COURT OF APPEAL

J.H. RAYNER (MINCING LANE) LTD. v. DEPARTMENT OF

TRADE AND INDUSTRY AND OTHERS AND RELATED APPEALS

MACLAINE WATSON & CO. LTD. v. DEPARTMENT OF TRADE AND INDUSTRY

See Law Reports version at [1989] Ch. 72

[This is one of a few key English post-1940 judgments ranscribed in full-text by volunteers for scholarly political discussion of international-law issues: United States users see 17 U.S.C §107; Canadian users see Copyright Act 50-year duration and “fair dealing exceptions”]

COUNSEL: Mark Littman Q.C., Richard Aikens Q.C., Richard McCombe and Adrian Hughes for Maclaine Watson.

Anthony Grabiner Q.C., Nicolas Bratza and David A. S. Richardsfor the Department of Trade and Industry.

Sydney Kentridge Q.C. and Jonathan Hirst for Rayner.

Patrick Talbot for Canada.

Richard D. Jacobs for France, Federal Republic of Germany and The Netherlands. Huw Davies for india.

Howard Page Q.C. for Indonesia.

Peter Irvin for the I.T.C.

SOLICITORS: Elborne Mitchell; Clyde & Co.; Slaughter & May; Allen & Overy; Clifford Chance; Treasury Solicitor; Travers Smith Braithwaite; Oppenheimers; Boodle Hatfield; Lovell White & King; Stocken & Lambert; Macfarlanes; Cameron Markby; Clifford Chance.

JUDGES: Kerr, Nourse and Ralph Gibson L.JJ.

DATES: 1988 Jan. 18, 19, 20, 21, 25, 26, 27, 28; Feb. 1, 2, 3, 4, 5, 8, 9, 10, 11, 12, 15, 16; March 1, 2, 3; April 27

International Law – Treaty – International organisation – International Tin Council formed by treaty between sovereign states including United Kingdom – Council established to trade in and control price of tin internationally – Principal offices in London – Council unable to meet liabilities to creditors – Whether member states liable for debts incurred by council – Whether sovereign immunity afforded to foreign sovereign states and E. E. C. – Whether proceedings against council and member states justiciable before English courts

The International Tin Council (“I.T.C.”) was an international organisation established by treaty in 1956 and was currently constituted by the Sixth International Tin Agreement (“I.T.A.6”) made between a number of states, including the United Kingdom. Under I.T.A.6 its functions were to adjust world production and consumption of tin and to prevent excessive fluctuation in the price of tin. Although I.T.A.6 was never part of the law of England the I.T.C. had its headquarters and principal office in London pursuant to another agreement. The I.T.C. was recognised under English law by the International Tin Council (Immunities and Privileges) Order 1972. The Order endowed the I.T.C., for all relevant purposes of English law, with the legal character and status and legal capacities of a corporate body which enabled it to contract under the name I.T.C. The Order granted certain immunities to the I.T.C. when carrying out its activities defined in I.T.A.6, including the purchase and sale of tin on the London Metal Exchange, but such immunities did not extend to the enforcement of a valid arbitration award. In 1985 the I.T.C. ran out of money trying to support the world price of tin and was unable to meet its commitments. Its dealings on the Exchange were suspended and it ceased trading owing several hundred million pounds to its creditors. The plaintiffs M.W. claimed certain sums due under contracts made between them and the I.T.C. They obtained an arbitration award against the I.T.C. and on 3 December 1986 they issued a writ against the Department of Trade and Industry, representing the United Kingdom, claiming that each member state was jointly and severally liable in respect of any such arbitration award which remained unsatisfied. Alternatively, it was claimed that if such contracts were not direct contracts by all the members acting jointly and severally under the name I.T.C. but were to be considered as contracts made by the [*73] I.T.C. as a separate legal entity from its members, then, on the true construction of the Order of 1972, each such contract was made by that separate legal entity not only on its own behalf but also on behalf of each of the member states jointly and severally. The other plaintiff brokers, having obtained arbitration awards, issued on 9 July 1986 and 3 February 1987 writs against all the member states, making similar claims. In December 1986 the six banks who were owed money by the I.T.C. issued writs claiming from the member states the money lent and interest or damages on account of money lent, breach of implied collateral contract and damages for negligence or negligent misrepresentation.

On 18 March 1987 the Department of Trade and Industry issued a summons seeking an order that M.W.’s statement of claim should be struck out under R.S.C., Ord. 18, r. 19, and under the inherent jurisdiction of the court on the grounds that it disclosed no reasonable cause of action against the department that it was frivolous and vexatious and that it was an abuse of the process of the court. The summons sought, in the alternative an order under Ord. 12, r. 8, that the writ and the service thereof on the department and all subsequent proceedings should be set aside and/or for other appropriate relief on the ground that the facts and matters contained in the writ and in the statement of claim were not justiciable in the English courts and there was no jurisdiction in the court to determine the matters pleaded. On 29 July 1987 Millett J. struck out M.W.’s writ and statement of claim. The member states, including the department, also took out summonses to strike out in the other actions on the main grounds that the claims were not justiciable and the plaintiffs had no cause of action. The Commission of the European Community, and later the European Economic Community (“E.E.C.”), also issued summonses claiming declarations that the court had no jurisdiction because the E.E.C. had sovereign immunity and that the claims were not justiciable. The I.T.C. issued a summons in the brokers’ action seeking to set aside the proceedings and a declaration that the court had no jurisdiction on the grounds that the claim was not justiciable and that the I.T.C. was immune from suit. Staughton J. made the orders sought by the summonses but deferred decision on the E.E.C.’s claim for sovereign immunity.

On appeals by all the plaintiffs and cross-appeals by, inter alia, the E.E.C.: -

Held, dismissing the appeals, (1) that the I.T.C. had legal personality separate and distinct from its members; that the result of the interposition of the I.T.C. as a legal entity between its members and third parties who entered into contracts with it, was that it did not engage its members by reason only of their being its members and that under the common law the members had no liability for the contracts made by the I.T.C., unless they were made on their behalf pursuant to the doctrine of agency (post, pp. 169A-B, 176C-E, F-H, 235A-B, C).

Nissan v. Attorney-General [1970] A.C. 179, H.L.(E.) considered.

(2) (Nourse L.J. dissenting) that neither the terms of I.T.A.6 nor rules of international law conferred on the member states secondary liability for the debts of the I.T.C.; but that, even if the court could consider I.T.A.6 and construe it in accordance with international law so as to determine the I.T.C.’s nature, [*74] and the I.T.C., under that approach, was regarded as an entity whose members were secondarily liable for its debts, it did not follow that the determination and enforcement of such secondary liability had been submitted by the members to the national courts of a member state (post, pp. 177F – 178D, 245B-C, 248G – 249A).

Westland Helicopters Ltd. v. Arab Organisation for Industrialisation (1984) 23 I.L.M. 1071 considered.

Per Nourse L.J. Although the I.T.C. had separate personality in international law its members are or may be liable, jointly and severally, directly and without limitation, for debts on its tin and loan contracts in England if and so far as they are not discharged by the I.T.C. itself and that liability was adopted for the purposes of English law by the Order of 1972 (post, pp. 221H – 222A, 223D-E).

(3) That it was the foundation of company law that agency between a corporation and its members in relation to the corporation’s contracts with third parties could not be inferred from the control exercisable by the members over the corporation or from the fact that the sole object of the contracts was to benefit the members; that the relationship of agency, apart from the concept of agency of necessity, was based on the consent of both parties; that there was nothing in the terms of I.T.A.6 to show that the real consent of all the members was that the I.T.C. should contract as their agent and that, accordingly, the contracts made by the I.T.C. were made on its own behalf without engaging the liability of its members (post, pp. 188E – 189A,250G – 251A).

Salomon v. A. Salomon & Co. Ltd. [1897] A.C. 22, H.L.(E.) and Garnac Grain Co. Inc. v. H.M.F. Faure & Fairclough Ltd. (Note) [1968] A.C. 1130, H.L.(E.) applied.

Smith, Stone and Knight Ltd. v. Birmingham Corporation [1939] 4 All E.R. 116 distinguished.

(4) Dismissing the E.E.C.’s cross-appeal, that there was no legislative source in this country under which the court could give the same recognition of the E.E.C.’s claim to sovereign immunity from its processes as it would accord to a foreign state and the relevant provisions of the E.E.C. Treaty and Merger Treaty 1965 revealed no such provision and that, accordingly the E.E.C.’s claim to sovereign immunity was untenable (post, pp. 199, 200, 223, 252-253).

Per Kerr and Ralph Gibson L.JJ. If the plaintiffs had succeeded on any of their points the question whether the member states of the I.T.C. were immune under section 1 of the State Immunity Act 1978 or fell within the exceptions in section 3(1)(a) or (b) would have to be tried as a preliminary issue, and on that preliminary issue it could not have been found that the member states would not have been immune (post pp. 194, 195, 252).

