afterwards the necessary pilots and three ground engineers made their way to Kuwait. This was in no sense a military operation, even though Kuwait Airport was under military control. They travelled by road to Basra and then by helicopter, or by light plane — the details are unclear. When they arrived at Kuwait the engineers carried out the basic checks necessary before the aircraft could fly. Then the pilots took them the short distance to Basra, a civilian airport. Then they were disposed between Saddam Hussein Airport at Baghdad, also a civilian airport and the home base for IAC, which was already crowded with the grounded IAC fleet, and at Mosul and Takrete which are civilian/military airports, as well as some remaining at Basra. Between pp 34 and 35, the Judge referred to the earlier removal of the five other KAC aircraft by pilots of the Iraqi Air Force; to four foreign aircraft (including a British Airways Jumbo 747) which were not removed from Kuwait Airport; to the Minister's instructions to Mr Saffi to "maintain" or "look after" the 10 KAC aircraft that had been brought to Iraq; to the kind of maintenance required; and to the recruitment by Mr Saffi of five Kuwaiti qualified Airbus engineers. The Judge continued: The underlying issue is whether IAC, under Mr Saffi's direction, was keeping the aircraft and recruiting the ex-KAC personnel with a view to operating the aircraft as part of its fleet at some future date, or whether it was doing so at the behest of the Iraqi Government so that the aircraft would be available to the Government for some other kind of operation at some future date. At p 36 the Judge said that Mr Saffi was in something of a dilemma. He described his earlier attempts to provide IAC with a fleet of new Airbuses, an ambition that was taking shape when the invasion of Kuwait took place. He then found himself with eight Kuwaiti Airbuses, which were not, however, new and for which at that time he had no pilots, no engineers and no passengers. At p 37, the Judge said that Mr Saffi had been reticent and that his evidence had been contradictory regarding his relations with the Minister during the period from Aug 8 until the time he knew of Decree 369. Having said that the evidence showed that, after that Decree took effect on Sept 17, at least two of the aircraft were repainted in the IAC livery and that at least one of the ex-KAC aircraft was used on internal flights, the Judge continued: The evidence is compelling, in my judgment, that when the occupation of Kuwait was regarded as complete the Iraqi Government arranged for the removal by the Iraqi Airforce of the five KAC aircraft which it required for other and possibly non-commercial uses, and it directed IAC to take possession of ten KAC aircraft which were to be used for commercial purposes, and look after them until such time as commercial operations could resume. This was the object of the "safekeeping" which Mr Saffi was instructed to achieve. The decision to recruit key specialist personnel for an Airbus fleet and the steps taken to implement this decision from mid-August onwards confirm that IAC was engaged, on the Minister's instructions, in the preliminary stages of establishing an Airbus operation and to this extent was anticipating the transfer of ownership of the aircraft which became effective, so it was believed, on September 17th. At p 39, the Judge also found that regular commercial flights by IAC between Iraqi airports and Kuwait Airport, which were regarded as internal flights, took place from about Aug 14. Immunity under s 14(2) On those findings Mr Justice Evans held that IAC was not immune from the jurisdiction of the English Courts under s 14(2) of the Act and thus decided the first main question in favour of KAC. I am unable to agree with him. Although the question was argued at length and with much citation of authority and international and academic material, it is, as I see it, both short and relatively simple. Its resolution depends on the application to the particular facts of the material provisions of the Act and the well recognised distinction between acts jure imperii and acts jure gestionis. Before a separate entity can be immune under s 14(2) two requirements must be satisfied: (a) the proceedings must "relate to anything done by it in the exercise of sovereign authority" and (b) the circumstances must be "such that a State would have been so immune". Here it is agreed that the question whether the second requirement was satisfied depends on whether the acts of which KAC complains amounted to an "activity" in which a State would have engaged "otherwise than in the exercise of sovereign authority" within s 3(3)(c) of the Act. The Act was enacted in order to give effect to the European Convention on State Immunity, to which the United Kingdom became a party in 1972. Its material provisions must now be referred to in greater detail. Section 14(2) has already been set out. Section 1(1) provides that a State is immune from the jurisdiction of the United Kingdom Courts — . . . except as provided in the following provisions of this Part of this Act. Sections 2 to 11 then provide for a wide range of exceptions from immunity. One such group is provided for by s 3, to which the marginal note is: Commercial transactions and contracts to be performed in the United Kingdom. So far as material at this point it provides: (1) A State is not immune as respects proceedings relating to — (a) a commercial transaction, entered into by the State . . . (3) In this section "commercial transaction" means — (a) any contract for the supply of goods or services; (b) any loan or other transaction for the provision of finance and any guarantee or indemnity in respect of any such transaction or of any other financial obligation; and (c) any other transaction or activity (whether of a commercial, industrial, financial, professional or other similar character) into which a State enters or in which it engages otherwise than in the exercise of sovereign authority . . . Subject to the question whether the transaction or activity must be entered into or engaged in the United Kingdom (see below), Mr Beloff, QC, for IAC, accepted that s 3(1)(a) and (3)(c) are capable of applying to independent proceedings in tort in respect of damage to or loss of tangible property and thus to an action for unlawful interference with goods. He also accepted that the acts of which KAC complains can be said to have amounted to an "activity" engaged in by IAC within s 3(3)(c). Those two questions having been removed from our decision, I express no view on either. The position then is that if the two requirements of s 14(2) are added together for the purposes of this case, the essential question comes to this: Does the action relate to acts done by IAC in the exercise of sovereign authority, being acts which, had they been done by the Republic of Iraq, would also have been done in the exercise of sovereign authority? It being clear that if the acts were done by IAC in the exercise of sovereign authority, they would necessarily have been done by Iraq in the like capacity, the question can be reduced still further: Does the action relate to acts done by IAC in the exercise of sovereign authority? In Alcom Ltd v Republic of Colombia, [1984] 2 Lloyd's Rep 24; [1984] AC 580 (a case on s 13), Lord Diplock, having referred to the adjudicative and enforcement jurisdictions of the United Kingdom Courts under the Act, said, at p 27, col 1; p 600C-D: But, although comprehensive, the Act in its approach to these two aspects of the jurisdiction exercised by courts of law does not adopt the straightforward dichotomy between acta jure imperii and acta jure gestionis that had become familiar doctrine in public international law, except that it comes close to doing so in section 14(2) in relation to the immunity conferred upon [separate entities]. On the deeper reflection appropriate to a case where s 14(2) is directly in point, it becomes clear that that provision, and indeed s 3(3), do indeed adopt the straightforward dichotomy between acts jure imperii and acts jure gestionis and the argument has throughout proceeded on that footing. In order to see to what acts the action relates, regard must be had in the first instance to the allegations made in par 2 of the points of claim (the first defendant being IAC and the second Iraq): On and/or after 2nd August 1990 the First and Second Defendants wrongfully interfered and have continued to interfere with the said aircraft. PARTICULARS a. On 2nd August 1990 the Second Defendants invaded Kuwait, took control of the airport and deprived the Plaintiffs of possession and control of, inter alia, the aircraft particularised above. b. Between 2nd August and 9th August the aircraft were removed from the airport. c. On a date or dates between 9th August and 17th September the Second Defendants unlawfully transferred possession and control of the aircraft to the First Defendants. The stated intention of the Defendants was to incorporate the aircraft within the First Defendants' fleet and to use them for commercial purposes. d. The First and Second Defendants have continued wrongfully to interfere with the aircraft by their unlawful possession and control of the aircraft and refusal and/or failure to deliver up the aircraft to the Plaintiffs. As I read them, the only allegations not made, either expressly or impliedly, against IAC are those made in par a of the particulars. The allegations which are made against IAC can be summarized by saying that it wrongfully interfered, and has continued wrongfully to interfere, with the aircraft, first, by removing them from the airport; secondly, by accepting an unlawful transfer of possession and control of them with the intention of incorporating them with the IAC fleet and using them for commercial purposes; thirdly, by continuing wrongfully to interfere with them by unlawful possession and control of them. On the facts as they are now known, the first of these allegations can be seen to refer to the period between Aug 6 and 8; the second to that between Aug 9 and Sept 17; and the third to the period after Sept 17. Do these allegations relate to acts done by IAC jure imperii? I think it clear that they do. An act jure imperii is one that can only be done by or at the behest of a sovereign state in exercise of its sovereign authority. Such an act is often described as "governmental", in order to distinguish it from an act that can be done by a private citizen. Bearing in mind, first, Iraq's deprivation of KAC's possession and control of the aircraft in the course of its invasion of Kuwait, secondly, its transfer of their possession and control to IAC by virtue of the Minister's directions to Mr Saffi to arrange for their removal to Iraq and thereafter to maintain or look after them there and, thirdly, IAC's purported acquisition of title to them under Iraqi law by virtue of Decree 369, I am unable to characterize IAC's acts in any other way. To put it in summary terms, IAC was a dutiful accomplice of Iraq in the forcible confiscation of the aircraft; as clear an act jure imperii as could possibly be imagined. (By "confiscation" I mean expropriation without payment of any or any proper compensation). Mr Justice Evans, while accepting that the acts of Iraq and those carried out on its behalf in invading Kuwait were jure imperii and, similarly, the appropriation of Kuwait's property for governmental purposes in the course of the invasion and occupation, nevertheless held that the acts of IAC were jure gestionis. At p 43, he said: The fact is that the Government of Iraq identified these ten aircraft as ones which were required for civilian operation by IAC and the Minister of Transport on its behalf instructed IAC to take the aircraft into its possession and control and to remove them to Iraq. There is no evidence which would justify a finding that the government relied upon IAC merely to provide pilots and engineers so that the aircraft could be removed to Iraq for some other purpose or that any other such purpose was governmental rather than commercial (for example, that the aircraft were required as troop carriers). Nor was there any other organisation within Iraq which could implement the decision to use the aircraft for commercial purposes. The fact that they could not be so used immediately was due to other factors, and meanwhile the Minister instructed IAC to "look after" the aircraft, meaning to keep them in such condition that they could be used with the minimum of delay and expense as soon as such use became possible. Although the Judge had earlier stated that it was common ground that the purpose or motive of IAC was not decisive, both this and other passages in his judgment, especially perhaps his statement of "the underlying issue" at p 35 (see above), suggest that his decision was much influenced by the consideration that the mutual intention of Iraq and IAC in removing the aircraft and looking after them was that they should be used for commercial and not governmental purposes. With respect to the Judge, I think that he fell into the very error which the common ground had sought to avoid. It is the nature of the act and not its purpose that is decisive. Thus in The I Congreso del Partido, [1981] 2 Lloyd's Rep 367 at p 373, col 2; [1983] AC 244 at p 263H, Lord Wilberforce quoted with approval the following passage in the judgment of the Federal Constitutional Court of the German Federal Republic in the Claim against the Empire of Iran Case, (1963) 45 ILR 57 at p 80: As a means for determining the distinction between acts jure imperii and jure gestionis one should rather refer to the nature of the state transaction or the resulting legal relationships, and not to the motive or purpose of the state activity. It thus depends upon whether the foreign state has acted in exercise of its sovereign authority, that is in public law, or like a private person, that is in private law. Mr Justice Evans referred to The I Congreso del Partido mainly in order to make a comparison between the circumstances of Playa Larga (one of the vessels in that case) and those of the aircraft in the present case. There the Government of Cuba, the owner of the ship, had ordered Playa Larga to be taken out of Chilean waters for her own safety and it was nevertheless held that no governmental authority had been invoked. In my view no useful comparison can be made between the two cases. Playa Larga was at all times engaged in the commercial activity of carrying goods by sea. The orders given to her could just as well have been given by a private owner. Here, I repeat, the aircraft were subjected to a forcible confiscation which could only have been carried out by or at the behest of a sovereign state in exercise of its sovereign authority. The intention to use them for commercial purposes, as and when practicable, and to keep them safe meanwhile could not and did not transform the essential nature of that act. While Mr Chambers, QC, who has appeared for KAC in this Court but did not appear below, accepted that it is the nature of the act and not its purpose that is decisive, he stressed the Judge's view that the purpose may