Appeals from Staughton J.

J. H. RAYNER (MINCING LANE) LTD. v. DEPARTMENT OF TRADE AND INDUSTRY AND OTHERS (“the Rayner action”)

By a writ dating 9 July 1986 the plaintiffs, J. H. Rayner (Mincing Lane) Ltd., claimed £16,347,825.17 and interest arising from certain contracts for the sale of tin between the plaintiffs and the I.T.C. and from an arbitration award from the defendants, (1) the Department of Trade of Industry, (2) the Commonwealth of Australia, (3) the Kingdom of Belgium, (4) Canada, (5) the Kingdom of Denmark, (6) the Commission of the European Communities, (7) the Republic of Finland (8) the Republic of France, (9) the Federal Republic of Germany, (10) the Hellenic Republic of Greece, (11) the Republic of India, (12) the Republic of Indonesia, (13) the Republic of Ireland, (14) the Italian Republic, (15) Japan, (16) the Grand Duchy of Luxembourg, (17) the Federation of Malaysia, (18) the Kingdom of the Netherlands, (19) the Republic of Nigeria, (20) the Kingdom of Norway, (21) the Kingdom of Sweden, (22) the Swiss Confederation, (23) the Kingdom of Thailand and (24) the Republic of Zaire. [*79]

Between 9 October 1986 and 4 February 1987 the defendants issued summonses seeking to set aside the proceedings and declarations that the court had no jurisdiction. The grounds on which the Department of Trade and Industry sought the order were that the claim was not justiciable by English courts and the plaintiffs had no cause of action. The Commission of the European Communities claimed that it had sovereign immunity, that the claim was not justiciable and that the plaintiffs had no good arguable case. The other defendants sought orders to set aside the proceedings and declarations that the court had no jurisdiction on the ground of sovereign immunity.

By an order dated 31 July 1987 Staughton J., inter alia, ordered the striking out of the points of claim sought to be struck out by the department pursuant to R.S.C., Ord. 18, r. 19 and under the inherent jurisdiction of the court on the ground that they disclosed no reasonable cause of action and that the claim pleaded by paragraph 12(b) of the amended points of claim was not justiciable in the English courts. By another order of the same date the judge ordered, inter alia, that the order of Bingham J. dated 22 July 1986 giving leave to the plaintiffs to issue and serve a concurrent writ of summons out of the jurisdiction on each of the 2nd and 24th defendants be discharged and service thereof set aside. The judge gave the plaintiffs leave to appeal against both these orders.

By a notice of appeal dated 12 August 1987 the plaintiffs appealed on the grounds that: (1) the judge wrongly held that on the true construction of article 5 of the Order in Council of 1972 the I.T.C. was to be treated as if it was a body corporate; (2) the judge ought to have held (a) that, on the true construction of the article and in English law, the I.T.C. had no juridical personality and was simply a collective name in which the defendants were permitted to contract, to own property and to do other things or, alternatively, that if the I.T.C. had some of the attributes of juridical personality it did not have the attribute of being entirely separate from its constituent members, so as to exclude them from liability for its debts and (b) that the members of the I.T.C. had unlimited liability for debts incurred by the defendants in the name of the I.T.C., alternatively for unpaid debts of the I.T.C.; (3) in the alternative, the judge having held that there was “a good deal to be said for the argument of agency,” wrongly held that the contracts for the sale of tin, entered into between the plaintiffs and the I.T.C. excluded the plaintiffs from contending that the I.T.C. entered into the contracts as undisclosed principals for the defendants; (4) the judge further wrongly held that the plaintiffs’ claim in agency was not justiciable in English law; (5) the judge ought to have held, on the assumption that the I.T.C. has a separate juridical personality, that the plaintiffs had a sufficiently arguable case which was justiciable in English law, that the I.T.C. entered into the contracts for the sale of tin as agents for the defendants; (6) the judge ought to have held that the amended points of claim disclosed a reasonable cause of action, that the 2nd to 5th and 7th to 24th defendants were not immune from the jurisdiction of the court and that the order granting leave to the plaintiffs to issue and serve a concurrent writ out of the jurisdiction and service thereof should stand. [*80

By a respondents’ notice dated 1 September 1987 (“the states’ notice”) the 2nd, 15th, 17th, 19th and 23rd defendants, the Commonwealth of Australia, Japan, the Federation of Malaysia, the Republic of Nigeria and the Kingdom of Thailand, gave notice of their intention to contend that the orders should (save as to order for costs) be affirmed on grounds other than those relied on by Staughton J. in his judgment dated 24 June 1987, namely that (1) even if the judge was wrong to conclude that the I.T.C. was or was to be treated in English law as a legal person, and if instead the I.T.C. was merely an unincorporated association of member states and the E.E.C., it would not follow automatically that its members were liable for debts which its officials and/or agents purported to incur in its name. The members of the I.T.C. would, even on that hypothesis, only be liable for such debts if it could be established that the officials and/or agents of the I.T.C. had authority to contract so as to render the members of the I.T.C. liable for such debts. The only facts relied on by the plaintiffs before the judge as giving rise to such an agency were the defendants’ membership of the I.T.C. and the terms of I.T.A.6, but (a) such an agency could not be inferred from the defendants’ membership of the I.T.C., (b) any claim based on agency said to arise from the terms of I.T.A.6 was non-justiciable and (c) such an agency was excluded by the terms of the tin contracts in question; (2) if, contrary to the judge’s decision and paragraph (1) above, the members of the I.T.C. were the undisclosed principals of the I.T.C. and/or the relevant officials and/or agents thereof in respect of the tin contracts and it was open to the court so to find, the contracts were not “entered into” by the 2nd to 5th and 7th to 24th defendants within the meaning of section 3(1)(a) of the State Immunity Act 1978 and the plaintiffs’ claims did not fall within any other statutory exception to immunity, and accordingly, such defendants were immune in respect of the plaintiffs’ claims therein; (3) the plaintiffs’ claims were non-justiciable by the court by reason of the fact that the plaintiffs’ claims were founded on the terms of I.T.A.6 and/or the membership/participation of sovereign states in the I.T.C. and the judge was wrong to conclude that the plaintiffs did not need to rely on I.T.A.6, and that therefore the plaintiffs’ claims were justiciable by the court; (4) the standard of proof which the plaintiffs had to satisfy to bring themselves within an exception under the Act of 1978 was proof on a balance of probabilities. The test was not, as held by the judge, whether the plaintiffs had a good arguable case that an exception applied. Even if, contrary to the judge’s decision, the plaintiffs had made out a good arguable case that their claim fell within one or more of those exceptions, they failed to satisfy such higher standard of proof.

By a respondents’ notice dated 1 September 1987 (“the E.E.C. notice”) the sixth defendant, the Commission of the European Communities (“E.E.C.”) gave notice that it would contend that Staughton J.’s order should be affirmed on the following additional grounds, namely: ground (1) was in identical terms to ground (1) in the states’ notice. Grounds (2) and (3) were in similar terms to grounds (3) and (4) in the states’ notice. Ground (4) stated that the E.E.C. was [*81] immune from the jurisdiction of the court in respect of the subject matter of the present action.

By a respondents’ notice dated 22 September 1987 (“the D.T.I. notice”) the department also gave notice that it would contend the judge’s order should be affirmed on the additional ground similar in terms as ground (1) in the states’ notice.

ARBUTHNOT LATHAM BANK LTD. v. COMMONWEALTH OF AUSTRALIA AND OTHERS

AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD. v. COMMONWEALTH OF AUSTRALIA AND OTHERS

BANQUE INDOSUEZ (A BODY CORPORATE) v. COMMONWEALTH OF AUSTRALIA AND OTHERS

HAMBROS BANK LTD. v. COMMONWEALTH OF AUSTRALIA AND OTHERS

KLEINWORT BENSON LTD. v. COMMONWEALTH OF AUSTRALIA AND OTHERS

TSB ENGLAND & WALES PLC. v. COMMONWEALTH OF AUSTRALIA AND OTHERS

(“The Six Banks actions”)

On 18 December 1986 Arbuthnot Latham Bank Ltd., Australia and New Zealand Banking Group Ltd., and Kleinwort Benson Ltd. issued writs in their respective actions claiming from the defendants, as in the Rayner action above, respectively £4,463,382.17 and interest or damages on account of money lent, breach of implied collateral contract and damages for negligence or negligent misrepresentation, £2,333,023.71 and £8,473,267.51. On 30 December Banque Indosuez, Hambros Bank Ltd. and TSB England & Wales Plc. issued their writs claiming respectively £1,165,761.39, £7,113,025.79 and £5,985,175.65 and interest or damages under section 35A of the Supreme Court Act 1981, as inserted by the Administration of Justice Act 1982, Schedule 1, Part I.