nevertheless illuminate the nature of the act. However, recognising the implications of IAC's role in the removal of the aircraft from Kuwait, he was forced to concentrate on what happened to them thereafter. That was a novel approach not adopted below. Mr Chambers said that it was enough that once the aircraft had got to Iraq their use became indubitably commercial; they were all available for that use and were no doubt registered as part of IAC's fleet; the livery of two of them was changed to that of IAC; and they were used as part of the fleet to the limited extent that was possible. The essence of the argument, as expressed in exchanges with the Court, was that the substance of the case against IAC was that it was unlawfully using KAC's aircraft as part of its commercial fleet. This argument is unsound. In order to decide whether proceedings "relate to" a commercial activity the claims made in them must be carefully scrutinised. Here it is impossible to detach events subsequent to Aug 8 from those which took place beforehand; and, even if they are detached, it is impossible to view them in some different light. When IAC's pilots and engineers removed the aircraft from Kuwait IAC wrongfully interfered with them. Everything else flowed from that. Although, as a matter of strict legal analysis, it may be correct to say that there was a fresh interference die in diem (a point not explored in argument), the continuing detention of the aircraft in Iraq and the purported acquisition of title to them under Iraqi law were merely extensions or embellishments of the original removal and, moreover, extensions or embellishments that took place, and could only have taken place, like the removal itself, on the sovereign authority of Iraq. No doubt IAC did do acts which can be said to have been part of a commercial activity. But that is not the point. The action relates to the acts or omissions of which it makes complaint. The complaints here made against IAC are of its removal and detention of the aircraft and its purported acquisition of title to them. Many decisions on the distinction between acts jure imperii and acts jure gestionis were cited. Inevitably, the facts were always different from those that confront us, so that reference to them is generally unhelpful. The most useful, I thought, was Arango v Guzman Travel Advisors Corporation and Others, (1980) 621 F 2d 1371, a decision of the United States Court of Appeals, Fifth Circuit, where, at pp 1379-1380, a distinction was made between various claims made in proceedings against the national airline of the Dominican Republic, some of them being held to relate to acts jure imperii and others to acts jure gestionis. The plaintiffs' claims for false imprisonment and battery arising out of their "involuntary re-routing" from Santo Domingo Airport by state immigration officers with the aid of airline employees were held to fall into the former category; their claims for breach of warranty and contract based on the miscarriage and non-performance of the vacation tour and the failure to refund the money into the latter. The first group of claims related to tortious governmental acts; the second to breaches of a commercial contract. No such distinction can be made in the present case, where all the acts complained of fall into the first category. I would also record my indebtedness to the views expressed in an article (to be published in [1994] 1 CLQ) by Lady Fox, QC entitled "A 'commercial transaction' under the State Immunity Act 1978"; views which were adopted by Mr Beloff as part of his argument. Other questions on immunity Two further questions on immunity must be briefly mentioned. First, Mr Beloff based an argument on s 3(2) of the Act, which provides, among other things, that the section does not apply "if the parties to the dispute are States". He submitted that the parties to the dispute, as distinct from the parties to the proceedings, were Kuwait and Iraq. Mr Justice Evans rejected that submission. Since, on the views I have expressed, this has become an academic question, I say no more than that I too would reject it. Secondly, Mr Beloff referred us to s 5 of the Act, which provides, among other things, that a State is not immune as respects proceedings in respect of — . . . damage or loss of tangible property caused by an act or omission in the United Kingdom. The existence of that provision is said to compel the view that s 3(1)(a) and (3)(c) only apply to proceedings in tort if they arise out of a transaction or activity entered into or engaged in the United Kingdom, a view which Lady Fox, in her article, argues is correct. Again this has become an academic question, on which, in this instance, I prefer to express no view at all. Submission to the jurisdiction Having decided that IAC was not immune from the jurisdiction of the English Courts under s 14(2), Mr Justice Evans did not have to decide whether it had lost its immunity by reason of a submission to the jurisdiction. However, he did consider this question and he decided it in favour of IAC. It has again been put in issue by the respondent's notice served by KAC. I am in no doubt that the Judge arrived at a correct conclusion on this question, albeit by a somewhat different route from that which I myself would follow. At this point a brief reference to the procedural history of the action is necessary. On Feb 11, 1991 KAC obtained judgment against IAC in default of notice of intention to defend, with damages to be assessed. Later they were assessed at something under US$490m, with interest running at US$20,000 odd per day. On July 21 and 26, 1991 Mr Justice Webster made orders staying execution on the judgment, subject to conditions which IAC has duly performed. On Aug 2, 1991 IAC issued a summons claiming, so far as material: (3) A Declaration that the Court has no jurisdiction over [IAC] in respect of the Plaintiff's claim and that the Plaintiff's claim is not justiciable in the Courts of England and Wales; (4) An Order setting aside: (a) the judgment against [IAC] . . . The grounds of the application were stated to be: (1) . . . (2) The Plaintiffs' claim is not justiciable in the Courts of England and Wales. (3) The High Court of Justice has no jurisdiction over [IAC] in respect of the Plaintiffs claim. (4) Forum non conveniens. Affidavits in support of the summons were duly sworn and filed. The provision of the Act on which the submission question mainly depends is s 2, to which the marginal note is "Submission to the jurisdiction". So far as material, it provides: (1) A State is not immune as respects proceedings in respect of which it has submitted to the jurisdiction of the courts of the United Kingdom. (2) A State may submit after the dispute giving rise to the proceedings has arisen . . . (3) A State is deemed to have submitted — (a) . . . subject to subsection[s] (4) . . . below, if it has intervened or taken any step in the proceedings. (4) Subsection (3)(b) above does not apply to intervention or any step taken for the purpose only of — (a) claiming immunity . . . Although s 2 is expressed to apply only to States, KAC contends that it is effectively applied to separate entities by s 14(2)(b), which, as has been seen, requires that the circumstances are such that a State would have been immune. That was the view of the Judge. In this Court Mr Beloff relied in the first instance on s 14(3), which provides, so far as material: If a separate entity . . . submits to the jurisdiction in respect of proceedings in the case of which it is entitled to immunity by virtue of subsection (2) above, subsections (1) to (4) of section 13 above shall apply to it in respect of those proceedings as if references to a State were references to that entity. Mr Beloff submitted that the language of s 14(3) shows that the question whether a separate entity has submitted to the jurisdiction must be judged independently of s 2. I cannot accept that submission. I think that the view of ss 2 and 14(2)(b) put forward by KAC and accepted by the Judge is correct. The words "by virtue of subsection (2) above" in s 14(3) necessarily allude to the test prescribed by s 14(2)(b). Thus, so far as concerns submission to the jurisdiction by a state entity, they point inevitably to s 2 as being the determinative provision. What then is the effect of s 2? Sub-section 3(b) provides that a State (or state entity) is deemed to have submitted if it has intervened or taken any step in the proceedings. But that provision is expressed to be subject to sub-s (4) which, by par (a), states that it does not apply to intervention or any step taken for the purpose "only" of claiming immunity. The joint effect of those provisions is to presuppose an intervention or step in the proceedings; the prima facie result of that is a deemed submission to the jurisdiction; but if the intervention or step is made or taken for the purpose only of claiming immunity, there is no submission. Moreover, and this is very important, there is no submission if what is done by the State or State entity does not amount to an intervention or step in the proceedings. This last point does not seem to have been firmly grasped in the Court below, or indeed in some of the argument in this Court; it being thought, so it appears, that the word "only" in s 2(4) causes a difficulty where, as here, the defendant objects to the continuation of the action against it both on the ground of immunity and, at the same time, on other grounds as well. I see no such difficulty. In my view s 2(4) is a relieving provision. It would apply if, for example, a defendant served a defence in which the only claim made was one of immunity. Usually the service of a defence would be the taking of a step in the proceedings. But if it was confined as in the example suggested, s 2(4)(a) would relieve the defendant from the usual consequences. Here there has been no "intervention" by IAC. So the first, and in my view the only, question is whether it has taken a step in the proceedings. That question must be judged on ordinary principles. It is well recognised that the authorities on what is or is not such a step, most if not all of which arise under 4(1) of the Arbitration Act, 1950 or its predecessors, are difficult to reconcile; see Mustill and Boyd's Commercial Arbitration, 2nd ed, at pp 472-473. As a general test, I would respectfully adopt that suggested by Lord Denning, MR in Eagle Star Insurance Co Ltd v Yuval Insurance Co Ltd, [1978] 1 Lloyd's Rep 357 at p 361: What then is a "step in the proceedings"? It has been discussed in several cases. On principle it is a step by which the defendant evinces an election to abide by the Court proceedings and waives his right to ask for an arbitration. Like any election, it must be an unequivocal act done with knowledge of the material circumstances. After considering several authorities, the Master of the Rolls continued: On those authorities, it seems to me that in order to deprive a defendant of his recourse to arbitration a "step in the proceedings" must be one which impliedly affirms the correctness of the proceedings and the willingness of the defendant to go along with a determination by the Courts of law instead of arbitration. It is clear that a defendant who does no more than claim immunity takes no step in the proceedings. But here Mr Chambers submitted that IAC has taken other such steps, first, by seeking a stay on the ground of forum non conveniens, secondly, by claiming non-justiciability on the ground of act of foreign state (see Buttes Gas and Oil Co v Hammer, [1982] AC 888) and, thirdly, by applying under RSC, O 45, r 11 for a stay of the default judgment against it and by performing the conditions subject to which Mr Justice Webster granted a stay. No doubt a defendant who seeks a stay on the ground of forum non conveniens will usually take a step in the proceedings. But it is not correct to say that IAC has sought a stay on that ground here. If regard is had to the summons of Aug 2, 1991 and the affidavits in support, it is seen that the only material relief claimed is a declaration that the Court has no jurisdiction over IAC in respect of KAC's claim and that the claim is notjusticiable in the Courts of England and Wales. The only reference to forum non conveniens is in the statement of the grounds of the application. Nowhere is the action sought to be stayed. Reading the summons and the affidavits as a whole, I think it clear that "forum non conveniens" is advanced only as a ground for holding that there is no jurisdiction. No doubt what is actually being said, correctly as I think, is that a municipal Court has no jurisdiction to determine what is in reality a dispute of international law. In any event, it cannot possibly be maintained that IAC, by making such a case, is affirming the correctness of the proceedings or its willingness to go along with their determination by the English Courts. It is doing exactly the opposite. Turning to act of foreign state, I would accept that that is a doctrine which can be relied on, and is usually relied on, by way of defence. But once again it is clear that here it is being advanced only as a further ground for holding that there is no jurisdiction. That is a plea which might or might not succeed. But the mere making of it does not constitute an affirmation of the kind required, any more than "forum non conveniens". As for the suggestion that the application for a stay of the judgment and the performance of the conditions subject to which it was granted could amount to a step in the proceedings, I share the feeling of bewilderment confessed to by Lord Russell of Killowen in Evans v Bartlam, [1937] AC 473 at pp 482 483, a passage on which Mr Beloff especially relied. Reference may also be made to a further passage in the judgment of Lord Denning MR in Eagle Star Insurance Co Ltd v Yuval Insurance Co Ltd, at p 361: Applying this principle, the defendants here were presented with a writ endorsed with a statement of claim which was very defective. They applied, quite properly, to strike it out. That was not an affirmation of the correctness of the proceedings. Quite the contrary. It was a disaffirmation of them. It was not a "step in the proceedings" such as to debar the defendants from applying for a stay. These observations apply equally to an application to stay the enforcement of a judgment and the performance of conditions on which the stay has been granted. Again IAC has acted only so as to disaffirm the correctness of the proceedings and its willingness to go along with their determination by the English Courts. For these reasons, I am satisfied that IAC has not taken a step in the proceedings within s 2(3)(b) of the Act. It has not submitted, nor is it deemed to have submitted, to the jurisdiction of the English Courts. Its immunity remains intact. I would therefore allow IAC's appeal. There being no longer any peg on which the action as against Iraq can be hung, KAC accepts that its cross-appeal must be dismissed. I would dismiss it accordingly. JUDGMENTBY-2: LEGGATT LJ JUDGMENT-2: LEGGATT LJ: The principal acts complained of by the respondents, Kuwait Aircraft Corporation ("KAC"), as giving them