By paragraph 6.1(a) the plaintiffs sought to contend as a matter of law and by reference to public international law including I.T.A.6 that the defendants were liable as members of the council for the liabilities incurred in its name, including the liabilities under the loan agreement, and that they were so liable jointly and severally, alternatively they were severally liable for their respective proportions of such liabilities.

The Department of Trade and Industry took out a summons in each of the bank’s actions for an order that the proceedings to set aside, a declaration that the court had no jurisdiction or the points of claim be struck out on the grounds that the claim was not justiciable and the plaintiffs had no cause of action. The E.E.C. issued a summons in each of the actions pursuant to R.S.C., Ord. 12, r. 8 for orders that the writ served on the E.E.C. and service thereof and all subsequent proceedings should be set aside, a declaration that the court had no jurisdiction over the E.E.C. in respect of the subject matter of the claim or the relief or remedy sought in the action and an order that the action be dismissed against the E.E.C. on the ground that it was immune from the jurisdiction of the court. The summons claimed further and in the alternative that, without prejudice to the immunity of the E.E.C., (a) the plaintiffs’ claims were not cognizable by the court, (b) the issues [*82] raised by the plaintiffs’ claims were not justiciable by the court and/or (c) there was no jurisdiction in the court to determine the matters pleaded in the points of claims. Other defendants also issued summonses on the grounds similar to those in the Rayner action.

On the department’s summonses Staughton J. ordered that paragraph 6.1(a) in the points of claims should be struck out under R.S.C., Ord. 18, r. 19 and under the inherent jurisdiction of the court on the ground that they disclosed no reasonable cause of action. The E.E.C.’s summonses were adjourned.

By notices of appeal dated 27 August 1987 the plaintiffs appealed on the similar grounds, namely, that: (1) the judge wrongly held that paragraph 6.1(a) disclosed no cause of action; (2) the question was whether the defendants, members of the I.T.C., were liable as such for obligations contracted in its name since (a) it was common ground that the I.T.C. had not been incorporated under English law and (b) the judge wrongly construed article 5 of the Order in Council of 1972 to mean that the I.T.C. was nevertheless to be treated as though it was an English body corporate in its dealings with others, so as to exclude the liability of members; (3) the judge ought to have held that the members were so liable: (a) as a matter of domestic English law, or (b) under public international law and on the true construction of I.T.A.6, the constituent instrument of the I.T.C.; (4) in rejecting argument based on I.T.A.6 the judge wrongly held that any claim that relied on the interpretation of I.T.A.6 was non-justiciable. The judge ought to have held: (a) that for the purpose of determining the nature of a treaty organisation (and, specifically, whether its members were liable for obligations contracted in its name) the court could and should consider and construe its constituent instrument in the light of public international law, just as it would for such purposes consider and construe in the light of its proper law the constituent instrument of any organisation established under the domestic law of some foreign state; and, (b) that, in any event, in the instant case the court was bound to do so by virtue of section 3 of the European Communities Act 1972 because the E.E.C. was a party to I.T.A.6, which was therefore a “treaty” within section 1 of that Act. The judge wrongly held that section 1(3) of that Act had the effect of excluding from the definition any treaty entered into by the United Kingdom as well as the E.E.C. (unless specified), although it would be within the definition, and therefore capable of giving rise to direct rights in English law, if the United Kingdom were not a party.

The department and E.E.C. gave respondents’ notices in similar terms to those in the Rayner action.

AMALGAMATED METAL TRADING LTD. AND OTHERS v. DEPARTMENT OF TRADE AND INDUSTRY AND OTHERS (“the Multi-Brokers action”)

On 3 February 1987 the plaintiffs, Amalgamated Metal Trading Ltd., Boustead Davis (Metal Brokers) Ltd., Gerald Metals Ltd., Gill & Duffus Ltd., Henry Bath and Son Ltd., Holco Trading Co. Ltd., Metallgesellschaft Ltd., Metdist Ltd. and Mocatta Commercial Ltd. issued a writ seeking against all the defendants in the Rayner action and the I.T.C., and the European Economic Community (“the E.E.C.”) [*83] rather than the Commission, £105 million or thereabouts and interest or damages arising from contracts for the sale of tin, arbitration awards, margin demanded, false representations made negligently or recklessly and breach of warranty.

The Department of Trade and Industry issued a summons on 9 March 1987 for an order that the proceedings be set aside, a declaration that the court had no jurisdiction or that the points of claim be struck out on the grounds that the claim was not justiciable and the plaintiffs had no cause of action. The I.T.C. issued a summons on 11 March for an order that the proceedings be set aside and a declaration that the court had no jurisdiction on the grounds that the claim was not justiciable and that the I.T.C. was immune from suit. The E.E.C. issued a summons on 2 April seeking to have the proceedings set aside and the declaration that the court had no jurisdiction on the grounds that the E.E.C. had sovereign immunity and that the claim was not justiciable. The other defendants issued similar summonses as in the Rayner action.

Staughton J. made an order striking out the points of claim under Ord. 18, r. 19 and under the inherent jurisdiction of the court on the grounds that they disclosed no reasonable cause of action and further that the pleaded claim was not justiciable in the English courts. The judge adjourned the E.E.C.’s summons.

By a notice of appeal dated 28 August 1987 the plaintiffs appealed on the grounds that: (1) the judge erred in law in holding that, under the Order in Council of 1972 the I.T.C. was, in English law, a legal person or was to be treated as a legal person and for that reason was alone liable for its obligations; (2) the judge ought to have held that on the true construction of the Order the members of the I.T.C. were liable on contracts made in the name of the I.T.C. either because the I.T.C. had no juridical personality at all but was merely a collective name in which its members were empowered to contract or because, while the I.T.C. had some of the attributes of juridical personality, it did not have the attribute of being separate from its members; (3) the judge erred in law in holding that the terms of the tin contracts entered into between the plaintiffs and the I.T.C. excluded undisclosed principals so that the plaintiffs were thereby prevented from suing the defendants on those contracts as undisclosed principals of the I.T.C.; (4) the judge further erred in law in holding that, even if the tin contracts did not exclude undisclosed principals, the plaintiffs’ claim against the defendants in agency was non-justiciable and in so holding the judge wrongly held that the principle of non-justiciability in English law was that a party could not sue on a cause of action where he had to found on an unincorporated treaty for an essential element of that cause of action and (5) the judge ought to have held that the doctrine of non-justiciability in English law was limited to cases where a party was seeking to enforce a right alleged to be conferred directly on him by an unincorporated treaty and that, since the plaintiffs’ reliance on I.T.A.6 in support of their claims in agency did not involve the enforcement of such an alleged right, their claims in agency were not non-justiciable. [*84]

The plaintiffs, Maclaine Watson & Co. Ltd., were the claimants in an arbitration reference set up in accordance with the rules and regulations of the London Metal Exchange in which the International Tin Council (“the I.T.C.”) were the respondents. The plaintiffs claimed that certain sums were due to them from the I.T.C. under certain contracts made between the plaintiffs, as metal brokers and ring dealing members of the exchange, and the I.T.C. The contracts provided for arbitration in the event of a dispute. The I.T.C. defaulted in its obligations to the plaintiffs.

On 6 November 1986 three arbitrators, Mr. A. M. R. Sylvester, Mr. G. J. Davey and Mr. L. Lubett, made an interim final award that the I.T.C. should pay to the plaintiffs the sum of £6 million plus the costs of the award, which were taxed and settled as £7,116.25. Judgment was entered in terms of the award under section 26 of the Arbitration Act 1950 on 13 November 1986 pursuant to leave granted by Staughton J.

On 3 December 1986 the plaintiffs issued a writ against the defendants, the Department of Trade and Industry (representing the United Kingdom of Great Britain and Northern Ireland). By the statement of claim dated 5 March 1987, and subsequently amended, the plaintiffs alleged, inter alia, that (1) by the International Tin Council (Immunities and Privileges) Order 1972 (S.I. 1972 No. 120) there was created and/or recognised under the law of England a group of persons or a body called the I.T.C. and for all relevant purposes of English law the legal character, status and constitution of the I.T.C. was at all material times defined, regulated and governed in all respects by the Order of 1972; (2) on the true construction of the Order of 1972 the I.T.C., at all material times, possessed the following characterics: (1) it consisted of all those 22 states (“the member states”), including the United Kingdom, who were signatories to an agreement entitled “The Sixth International Tin Agreement” (“I.T.A.6”) which agreement had itself never been made part of the law of England, (ii) the I.T.C. was endowed with the legal capacities of a body corporate, (iii) the I.T.C. was enabled to contract under the name of “the International Tin Council” and any such contract was a direct contract by all the member states acting jointly and severally under that name, (iv) it enjoyed certain immunities when carrying out the activities defined in I.T.A.6, including the purchase and sale of tin on the London Metal Exchange, but such immunities did not extend to the enforcement of a valid arbitration award in the circumstances set out in the Order of 1972, and (v) no limit was placed on the liability of the member states in respect of the enforcement of such an arbitration award; (3) in the premises each member state was jointly and severally liable in respect of any such arbitration award which remained unsatisfied; (4) alternatively, if such a contract was not a direct contract by all the member states acting jointly and severally under the name “International Tin Council” but was to be considered as a contract made by the I.T.C. as a separate legal entity [*85] from its members, then, on the true construction of the Order of 1972, each such contract was made by that separate legal entity not only on its own behalf but also on behalf of each of the member states jointly and severally; and (5) between 29 August and 23 October 1985 the plaintiffs entered into certain contracts for the purchase and sale of tin with the I.T.C. and each of those contracts was in the terms of rules and regulations of the exchange and was entered into by the members of the I.T.C., including the United Kingdom Government, by the officers of the I.T.C. duly authorised so to do by all such members, including the United Kingdom and, further and in the alternative, by reason of the award and judgment the members, including the United Kingdom Government, were not entitled to contend that such officers were not authorised.

On 18 March 1987 the department took out a summons seeking an order that the plaintiffs’ statement of claim should be struck out under R.S.C., Ord. 18, r. 19 and/or under the inherent jurisdiction of the court on the ground that (i) it disclosed no reasonable cause of action against the department (ii) it was frivolous and vexatious and (iii) it was an abuse of the process of the court and that the plaintiffs’ action against the department should be stayed or dismissed. The summons claimed in the alternative an order, pursuant to Ord. 12, r. 8, that the writ and the service thereof on the department and all subsequent proceedings should be set aside and/or for other appropriate relief on the grounds that the facts and matters contained in the writ and in the statment of claim were not justiciable in the English court and there was no jurisdiction in the court to determine the matters pleaded.

On 29 July 1987 Millett J. ordered that the plaintiffs’ statement of claim be struck out and their action be dismissed.

By a notice of appeal dated 12 August 1987 the plaintiffs appealed on the grounds, inter alia, that: (1) the judge should have held that on the true construction of the Order of 1972 (i) the I.T.C. was a collective name for the member states, including the United Kingdom Government, (ii) the I.T.C. was an unincorporated association in the nature of an English or civil law partnership, and/or (iii) the I.T.C.’s possession of the legal capacities of a body corporate did not give it a separate legal existence from the sovereign states and bodies which comprised its members, and/or (iv) any contract between a third party and the I.T.C. was a contract with the member states acting under the name of the I.T.C. and/or (v) the member states were jointly and severally liable for the debts of the I.T.C. including those created by reason of an arbitration award made against the I.T.C.; (2) the judge wrongly held (i) that on the true construction of article 5 of the Order of 1972 the I.T.C. had full juridical personality in the sense that it existed as a separate legal entity distinct from its members, (ii) that the dichotomy between status and capacity was false, (iii) that the separate existence of an artificial legal entity was the sum or product of its capacities to be the subject of legal rights and duties, (iv) that Bonsor v. Musicians’ Union [1956] A.C. 104 and Chaff and Hay Acquisition Committee v. J.A. Hemphill and Sons Proprietary Ltd. (1947) 74 C.L.R. 375 confirmed his findings in (iii) above; (3) the judge’s construction of article 5 of the [*86] Order of 1972 was inconsistent with the evident intention of Parliament not to create a body corporate or to treat the I.T.C. as a body corporate; (4) the judge erred in holding that if the I.T.C. possessed separate legal existence from the member states that necessarily precluded the member states from being liable for the debts of the I.T.C.; (5) the judge wrongly held that the I.T.C. should not be treated as analogous to other forms of unincorporated association in the law of the United Kingdom in which the members were liable for the debts of the association by virtue of membership or from agency implied or inferred from membership; (6) the judge was wrong to hold, since he had no facts before him to hold, that no officer of the I.T.C. had actual or ostensible authority to pledge the credit of the member states; (7) the judge wrongly held that the actual authority of the officers of the I.T.C. to pledge the credit of the member states had to be proved by the plaintiffs at that stage of the proceedings; (8) the judge should have held that in any event it was not necessary for the plaintiffs in the instant action to prove such authority, alternatively, that by reason of the award and judgment against the I.T.C. the department was not entitled to contend that such authority was not given; (9) there was no evidence on which the judge could hold that the officers of the I.T.C. had no authority to pledge the credit of the member states and, in any event, the judge was wrong to attempt to decide such a question at the present stage of the proceedings; (10) in considering whether the officers of the I.T.C. had actual authority to pledge the credit of member states the judge did not give any or any sufficient weight to the fact that the council of the I.T.C. was composed of the delegates of all the member states; (11) the judge erred in principle in disallowing the plaintiffs’ amendment to the statement of claim; and (12) as a matter of law, and in particular on the true construction of the Order of 1972, the member states were liable directly or indirectly for the debts incurred in the name of the I.T.C.

The department and the E.E.C. gave respondents’ notices in similar terms as in the Rayner action.

All the appeals were heard together.

Mark Littman Q.C., Richard Aikens Q.C., Richard McCombe and Adrian Hughes for Maclaine Watson. The central issue on appeal is whether the I.T.C. is, as the result of the Order in Council of 1972, a juridical persona distinct from its members, so that the distinct persona is alone liable on the judgment to the exclusion of any liability on the part of the members.

Maclaine Watson contend that it is an association all the members of which are jointly and severally liable, either because there is no such distinct legal persona or because, if there is, it is not of such a character that excludes the liability of members.

The I.T.C.’s purposes are defined by the Sixth International Tin Agreement (“I.T.A.6”). The collective enterprise of the I.T.C. aims at a number of public objectives and they are mainly achieved by trading activities on a very large scale in which the I.T.C. is expected to make a profit. [*87]

The Order of 1972, on its true construction, conferred certain legal capacities on the I.T.C. but did not change its status from that of an unincorporated association into a juridical persona distinct from its members. Alternatively, if the Order did bring about such a change of status that new status does not exclude the liability of the members in the event of default. Article 5 of the Order did not create a separate legal entity. The I.T.C. was an unincorporated association engaged in trade, all the members of which must be taken by the judgment and/or the constitution of the I.T.C. to have authorised the entry into these contracts and all of whom are, therefore, jointly and severally liable on the judgment.

Even if the Order of 1972 made the I.T.C. a distinct legal entity there was no exclusion of liability of members and they are still liable if the I.T.C. itself makes a default (c.f. Scottish or French partnerships or other civil law associations). In construing the Order of 1972 extrinsic factors can be examined. First, the statutory history can be looked at. The Order was made under the International Organisations Act 1968. That Act applied to any international organisation declared by an Order in Council to be one of which the United Kingdom was a member: article 1(1) of the Order. The Act uses identical words as used in the Order: article 1(2)(a). The earliest statute dealing with the subject matter dealt with in the Act of 1968 is the Diplomatic Privileges (Extension) Act 1944. The statutes since 1944 employ identical words. Thus the words in the Order of 1972 had to be construed as bearing the same meaning as in the Act of 1944.

Secondly, the judgments of Staughton J. and Millett J. have not given any findings that, apart from statute, international organisations in general, or the I.T.C. in particular, would be treated under English law as being a distinct juridical personality separate from its members.

Thirdly, to construe a statute it is relevant to see what mischief it was intended to remedy. Here, the mischief was the fact that unincorporated associations were under a procedural handicaps in owning property, carrying on business and in bringing and defending proceedings which did not exist for body corporates: Hanbury and Maudsley, Modern Equity, 12th ed. (1985), pp. 107 et seq.; Davis & Son v. Morris (1883) 10 Q.B.D. 436 and the Registration of Business Names Act 1916, now replaced by the Business Names Act 1985. Procedural handicaps would be removed by the grant of the legal capacities of a body corporate which would thus facilitate the carrying out of the functions of the I.T.C. Thus the purpose of the Act of 1968 was to facilitate the operations of the I.T.C. rather than to change its status: see the preamble of the Act and c.f. section 3 of the International Finance Corporation Act 1955. Parliament would not have wished to change the status of the I.T.C. as an international organisation of a plurality of sovereign states by converting it into a creature of the United Kingdom national law by making it a United Kingdom corporation or any other kind of United Kingdom entity.

Fourthly, it is relevant to the interpretation of the Act of 1944 and subsequent Acts of Parliament dealing with international organisations that there is no power under the international law to create an [*88

international organisation where the members are not liable for its debts: see Schermers, International Institutional Law (1980), p. 780, para. 1395; H.-T. Adam, Les Organismes Internationaux Spécialisés(1965), p. 110 and Seidl-Hohenveldern, Corporations in and under International Law (1987), p. 121 and Westland Helicopters Ltd. v. Arab Organisation for Industrialisation (1984) 23 I.L.M. 1071.