a cause of action in conversion were depriving KAC of the aircraft, and removing them from the Airport, and unlawfully transferring them to the appellants, Iraq Airways ("IAC"). In a word, this amounted to expropriation. The aircraft when seized were owned and operated by KAC. IAC had no right or title to any of them. The evidence discloses no contractual or other relationship between KAC and IAC. On behalf of KAC Mr Nicholas Chambers, contended that IAC's conversion of the aircraft was not part of the invasion but consisted of one civil airline tortiously interfering with the property of another civil airline. Counsel for KAC add, as is uncontestable, that "conversion is not a sovereign function." In my judgment the expropriation of the aircraft by IAC on the directions of the Republic of Iraq was as much an exercise of the power and authority of a hostile state as the invasion had been. At the material time there was no trading relationship between KAC and IAC, and IAC did not even purport to acquire the aircraft pursuant to a commercial transaction. The suggestion is that conversion is a peculiarly private tort which it is at once apparent cannot have constituted an exercise of the power of the state. I am unable to understand this submission. From earliest times the concept of plunder, booty and the spoils of war has been amongst the most basic. The seizure by one state of goods belonging to another represents an act of conversion as obvious as it is flagrant. Whether the acts of conversion here complained of were done in the exercise of the power of the state must be determined on a broad view of the facts as a whole. In truth there was no contractual relationship to disguise or divert attention from the exercise of state authority. The acts of seizing and "looking after" the aircraft plainly were done jure imperii. Those acts were done, and could only have been done, by the exercise of sovereign powers. No civil airline could have commandeered the aircraft of another civil airline without invoking governmental authority. The Republic of Iraq was not engaged in a foray into the realms of trade, since there was no trading relationship between IAC and KAC. As Lord Wilberforce said in The I Congreso del Partido, [1981] 2 Lloyd's Rep 367 at p 377, col [1983] 1 AC 244 at p 269A: It is precisely to protect private trade against politically inspired breaches and wrongs, that the restrictive theory allows states to be brought before a municipal Court. Lord Wilberforce cited with approval the ultimate test propounded by Mr Justice Robert Goff: . . . it is not just that the purpose or motive of the act is to serve the purposes of the state, but that the act is of its own character a governmental act, as opposed to an act which any private citizen can perform. In this Court, though not before the Judge, Mr Chambers argued that IAC can look to each successive act of conversion independently of others, and if any such act was arguably not done in exercise of sovereign power but as a commercial activity, that act will not be immune from process. In my judgment that approach is neither realistic nor permissible. But for the seizure and removal of the aircraft, which indisputably were neither commercial acts nor such as might have been done by a private person, the aircraft could not have been "looked after" by IAC as agent for the Republic of Iraq. There followed another indisputably sovereign act in the passing of Decree 369, by which the title to the aircraft was ostensibly transferred to IAC. Thereafter though IAC may have treated the aircraft or some of them as part of its civil airline fleet, its ability to do so stemmed solely from the exercise of sovereign authority by the Republic of Iraq. IAC, like the bank in United States of America and the Republic of France v Dollfus Mieg and the Bank of England, [1952] AC 582, was dependent for such title as it enjoyed to the aircraft upon sovereign acts that rendered its possession of the aircraft immune from proceedings. It is a tribute to the pertinacity of Mr Chambers that his argument did not founder sooner. That may have been because it had been given a fair wind by the Judge. He assumed (at p 20 of the transcript of his judgment) that the government's removal through the Iraqi Air Force of five KAC aircraft which it required for its other purposes was a governmental act and therefore immune. He contrasted what was done with those aircraft with the fate of the aircraft the subject of the action, saying — The fact is that the Government of Iraq identified these 10 aircraft as ones which were required for civilian operation by IAC and the Minister of Transport on its behalf instructed IAC to take the aircraft into its possession and control to remove them from Iraq. The only distinction drawn is between the military and civilian uses to which the Government intended to put the two groups of aircraft respectively. The Judge emphasised this by saying: There is no evidence which would justify a finding that the Government relied upon IAC merely to provide pilots and engineers so that the aircraft could be removed to Iraq for some other purpose or that any other such purpose was governmental rather than commercial (for example, that the aircraft were required as troop carriers). Nor was there any other organisation within Iraq which could implement the decision to use the aircraft for commercial purposes. In The I Congreso (ibid) Lord Wilberforce at p 373, col 2; p 263H adopted the following passage from the judgment of the Federal Constitutional Court of the German Federal Republic in Claim Against the Empire of Iran Case, (1963) ILR 57 at p 80: As a means for determining the distinction between acts jure imperii and jure gestionis one should rather refer to the nature of the state transaction or the resulting legal relationships, and not the motive or purpose of the state activity. It thus depends upon whether the foreign state has acted in exercise of its sovereign authority, that is in public law, or like a private person, that is in private law. Because the Judge founded his approach exclusively upon his assessment of the purpose for which the aircraft were to be used, he was in my judgment led to the wrong conclusion. Since I agree with my Lords and also with the Judge that IAC did not submit to the jurisdiction I there is little that I need say about it. The essential reason why in the circumstances of such a case as this there is no submission was explained by Lord Russell of Killowen in Evans v Bartlam, [1937] AC 473 at pp 482-483 when he said: My Lords, I confess to a feeling of some bewilderment at the theory that a man (who so long as it stands must perforce acknowledge and bow to a judgment of the Court regularly obtained) by seeking and obtaining a temporary suspension of its execution is thereby binding himself never to dispute its validity or its correctness, and never to seek to have it set aside or reversed. The acknowledgement of service did not necessarily entail any more than a willingness to participate in the action for the purpose of contesting the jurisdiction; and the stay constituted no more than resistance to enforcement. Neither could sensibly be construed as an indication of readiness on the part of KAC to have the merits of the dispute determined by the English Court. As Lord Fraser said in Williams & Glyn's Bank Plc v Astro Dinamico Compania Naviera SA, [1984] I Lloyd's Rep 453 at p 456, col 2; [1984] 1 WLR 438 at p 443E: By entertaining the application for a stay in this case, the Court would be assuming (rightly) that it has jurisdiction to