Fifthly, I.T.A.6 and the Headquarters Agreement are not relevant to construe the Order of 1972 as made many years after the passing of the Act of 1944. Because referred to in the Order, the Headquarters Agreement and I.T.A.6 can be referred to so as to establish matters of fact: Salomon v. Commissioners of Customs and Excise [1967] 2 Q.B. 116; Garland v. British Rail Engineering Ltd. [1983] 2 A.C. 751 and Zoernsch v. Waldock [1964] 1 W.L.R. 675. Those agreements show (a) that the Council consists of representative of each participating state: article 4; and (b) the organisational structure: articles 13, 14 and 15.

At this point the subject of treaties and the United Kingdom law can be dealt with as to which there is not much dispute. (1) The applicable principle as to the effect of treaties and the occasions on which reference may be made to them are discussed in In re International Tin Council [1987] Ch. 419 by Millett J. and J. H. Rayner (Mincing Lane) Ltd. v. Department of Trade and Industry [1987] B.C.L.C. 667 by Staughton J. (2) Certain matters are common ground and need not be elaborated e.g. (a) a treaty does not by itself affect or alter existing law and it is only so when enacted into domestic law: Attorney-General for Canada v. Attorney-General for Ontario [1937] A.C. 326, 347-348, and Blackburn v. Attorney-General [1971] 1 W.L.R. 1037, 1039-1041, (b) the treaty may be referred to whenever Parliament has expressly or by implication required it to be considered: see section 1(6) of the Act of 1968 or when its provisions are scheduled and brought directly into force; and (c) where an obligation has been undertaken under a specific international agreement and subsequently an Act is passed for the evident purpose of giving effect to that obligation then in the event of ambiguity in the words of the statute the court will, if possible, interpret the Act so as to amount to performance of that obligation. (3) However, where the words of the statute are unambiguous effect will be given to them. (4) The principle of reference only applies where (i) the treaty precedes the Act and (ii) it is apparent that the Act was specifically passed to implement that treaty. (5) The interpretation of treaties which have not been incorporated into English law not within interpretative function of the English court: British Airways Board v. Laker Airways Ltd. [1985] A.C. 58, 85. [Reference was made to Pooley v. Driver (1877) 5 Ch.D. 458.]

When one is dealing with incorporation the court will not, in the absence of clear words, find that a body has been incorporated, if it can discharge all its duties and exercise all its rights without treating it as an incorporated body: Salford Corporation v. County Council of Lancashire (1890) 25 Q.B.D. 384, 389, and dictum of Atkin L.J. in Mackenzie-Kennedy v. Air Council [1927] 2 K.B. 517, 534. Similar principle has also been held to be applicable where it was sought not to say that there had been an implied incorporation, but where it was sought to say in the [*89

absence of express words in the statute that there was an additional juridical entity, even though it was not a corporation: Bonsor v. Musicians’ Union [1956] A.C. 104.

It is certainly a legal capacity of a body corporate that it has the power to contract, and to contract in its own name. Since bodies corporate have the status of a juridical persona distinct from their members, these are made by that persona and do not, at least in most cases, by themselves impose any liability actual or contingent on the members. The reason that a body corporate is the sole party liable is not because of any capacities it may have but simply because it has the status of being a separate and distinct entity. Parliament can create an artificial legal entity with some of the characteristics and attributes of a body corporate but it is not correct that they show that Parliament can create a body corporate in all but name: Salomon v. A. Salomon and Co. Ltd. [1897] A.C. 22, 29, 33, per Lord Halsbury L.C. The reason why bodies corporate are in that position is because they have the status of existing as a distinct purpose and therefore have the capacity to contract as such. [Reference was made to Chaff and Hay Acquisition Committee v. J. A. Hemphill and Sons Proprietary Ltd. (1947) 74 C.L.R. 375 and In re Sheffield and South Yorkshire Permanent Building Society (In Liquidation) (1889) 22 Q.B.D. 470.]

In conclusion, the Order in Council of 1972, on its true construction, conferred certain legal capacities on the I.T.C. but did not thereby or at all change its status from that of an unincorporated association into that of a juridical person distinct from its members. If that submission is right that is the end of the matter.

On the basis that the I.T.C. is not a distinct legal persona the liability of its members would be as members of an unincorporated association and as such they are not automatically liable for its debts. Such cases are governed by ordinary principles of the law of agency: Flemyng v. Hector (1836) 2 M. & W. 172. The principles which determine the existence or otherwise of such liability have been most fully and precisely worked out in relation to partnerships and members clubs.

In the case of partnerships, it is settled law that partners are agents for each other and each is fully liable for the debts of the partnership, whether contracted under the firm name or otherwise, and irrespective of any purported limitations on partnership liability in the partnership deed, except as provided by the Limited Partnerships Act 1907. The underlying principle is that of agency: Lindley on Partnership, 3rd ed. (1873), p. 248.

The same principle of agency is applied in the numerous decisions on the members’ clubs, although in these cases the question is not normally whether the acts of one member bind another but whether all the members are bound by the acts of a common employee, e.g. the club steward, who has, characteristically, ordered hogsheads of claret on credit. Members are not liable automatically by virtue of their contract of membership since it is said to be notorious that persons who join clubs do not expect to be liable for more than their subscriptions or for cash transactions unless they have authorised purchases on credit. [*90

Where, however, it is established that they have authorised the relevant transaction they are liable. The principle is applied in this way. The party primarily liable is the person who ordered the goods, e.g. the club secretary or steward. If it is shown that he was acting on the instructions or with the authority of a committee then the committee members will be liable. If it is shown that the members as a whole have authorised the transaction they will also be liable.

The principles applicable to the I.T.C. are as follows: (1) The purposes of the I.T.C. are predominantly commercial. Its methods are primarily large scale trading activities. Profits are anticipated since there is no provision for dealing with losses and such profits are to be shared among members. (2) On the assumption that the body is unincorporated it has to be assumed that the I.T.C. is simply the umbrella name for individual members as it is for clubs and partnerships. (3) Members are not that numerous. In that respect it is to be contrasted with the many thousands who may be said to form a trade union normally or even a large sized club. (4) The members are unlike members of trades unions or clubs as to which it is well known and judicially recognised that they simply pay a subscription and expect to pay no more generally leaving the management in particular the purchase of supplies or hiring of staff in the hands of staff or committees or trustees. (5) It was clearly envisaged that it will make numerous and large contracts. They would be made by the buffer stock manager or his deputy. No one would expect that such contracts were simply made on his credit. They were expressed to be made in the name of the I.T.C., i.e. the members. The award and judgment are conclusive evidence that these contracts were authorised by the I.T.C. (6) The buffer stock manager acts under the control of the Council. The committee of a club, who have often been held to be personally liable but the members are not liable, is in a different position than the Council, which consists of representatives of the member states. The buffer stock manager had authority to commit the Council, i.e. the member states. (7) All that is clear without looking at I.T.A.6 itself. It is indeed unchallenged and unchallengeable. However, the court is entitled to look at I.T.A.6 to establish the facts relating to the nature of the organisation and the chain of authority: Zoernsch v. Waldock [1964] 1 W.L.R. 675, 683; articles 4(1), 7 and 13 of I.T.A.6. (8) The court is not concerned with the question whether one member acting alone had power to bind another. It is only a question as to who was the true principal behind the buffer stock manager’s agency. It was the I.T.C. If the I.T.C. was a separate legal entity that entity was the buffer stock manager’s principal. If I.T.C. is the name for the members the principals were the members. (9) In the case of trades unions it may be impossible for a plaintiff to show a chain of authority going back to members but here it can be shown. (10) The better analogy is the case of the unincorporated companies. They were large partnerships where individual members had no powers to bind each other on trading contracts. That power was conferred on a limited numbers of authorised servants or directors. The members were liable. Even the grant of corporate capacities did not relieve them: In re Sea Fire and Life Assurance Co., Greenwood’s Case (1854) 3 De G.M. & G. [*91] 459, 475-479, 482-483 and Delauney v. Strickland (1818) 2 Star. 416. (11) The members have entrusted to the buffer stock manager exercise of the capacity to contract in the name of the I.T.C.

Going back to submission B, it will be observed that both Staughton and Millett JJ. assumed that where there was a separate legal entity, it necessarily followed that it was only the entity or person liable to the exclusion of the members. The answer to that is that (i) even if the effect of the relevant words was to make the I.T.C. a separate juridical entity or to provide that it should be treated or deemed to be such this would not imply the exclusion of liability of members (c.f. Scottish or French partnership). The words should not be interpreted as doing more than was necessary to effect the manifest purpose of the legislature. This would be fulfilled by the attributions of a distinct juridical entity which is primarily liable while retaining the secondary and contingent liability of the members should the I.T.C. not meet its obligation.

Great importance is attributed to submission B but submission A is still placed at the forefront.

(ii) This alternative submission differs from submission A in as much as (a) it assumes that the I.T.C. is a distinct juridical entity and (b) it speaks of a secondary or contingent liability, i.e. a liability to pay if the I.T.C. does not pay, as compared with the immediate liability of all members of an unincorporated association under a judgment against it under its collective name. (iii) The difference under the law of England can be illustrated by comparing a judgment against an English partnership with that against a Scottish partnership: see Mair v. Wood [1948] S.C. 83. If this approach is correct it would place the I.T.C., and probably any other international organisation under the Act of 1968, in the same juridical category as a Scottish partnership. (iv) The reasoning of both judgments, even if correct, only leads to the conclusion that there is some kind of distinct legal entity. It would not be, as both judgments accepted, a corporation or body corporate, but a legal person or is to be treated as such. (v) There are other examples of entities under the law of the United Kingdom where there is a distinct legal entity, but there is a contingent or secondary liability of an underlying interest, so that if that distinct legal entity defaults, that underlying interest is liable. Those examples are: (a) the Crown in the case of the public corporations comprising the nationalised industries: Tamlin v. Hannaford [1950] 1 K.B. 18. Gower, Principles of Modern Company Law, 4th ed. (1979), pp. 287 et seq.; (b) the Crown in the case of a corporation sole; and (c) the partners in the case of a Scottish partnership. [Reference was made to National Bank of Greece and Athens S.A. v. Metliss [1958] A.C. 509, 525, per Viscount Simonds: “But, my Lords, in the end and in the absence of authority binding this House, the question is simply: What does justice demand in a case such as this?”] Though there have been many persons in this court during the course of the case, and there are today, there can be no doubt in anybody’s mind as to what justice demands in the case before the court.

Aikens Q.C. following. The question which has to be dealt with is whether or not the court could look at previous statutes as an aid to construction of the International Organisations Act 1968 and the Order [*92]

in Council 1972. The Act of 1968 employs the wording which is reproduced in the Order of 1972 concerning the I.T.C. The same wording is used in the other Orders which were made under the Act of 1968: Common Fund for Commodities (Immunities and Privileges) Order 1981 (S.I. 1981 No 1802). Article 4 provides: “The Fund shall have the legal capacities of a body corporate.” So the court is really concerned with the construction of the wording of the Act itself.

The vital phrase in the Act of 1968 is “the capacities of a body corporate,” and that phrase had been used in previous statutes: see the Diplomatic Privileges (Extension) Act 1944. The long title of the Act states that it is an Act to make provision as to immunity privileges and capacities of international organisations. In section 1(1) it states that the section applied to any organisation declared by an Order in Council to be an organisation to which His Majesty’s Government of the United Kingdom and other governments are members. Section 1(2)(a) provides what may be put in an Order in Council, including the words, “The organisation shall have the legal capacities of a body corporate.”

The Act of 1944 was amended by the Diplomatic Privileges (Extension) Act 1946 in connection with the general convention on privileges and immunities of the United Nations. The Act of 1944 as amended was set out in Schedule 2 to the Act of 1946. The phraseology used is the same. Then the Diplomatic Privileges (Extension) Act 1950 again amended the Act of 1944, setting it out in Schedule 2 to the Act of 1950. Again the same phrase is used. That was followed by the International Organisations (Immunity and Privileges) Act 1950 which consolidated the previous statutes. The International Organisations Act 1968 replaced that Act.

In construing the Act of 1968 the court is not only entitled, but bound to take account of the legislative history of the Acts which deal with this similar material, namely, the facilities accorded to international organisations under English municipal law. From the point of view of principle the court has to look at the particular Act and try to interpret the intention of Parliament from the way it uses particular words. If Parliament has addressed the same question in previous Acts, either with similar words or indeed with different words, then the way Parliament has dealt with it in the past must have a bearing on discovering its implied intention in the Act in question even though the earlier statutes have been repealed: Halsbury’s Laws of England, 4th ed., vol. 44 (1983), pp. 540, 541, 546 and 547, paras. 885, 886, 893, 894; In re B. Johnson & Co. (Builders) Ltd. [1955] Ch. 634; Beswick v. Beswick [1968] A.C. 58; Reg. v. Sheppard [1981] A.C. 394; Allgemeine Gold- und Silberscheideanstalt v. Customs and Excise Commissioners [1980] Q.B. 390 and Reg. v. Governor of Holloway Prison, Ex parte Jennings [1983] 1 A.C. 624.

In the Maclaine Watson case the first issue is whether the I.T.C. has a separate legal personality, such that the United Kingdom, as a member state, cannot be liable for the judgment debt of the I.T.C. There are two other issues: (i) what is the effect if the I.T.C. is just an unincorporated association of members and whether or not the members could nevertheless escape liability and (ii), if there is a distinct legal [*93

personality it does not automatically follow that the members can thereby escape liability. The following argument is only addressed to the first of those three issues.

It was common ground before Millett J. that this issue of personality had to be decided solely according to English municipal law rather than attempting to introduce international law as an element in deciding what is meant by certain words. The question whether any organisation is regarded as having a separate legal identity is a question concerning the status of that organisation. English law confers a separate legal identity or personality when it grants an organisation a particular status under English municipal law. If the organisation does not have that separate status, then no liability can devolve on itself to the exclusion of liability of its constituent parts. There is, here, no express conferment of separate legal identity in the Order of 1972. There is nothing in the Order which expresses the effect that the I.T.C. has the status of a separate being. Millett J. infers status by holding that this status is a legal consequence of Parliament granting the I.T.C. “The capacities of a body corporate.” In principle the conferment of capacities on a group to do various things vis-š-vis others, including members of the group, does not have the inevitable legal consequence that the group obtains a separate legal identity. English jurists have always regarded the concepts of “status” and “capacity” as being distinct, albeit related: Sir Carleton Allen’s article, “Status and capacity” (1930) 46 L.Q.R. 277, 278-279, 281-282, 283-289, 293 et seq.; R. H. Graveson, Status in the Common Law (1953). The question of status is governed by the law of the domicil of the entity being considered: Salveson or Von Lorang v. Administrator of Austrian Property [1927] A.C. 641 and In re Luck’s Settlement Trusts [1940] Ch. 864. There is absolutely nothing in the Order in Council of 1972 or in the Act of 1968 which attempts to reduce the I.T.C. to a particular domicil. In fact, quite the contrary. The intention was to keep the I.T.C. on an international plane. Natural persons and artificial persons have nationality, and it is well established that a corporation, and any other legal entity, will have a nationality. [Reference was made to Gasque v. Commissioners of Inland Revenue [1940] 2 K.B. 80.]

The conclusions are that the I.T.C. was granted only the capacity of a body corporate because that was all that was needed for it to carry out its duties. But if anything more than capacity was being given to the I.T.C. it would grant it the status of being under a municipal system of law with the attendant attributes of domicil and nationality and the consequent involvement of the I.T.C. in the municipal law of one member state. This was not intended nor desired. For those reasons the court should find that the intention of the parties was not to grant the status of separate legal personality to the I.T.C.

Sydney Kentridge Q.C. and Jonathan Hirst for Rayner. The issue is whether the members of the I.T.C. walk away without having to pay the debts incurred by their association? The I.T.C. is described by the defendants as an international organisation. But the answer to the question in the case does not depend on any rule of international law. It is within the United Kingdom domestic law. The defendants have set up their organisation in the United Kingdom to enter into commercial [*94

contracts. Whether or not they are exempt from liability for their organisation’s dealings?

The crux of the Rayner contention is that the defendants, under the collective name of the I.T.C., came into the United Kingdom to enter into ordinary dealings with private individuals on the London Metal Exchange and are liable to meet the obligations arising from those transactions under the domestic law of the United Kingdom. It is irrelevant how they chose to call themselves. The question is whether the I.T.C. had had bestowed on it the privilege of carrying on business so that it avoids liability for itself and its members.

Members of a trading association can avoid liability for the association’s debts under English law only if they can point to a United Kingdom statute or to a lawful exercise of the Royal Prerogative which relieves them of their prima facie liability. The association can be made a body corporate or in some other manner conferring on the members exemption from such liability. A body corporate may be created in the United Kingdom only by Royal Charter under the Prerogative or in terms of a statute: see Blackstone’s Commentaries, Book 1. Thus the I.T.C. is governed by the United Kingdom domestic law and not by any international treaties: In re International Tin Council [1987] Ch. 419.