decide whether or not it has jurisdiction to deal with the merits, but would not be making any assumptions about its jurisdiction to deal with the merits. So I would allow the appeal; and, since the Republic of Iraq is involved in the action only as a necessary party to the claim against IAC, I would dismiss the cross-appeal. JUDGMENTBY-3: SIMON BROWN LJ JUDGMENT-3: SIMON BROWN LJ: The first defendant, IAC, is the national civil airline of Iraq, a legal entity wholly owned by the State. In circumstances already sufficiently outlined by Lord Justice Nourse, IAC came, as a result of Iraq's invasion of Kuwait, to incorporate within its fleet aircraft then owned by the plaintiffs, KAC. By these proceedings KAC seek to recover from both IAC and the second defendant, the Republic of Iraq, damages for their unlawful interference with those aircraft as particularised in par 2 of the points of claim, a paragraph which my Lord has already set out in full. KAC complain in essence of a series of acts of interference each of which I have no doubt is capable in law of amounting to an act of conversion. The central issue raised upon the appeal is whether the Courts of the United Kingdom have jurisdiction over KAC's claim in so far as it is advanced against IAC. IAC is an — . . . entity . . . which is distinct from the executive organs of the government of the State and capable of suing or being sued . . . and thus "a separate entity" within the meaning of s 14 of the State Immunity Act 1978, for present purposes the ruling provision. Section 14(2) provides as follows: (2) A separate entity is immune from the jurisdiction of the courts of the United Kingdom if, and only if — (a) The proceedings relate to anything done by it in the exercise of sovereign authority; (b) the circumstances are such that a state . . . would have been so immune. The following two questions accordingly arise: (a) Does KAC's claim against IAC relate to anything done by IAC in the exercise of sovereign authority? (b) Are the circumstances such that had IAC been a State it would have been immune? On the particular facts of this case question (b) raises in turn two further questions: (1) Are the circumstances such that had IAC been a State it would — although prima facie immune under s 1(1) of the Act — have been denied such immunity by reason of s 3 of the Act. Most materially for present purposes s 3 provides that: (1) A State is not immune as respects proceedings relating to — (a) a commercial transaction, entered by the State . . . (3) In this section "commercial transaction" means . . . (c) any transaction or activity (. . . of a commercial . . . character) into which a State enters or in which it engages otherwise than in the exercise of sovereign authority . . . This question can accordingly be re-formulated in this way — does KAC's claim against IAC relate to a commercial transaction entered into by IAC, ie an activity of a commercial character engaged in by IAC otherwise than in the exercise of sovereign authority? Formulated thus, it will readily be seen that in the particular circumstances of this case the question adds nothing of materiality to question (a) above (ie that raised directly by s 14(2)(a)). Both invite an answer to the same basic question: was IAC, when acting in the manner complained of in respect of KAC's aircraft, engaged in the exercise of sovereign authority? Mr Justice Evans, (as he then was) held that it was not. Upon the first question (which I shall call the issue of sovereign authority) IAC submits that the Judge was wrong. (2) Are the circumstances such that had IAC been a State it would — even assuming that it were otherwise entitled to immunity — have lost that immunity through having submitted to the Courts adjudicative jurisdiction within the meaning of s 2 of the Act? The material parts of s 2 are these: (1) A State is not immune as respects proceedings in respect of which it has submitted to the jurisdiction of the courts of the United Kingdom. (3) A State is deemed to have submitted subject to (subsections) (4) . . . below, if it has intervened or taken any step in the proceedings. (4) Subsection 3(b) above does not apply to intervention or any step taken for the purpose only of — (a) claiming immunity . . . KAC argue that IAC has taken steps in the proceedings other than "for the purpose only of claiming immunity" and accordingly that it has lost whatever immunity it would otherwise have enjoyed. This contention Mr Justice Evans, rejected. Upon this second question, therefore, (which I shall call the issue of submission to jurisdiction) it is KAC who submit that the Judge was wrong. At the risk of reiterating much of what Lord Justice Nourse, has already said on both issues, I propose to indicate as shortly as may be my own views on each. 1. Sovereign authority As stated, the critical question raised in this regard is whether IAC, when "interfering" with KAC's aircraft in the manner complained of in these proceedings, was acting in the exercise of sovereign authority. Mr Beloff, QC argues that that is the same question as asking whether IAC's acts of interference can properly be characterised as commercial. Subject to one qualification which I shall mention later, the argument is surely well founded. As Lord Diplock explained in Alcom Ltd v Republic of Columbia, [1984] 2 Lloyd's Rep 24 at p 27; [1984] AC 580 at p 600, public international law recognises a "straightforward dichotomy" between acta jure imperii (activities undertaken in the exercise of sovereign authority) and acta jure gestionis (transactions of a commercial or private law character which might appropriately be undertaken by private individuals instead of sovereign states). That dichotomy crucially informs not only an understanding of the developing jurisprudence upon the restrictive theory of immunity but also the proper application of s 3 of the 1978 Act which now substantially supersedes the earlier case-law. In short, the Court is bound in the great majority of sovereign immunity cases to focus upon the central antithesis between sovereign or governmental action on the one hand and trading or commercial activity on the other. So far so good. But how is any given claim to be characterised? By what touchstones should one decide into which of the two categories (not always self-evidently discrete) it falls? That is where the difficulty invariably arises. It was a difficulty recognised and explored by Lord Wilberforce in The I Congreso del Partido [1981] 2 Lloyd's Rep 367; [1983] AC 244 (and which eventually divided the House in respect of one of the two vessels there under consideration). Lord Wilberforce's conclusion upon the authorities was this: The conclusion which emerges is that in considering, under the "restrictive" theory whether State immunity should be granted or not, the court must consider the whole context in which the claim against the state is made, with a view to deciding whether the relevant act(s) upon which the claim is based, should, in that context, be considered as fairly within an area of activity, trading or commercial, or otherwise of a private law character, in which the state has chosen to engage, or whether the relevant act(s) should be considered as having been done outside that area, and within the sphere of governmental or sovereign activity. I do not understand that conclusion (as opposed to its application on the facts) to be put in question by any of the other speeches, nor do I doubt its relevance to the similar issue raised in statutory form by s 3 of the 1978 Act. One further basic principle also emerges clearly from the jurisprudence: As a means for determining the distinction between acts jure imperii and jure gestionis one should rather refer to the nature of the state transaction or the resulting legal relationships, and not to the motive or purpose of the state activity. It thus depends on whether the foreign state has acted in exercise of its sovereign authority, that is in public law, or like a private person, that is in private law. [The Empire of Iran case, (1963) 45 ILR 57, approved in The I Congreso]. With those governing principles in mind I turn to the judgment under appeal, the determinative passages in which appear to me to be these: [IAC's] submission that "only a State could appropriate the airline of another State" may well be true, and if the present case was limited to a complaint that the Government of Iraq took possession of the ten KAC aircraft by reason of its occupation of the airport, then I am prepared to assume that the same immunity would be available to a "separate entity" including IAC which performed that act on its behalf. But the complaint in the present case is not merely that the defendants took possession or control of the aircraft by reason of [Iraq's] occupation of the airport by force of arms. It includes the allegation [that . . .] "between 2nd August and 9th August aircraft were removed from the airport". . . . the fact is that the Government of Iraq identified these ten aircraft as ones which were required for civilian operation by IAC, and the Minister of Transport on [Iraq's] behalf instructed IAC to take the aircraft into its possession and control and to remove them to Iraq. There is no evidence . . . that the aircraft [were being] removed to Iraq [for any purpose that] was governmental rather than commercial (for example, that the aircraft were required as troop carriers). Nor was there any other organisation within Iraq which could implement the decision to use the aircraft for commercial purposes. Mr Justice Evans, accordingly held IAC not to be immune from the Court's jurisdiction save possibly in respect of KAC's loss of possession of the aircraft on Aug 2, 1990 when Iraq first invaded Kuwait and took control of the airport. Although at an earlier stage of his judgment Mr Justice Evans, had recorded as common ground that the defendant's purpose or motive is not decisive and that the categorisation of the act complained of is to be determined rather by its nature, it seems to me evident from the passages cited above that the consideration which in the event he found decisive was that these 10 aircraft were appropriated specifically to augment IAC's capability as a civilian airline. They were seized, flown out to Iraq, and thereafter incorporated by decree into IAC's fleet for that commercial purpose and no other. That is the long and the short of it. The difficulty I have with that reasoning is this: it seems to me inevitably to accord precedence to the ultimate objective of the appropriation over and above what I for my part would regard as the dominant circumstance — the very act of appropriation itself. The plain fact is that Iraq invaded and occupied Kuwait by force of arms, here subsequent expropriation of Kuwaiti assets being the action of a victorious military power exercising rights of conquest. So far as the seizure of KAC's aircraft was concerned, IAC was no more and no less than Iraq's tool and partner in the adventure. To characterise as a commercial activity what in reality was, IAC's willing participation in naked acts of forcible seizure and expropriation, sanitised although these eventually were under colour of domestic legislation, would seem to me to do no service to the rule of law; rather it would afford IAC an apparent respectability it does not merit. No one doubts that the nationalisation of assets within a State is an act jure imperii. The expropriation of foreign assets by a victorious power seems to me a fortiori such an act and I would hold it no less so merely because such assets are to be deployed for the enrichment of its national airline rather than some other, perhaps more direct, governmental purpose of the conquering State. That then deals with the case as argued and decided below. It does not, however, deal with a second argument developed for the first time before us. The alternative argument contrasts strongly with the main one, not least in this: so far from emphasising and relying upon IAC's early participation in the physical removal of the 10 aircraft from Kuwait en route to their intended civilian use (an argument designed to suggest a commercial flavour to the entire expropriatory process), it seeks instead to distance IAC from these earlier stages. In essence the argument is this. Following Iraq's Decree of Sept 9, 1990, transferring with effect from Sept 17 all KAC's assets to IAC, IAC continued to commit acts of conversion with regard to the disputed aircraft, in particular by wrongly assuming and asserting title to them inconsistently with KAC's own continuing lawful title. These acts of conversion arose, KAC submit, directly out of IAC's operation of its civilian fleet of aircraft — on any view a commercial transaction within the meaning of s 3(1) of the Act. But in any event, the argument runs, irrespective whether such a claim in conversion can properly be said to relate to a commercial transaction, IAC falls at the first hurdle: it cannot properly be regarded as exercising any form of sovereign authority. Rather, in asserting title to the aircraft, it is relying on the Decree. Thus its true defence is one of act of state, not sovereign immunity under s 14(2). There is, submits Mr Chambers, QC, a parallel between IAC's position here and that of the Bank of England in United States of America and the Republic of France v Dollfus Mieg and the Bank of England, [1952] AC 582. By the same token that the bank there was held open to an action for conversion by the rightful original owners of 13 gold bars disposed of by the bank without the authority of the bailor States (who would otherwise have been entitled to claim immunity and thereby protect also their bailee bank proceedings), so too should IAC be open to proceedings and unable to rely parasitically it is suggested, upon Iraq's (assumed for the purposes of this argument) right of immunity. Although ultimately unpersuaded by it, I confess to having found this an altogether more promising argument than that which prevailed before Mr Justice Evans — not least because in this context it is unnecessary for KAC to point to any commercial activity: assuming IAC was indeed committing acts of conversion by the mere inclusion of the disputed aircraft within its fleet, the critical first question remains that posed by s 14(2)(a): was it doing so in the exercise of sovereign authority? (It is here that I would qualify my acceptance of Mr Beloff's submission that any action undertaken otherwise than in the exercise of sovereign authority will necessarily be "commercial". It will not: there may well be occasions when a separate entity is guilty of tortious or even criminal conduct which, although affording immunity to a state, will not avail a separate entity.) Assume that IAC had sold these aircraft on to some other airline who then, having refused KAC's claim to their return, found themselves sued in conversion. Surely no one would suggest that this successor airline could invoke the doctrine of sovereign immunity. Why then should IAC be more advantageously placed? The answer is, I believe, this: that on the particular facts of this case, it is unreal and impermissible to seek to separate out IAC's eventual use of the disputed aircraft pursuant to the State's Decree from the circumstances of their initial acquisition. The reality is, as already indicated, that IAC was intimately involved throughout the entire expropriatory process: the planes were spoils of war and IAC was party to their taking. In the result IAC cannot now be impleaded: having acted in concert with the State in what was par excellence an act of sovereign authority — the exercise of militaristic power — it too is entitled to immunity from the jurisdiction of domestic Courts. I would accordingly overrule the trial Judge on this first issue. 