The relevant statute here is the Order in Council of 1972 issued under the International Organisations Act 1968. Following the language of the Act, article 5 of the Order provides that the I.T.C. “shall have the legal capacities of a body corporate.” That provision enables the I.T.C. to sue and be sued in its own name, and deal with matters in its own name. But it does not make it a body corporate and makes no provision for its property or debts to be entirely separate from those of its members. If that was intended it would have been easy to provide for using clear words as under the law it could be done: section 4(2) of the Partnership Act 1890; Lindley on Partnership, 3rd ed. (1873), p. 388; Pooley v. Driver (1876) 5 Ch.D. 458; In re Sheffield and South Yorkshire Permanent Building Society (In Liquidation) (1889) 22 Q.B.D. 470. [Reference was made to Salomon v. Commissioners of Customs and Excise [1967] 2 Q.B. 116.]

The International Tin Agreements show that there was no separate legislation in respect of the I.T.C. The agreements stated that the United Kingdom would give it necessary authority. Parliament did that by giving it that status by making it a body corporate and by giving it that capacity under the Order of 1972. According to the constitution of this country whatever is the Crown’s position with regard to making treaties, legislation remains with Parliament. Here Parliament has not given the I.T.C. any more power than other bodies corporate have: see Attorney-General for Canada v. Attorney-General for Ontario [1937] A.C. 326. The term legal personality as used in international treaties must not be assumed to have the same connotation as an independent personality as a body corporate in English law. There is no reason to assume that legal personality means the same as incorporation. The question is what the 23 countries came together to create. It was not a body corporate. There is no contradiction between the concept of legal personality and concurrent liability of members. See for example, [*95] Pollock and Maitland, History of English Law (1895), vol. 1, pp. 487, 492; Holdsworth, A History of English Law, pp. 484, 487. The trade union cases, especially Bonsor v. Musicians’ Union [1956] A.C. 104, show that Parliament may endow bodies with some of the capacities or attributes of a legal personality and yet not create a personality entirely separate from its membership.

References to “legal personality” in article 16 of I.T.A.6 and in article 3 of the Headquarters Agreement are of no assistance to the defendants. First, it is inappropriate to interpret the Act of 1968 by any particular treaty. Secondly, there is no basis for assuming that “legal personality” as used in an international treaty is to be equated with “legal personality” in the sense of a complete separation between the organisation and its members with the exclusion of the members’ liability as would be the case in a fully-fledged English body corporate. It is not established by the defendants that legal personality in international law entailed the exclusion of the liability of the members of an international organisation. Furthermore, it is not shown that in the law or understanding of the foreign sovereign states the recognition of a body as having “legal personality” implies the exclusion of the liability of the members: see Von Hellfeld v. E. Rechnitzer [1914] 1 Ch. 748, 754 and Dreyfus v. Inland Revenue Commissioners (1929) 14 Tax Cas. 560, 565.

By the 16th century a corporation created by the sovereign was regarded as a separate corporation independent of its members. A body created by a Royal Charter in the exercise of the Royal Prerogative did not put any liability on its members. The position was the same in the 19th century: see In re Sheffield and South Yorkshire Permanent Building Society (In Liquidation), 22 Q.B.D. 470. See also the Building Societies Act 1874 (37 & 38 Vict. c. 42), sections 9 and 32. [Reference was also made to Salford Corporation v. County Council of Lancashire (1890) 25 Q.B.D. 384.] But the I.T.C. is not a body corporate and its members are liable. If Parliament wishes it can create a corporation and specifically provide that the corporation’s members are not liable for its debts. But that is brought about by clear words. Normally where a corporation is created by Parliament to carry on business a provision would be made for its control, its financing and also dissolution: e.g. section 22 of the Coal Industry Nationalisation Act 1946 and section 2 of the China Indemnity (Application) Act 1931. Parliament has made very elaborate provisions for control and duties of members of joint stock companies and has made provisions of the privilege of limited liabilities of companies: Chartered Companies Act 1837 (7 Will. 4 & 1 Vict. c. 73); Joint Stock Companies Act 1844 (7 & 8 Vict. c. 110); Joint Stock Companies (Winding-up) Act 1844 (7 & 8 Vict. c. 111); Partnership Act 1890 (53 & 54 Vict. c. 39), section 4(2) Scottish partnerships) and in re Sea Fire and Life Assurance Co., Greenwood’s Case, 3 De G.M. & G. 459.

The Companies Act 1948 requires that the memorandum should specifically state that the liability of members is limited. Otherwise the privilege of limited liability can be lost: Palmer’s Company Law, 23rd ed. (1982), volume 1, ch. 10, headed “limited liability clause,” Gore-Brown on Companies, 44th ed. (1986), vol. 1, p. 2.001, “the [*96

Memorandum of Association.” Also see the Companies Act 1985 and the Insolvency Act 1986.

Staughton J. appears to have held that the grant of separate legal personality with the exclusion of the members was implicit in the grant of the capacities of a body corporate. That is incorrect. If the intention to create a full legal personality and to exclude the liability of the members of the I.T.C. is to be found in the statute it can be found only by means of a necessary implication in the statute: Salford Corporation v. County Council of Lancashire, 25 Q.B.D. 384 and Mackenzie-Kennedy v. Air Council [1927] 2 K.B. 517. In the present case there is no necessity to make such an implication because (i) the I.T.C. does not have sovereign status. It has its immunities and capacities for functional reasons only so as to enable it to carry out efficiently its operations in this country: cf. Standard Chartered Bank v. International Tin Council [1987] 1 W.L.R. 641, 647-648. The exclusion of the liability of members is not required in order to enable the I.T.C. to function efficiently. (ii) If the judge is right then Parliament has imposed a potential disadvantage on those who contract with the I.T.C. within the United Kingdom. (iii) If the judge is correct this would be an unusual, if not unique, case of the members of a trading organisation being given the privilege not merely of limited liability, but of no liability at all, without any provision for the protection of creditors such as one finds in the Companies Acts of this and other developed countries.

The trade union cases show that there have been occasions when something has been held to be a body corporate by implication: Salford Corporation v. County Council of Lancashire, 25 Q.B.D. 384; Conservators of the River Tone v. Ash (1829) 10 B. & C. 349 and Chaff and Hay Acquisition Committee v. J. A. Hemphill and Sons Proprietary Ltd., 74 C.L.R. 375. It is doubtful if the Chaff and Hay case can stand with the decision in Bonsor v. Musicians’ Union [1956] A.C. 104. The question of the nature of a trade union in law has been considered in detail in Taff Vale Railway Co. v. Amalgamated Society of Railway Servants [1901] A.C. 426. [Reference was made to Kelly v. National Society of Operative Printer’s Assistants (1915) 84 L.J.K.B. 2236.] The point in issue in National Union of General and Municipal Workers v. Gillian [1946] K.B. 81 was that a trade union could maintain an action in its registered name. If, however, a plaintiff obtains judgment in the name of the trade union only he can go against those assets which are of the members put into the trade union collectively. If the judgment creditor wants to go against the members own property he has to do something more to bring the members before the court.

The suing of partnerships and enforcing judgments or orders against firms are dealt with in R.S.C., Ord. 81, r. 5. The effect of the rule is that although one can properly get a judgment against the firm and execute against any property of the firm within the jurisdiction one cannot go against the property of the individual partners unless they have either acknowledged service or been served, or admitted partnership, or have been adjudged after the hearing to be a partner. Particularly, if a member is outside the jurisdiction one cannot get execution unless there has been a proper service. In other words, having obtained a [*97

judgment against a partnership the judgment creditor has to institute proceedings against an individual partner to fix that partner with liability which entitles the creditor to execute against him: Jackson v. John Litchfield & Sons (1882) 8 Q.B.D. 474, 478; Davis & Son v. Morris, 10 Q.B.D. 436, 443 and Clark & Son v. Cullen (1882) 9 Q.B.D. 355.

Accordingly, when the statute simply gives the I.T.C. the capacities of a body corporate, it has those capacities. There is no creation of a 25th person. It is simply an association engaging in trade, in the nature of the partnership. In the alternative, if it goes further than that then even if by implication it is given some personality of its own, enough personality to be the principal of those, such as the buffer stock manager, who did the actual buying and selling nonetheless there can be no reason for an implication that the members did not have a secondary and contingent liability. In the further alternative, the liability of the members of the I.T.C. is based on agency.