2. Submission to jurisdiction Mr Chambers for KAC fixes upon the word "only" in s 2(4) of the Act and argues that by necessary implication any step taken for a purpose other than that of claiming immunity must be a step in the proceedings such as amounts by virtue of sub-s (3)(b) to a deemed submission on IAC's part. A number of other such steps, Mr Chambers submits, have been taken by IAC, most conspicuously that of inviting the Court to deny KAC jurisdiction on the ground of forum non conveniens. In reply, Mr Beloff submits first that s 2 has no application at all to claims for immunity asserted by a separate entity under s 14: s 2 in terms is confined to submissions to jurisdiction by States and, he points out, s 14(3), as if to highlight the point, expressly deals with submission by the separate entity itself. That argument I would reject. Section 14(2)(b), in asking, as I believe it does, whether the separate entity would have been immune had it fallen within the s 14(1) definition of a State, is necessarily asking whether the separate entity is to be regarded as having submitted by reference to the test of submission laid down for States in s 2. That is why s 14(3) is silent as to what actually amounts to submission on the part of a separate entity; its function is rather to preserve for separate entities who have submitted to the jurisdiction the immunity from execution provided by s 13. Mr Beloff's second submission is that s 2(4) is no authority for the converse proposition that any step not taken only for the purpose of claiming immunity is a submission to jurisdiction. This argument too I would reject. The word "step" in sub-s (4) must, I think, be understood to mean "step in the proceedings", precisely as in sub-s (3). But Mr Beloff's third argument I do accept. That is that s 2 as a whole, so far from imposing on States a more rigorous than usual test of submission to jurisdiction (ie a test more likely to be inadvertently failed), should be construed rather as affirming that a State will not be held unintentionally to have submitted to jurisdiction merely for having required the Court to determine whether or not its claim to immunity is well founded — for invoking, in other words, the Court's "jurisdiction". In short, s 2(4) in my judgment exists only for the avoidance of doubt and leaves untouched the need in the ordinary way to determine whether anything else done by the State (or separate entity) should on general principles be held to constitute a step in the proceedings. These general principles have for the most part evolved in the context of the Arbitration Acts and are conveniently to be found stated in Mustill & Boyd on Commercial Arbitration, 2nd ed, at p 272 as follows: The reported cases are difficult to reconcile, and they give no clear guidance on the nature of a step in the proceedings. It appears, however, that two requirements must be satisfied. First, the conduct of the applicant must be such as to demonstrate an election to abandon his right to stay, in favour of allowing the action to proceed Second, the act in question must have the effect of invoking the jurisdiction of the court . . . The circumstances which accompany an act may be looked at to see whether the act amounts to an election to give up the right to a stay. Thus, an application to the court which might otherwise amount to a step in the proceedings is deprived of this characteristic if the applicant makes it clear — by stating that his application is without prejudice to a subsequent request for a stay, or by simultaneously taking out a summons to stay — that he intends to insist on a reference to arbitration. An act carried out as a preliminary to proceedings is not a step in proceedings. Even allowing for the stated uncertainty of the law, applying those principles in the present case it seems to me quite impossible to hold that IAC here did anything that could properly be said to amount to taking a step in the proceedings. So far from conducting itself so as to "demonstrate an election to abandon (its) right" (here to immunity rather than a stay for arbitration), IAC through its advisors from first to last repeatedly emphasised its intention not to submit to the Court's jurisdiction. In the face of such protestations I would be loath to find that it had nevertheless done so. Whilst accepting entirely the correctness of Mr Justice Saville's unreported decision in A Co Ltd v B Co Ltd and Republic of Z, (Apr 1, 1993) — that for a State expressly and formally to invoke and submit to the Court's jurisdiction to determine an application for a stay on the grounds of forum non conveniens before inviting the Court to determine its claim to immunity does indeed involve that State's submission to the jurisdiction for the purposes of s 2 of the 1978 Act — I regard that case as readily distinguishable from the present one. To my mind, indeed, it lies at the very opposite end of the spectrum. Consider the differences. In the first place, the plea of forum non conveniens raised here by IAC was by no means a conventional one. On the contrary, the summons before the Court sought not a stay but rather a declaration that the United Kingdom Courts have no jurisdiction over IAC in respect of KAC' s claim, and that such a claim is not justiciable. IAC was not suggesting that the claim against it could and should more appropriately be dealt with in some other competent and more convenient municipal forum. Its contention was rather that the dispute was clearly of an international character — intrinsically a plea directed to immunity and merely ancillary to the main argument. And that, indeed, was clearly how the matter was perceived by the various Judges hitherto seised of the case: that IAC's sole challenge was to the Court's jurisdiction on grounds of immunity from suit. The position was very different in A Co Ltd. There, by contrast, a wholly distinct application lay before the Court — an application expressly requiring the Court to decide whether, assuming the defendants not to be immune, England was the proper forum for the resolution of the dispute. That was a conventional plea of forum non conveniens, a plea moreover not merely distinct from the immunity claim but expressly required to be separately dealt with at an earlier hearing. The contrast between the two cases could hardly be starker. On this part of the case, therefore, I would uphold the I decision of the Judge below. In the result I too would allow IAC's appeal and hold it immune in respect of KAC's claim from the jurisdiction of our Courts. It would follow also that KAC's cross-appeal with regard to the Republic of Iraq must fail: there remains no claim to which they are a necessary or proper party. [Editor's Note: Unfortunately due to an error by the Shorthandwriters only the judgment of Lord Justice Nourse was published in [1994] 1 Lloyd's Rep 276 (PART 3).] DISPOSITION: Judgment accordingly SOLICITORS: Landau & Scanlan; Clyde & Co |