The principle of non-justiciability of treaties in an English court, put in its broadest terms, is that the court will not enforce obligations which arise under treaties between sovereign states. The enforcement of such obligations is regarded as outside the purview of the domestic courts of this country. They are regarded as matters which have to be dealt with, either in international tribunals or by diplomacy. That rule applies only where the right sought to be enforced is a treaty right. The principle of non-justiciability of treaty obligations in English courts has been applied in situations very different from the present situation. For example, first, an English court should not decide whether a party to a treaty is in breach of its treaty obligations: British Airways Board v. Laker Airways Ltd. [1985] A.C. 58, 85-86. Secondly, the courts will not enforce treaty obligations as between the parties to a treaty: Cook v. Sprigg [1899] A.C. 572. Thirdly, an individual may not invoke treaty rights as a source of private rights whether against another individual, the Crown or a foreign state: Cook v. Sprigg; Hoani Te Heuheu Tukino v. Aotea District Maori Land Board [1941] A.C. 308 and Winfat Enterprise (HK) Co. Ltd. v. Attorney-General of Hong Kong [1985] A.C. 733. Fourthly, the court will not review the conduct of the Crown in relation to its obligations under a treaty: Blackburn v. Attorney-General [1971] 1 W.L.R. 1037.

In the present context the court can look at I.T.A.6 to see what sort of body the I.T.C. is: is it a club? Is it a partnership? It may also look at it, not in order to pronounce on the obligations owed by the sovereign states interstate, but to pronounce on the relationship of those members to the trading activities of the I.T.C. and, in particular, their relationship to their buffer stock manager: Philippson v. Imperial Airways Ltd. [1939] A.C. 332; Zoernsch v. Waldock [1964] 1 W.L.R. 675; Nissan v. Attorney-General [1970] A.C. 179 and Godman v. Winterton (1940) 11 I.L.R. 205.

The foreign state defendants have raised the defence of state immunity under the State Immunity Act 1978. Their case is that Rayner have to bring themselves within the exceptions in section 3, the exception applies only in proceedings relating to a commercial transaction entered into by the state, in order to be within the exception, even at this stage, [*98] Rayner have to prove in the same way as it would be proved at the trial, that is to say, the states did actually enter into a commercial transaction. In other words, it is not enough for Rayner to show a prima facie case or even a good arguable case. They actually have to prove their case on a balance of probabilities as though at the trial. But as in all questions relating to jurisdiction the question of jurisdiction is ordinarily raised as an interlocutory issue and it is ordinarily decided on the test of whether a reasonable or a good arguable case is made out. Where there are questions of law the concept of burden of proof is irrelevant: see Hemelryck v. William Lyall Shipbuilding Co. Ltd. [1921] A.C. 698; Wise v. Perpetual Trustee Co. Ltd. [1903] A.C. 139 and Bradley Egg Farm Ltd. v. Clifford [1943] 2 All E.R. 378.

Stanley Burnton Q.C., Maurice Mendelson and Mark Barnes for the banks. The stages, in summary, of the banks’ case are: (1) The member states of the I.T.C. are liable to third parties on contracts entered into in the name of the I.T.C. This liability arises: (a) as a matter of domestic English law and (b) alternatively, by the application of English rules of conflict of law as they relate to an international treaty organisation. (2) The latter alternative requires the court to consider I.T.A.6 to determine whether the members are liable for the debts incurred in the name of the I.T.C. There is no rule of non-justiciability that precludes the court from doing so for that purpose. (3) Article 5 of the Order in Council of 1972, on its true construction, does not remove the liability of the member states. (4) The obligations of the member states under contracts entered into in the name of the I.T.C. are within the exceptions to sovereign immunity contained in section 3 of the State Immunity Act 1978. (5) The immunities and privileges of the I.T.C. under the Order of 1973 do not extend to its member states. They apply only to proceedings against the organisation as such and to its assets. (6) On that basis the conclusion drawn is that member states are liable to the banks. The submissions made so far on the liability of the member states are adopted subject to the question of the extent of the immunity conferred by the Order of 1972. In particular the banks support the submission that where persons or states create an organisation, the presumption is that they are jointly and severally liable for the liabilities so incurred: In re Sea Fire and Life Assurance Co., Greenwood’s Case, 3 De G.M. & G. 459. It is the question of entity here. It is not a partnership. It differs from a partnership in that the various partners do not have authority to bind each other and even though the members here do not have authority to bind each other either they have conferred on their officers powers to trade, and the inference to be drawn from that is, though it is not a partnership, they accept liability for its debts. The liability of the member states of the I.T.C. to its creditors is extrinsic of the engagements between themselves. [Reference was made to Wise v. Perpetual Trustee Co. Ltd. [1903] A.C. 139 and Flemyng v. Hector, 2 M. & W. 172.]

The question arises whether there is a rule of law to which the member states can point which rebuts the presumption that the member states should be said to be jointly and severally liable. At this point the [*99] banks depart somewhat from the arguments put before the court hitherto.

It has to be recognised that the I.T.C. is not an organisation which the member states purported to create under English law. There, therefore, arises the question of a choice of laws. If the I.T.C. was the equivalent of a French limited company, something created in France, then the members could rebut the presumption by pointing to the constitution of their organisation, the law creating the organisation and establishing that under that law the members had no liability for the debts of the organisation and that, in so far as they acted in connection with the transaction in question, their participation was not that of principals instructing an agent, but merely as an organ, such as a board of directors, of a body in circumstances in which that organ had no liability to third parties.

The court should determine the question by the application of English conflict of law rules. Under those rules the applicable law is the law of the creation of the organisation or proper law of the organisation: Dicey & Morris, The Conflict of Laws, 11th ed. (1987), vol. 2, p. 1135, rule 174; Johnson Matthey and Wallace Ltd. v. Alloush (unreported), 24 May 1984; Court of Appeal (Civil Division) Transcript No. 234 of 1984. The law of the creation of the I.T.C. is public international law. Its constituent instrument is I.T.A.6. The question is whether under that treaty, taking effect under public international law, the member states are liable for the contractual obligations of the I.T.C. For the purpose of deciding who is liable on a private law contract entered into by the I.T.C. the court may and should examine and interpret and determine the effect of I.T.A.6. An examination of I.T.A.6 under public international law establishes that the member states are liable to its creditors on its contracts. That treaty was drawn up between the member states themselves. It is an agreement between them. The presumption of liability on the part of the member states, arising from their authorising liabilities to be incurred in the name of their organisation, should apply equally in international law as in English law. It is not simply a rule of law. It is an inference which is drawn or a presumption which is imposed for reasons of justice and logic.

The question of the liability of member states of an international treaty organisation had not been overlooked in international law when I.T.A.6 was drafted. The treaties of well known organisations carrying on trading contain express provisions excluding or limiting liability. For example, the International Finance, article 11.4, the International Bank for Reconstruction and Development, article 11.6, the Asian Development Bank, article 5.7, the International Development Association, article 11.3 and the Common Fund for Commodities, article 11.3. Further, the treaties of the International Finance Corporation, the Asian Development Bank and the International Bank for Reconstruction and Development require express warning to be given that their securities are not obligations of the member states unless expressly stated to the contrary. This is consistent with national laws making provision for proper warning to be given to creditors of limited liability companies. [*100

Dealing with article 5 of the Order in Council of 1972, the ordinary meaning of the words used has to be found. “Capacity” ordinarily signifies ability and “legal capacities” are the legal qualifications that allow individuals or groups to contract: Shorter Oxford English Dictionaryand Stroud’s Judicial Dictionary 5th ed. (1986), Dicey & Morris, The Conflict of Laws, 11th ed., p. 1134 and Farwell J. in Taff Vale Railway Co. v. Amalgamated Society of Railway Servants [1901] A.C. 426, 429. Article 5 means that the I.T.C. can do what a body corporate can do. But that does not mean that the I.T.C. is, or is to be treated as, a body corporate. A body corporate has various legal attributes that are not aptly described as “capacities.” For instance, it may be subject to the Companies Acts and the winding up jurisdiction of the court. It would be an abuse of language to say that it had the “capacity” to be subject to the Companies Acts, or the winding up jurisdiction: In re Luck’s Settlement Trusts [1940] Ch. 864, 907.

The trade union legislation shows that Parliament may confer on an organisation a capacity to sue and be sued and a capacity to contract in the name of the organisation, with the result that proceedings taken in the name of the organisation can only be the subject of execution against the assets of the organisation itself, even though there is no separate legal personality. But Taff Vale Railway Co. v. Amalgamated Society of Railway Servants and Bonsor v. Musicians’ Union [1956] A.C. 104 show that that conferment of a power to sue an organisation and be sued does not affect the liability which the members of the organisation would otherwise have.

The preamble of the International Organisations Act 1968 refers to conferment of “facilities.” That word is appropriate to describe the conferment of an ability to enter into valid transactions in the name of the organisation. It is not apt to describe a provision which changes the nature of the organisation or exempts its members from liability. A reference to the International Organisations (Immunities and Privileges of the International Tin Council) Order 1956 (S.I. 1956 No. 1214) shows the word used there was also “facilities.” The reason is that to grant the capacities of a body corporate to an organisation is to grant it the facility to contract in its own name, to sue in its own name and to hold property in its own name. These matters facilitate the implementation of the objects of the organisation in this country because without that facility it might not be possible for it to acquire property. Before these enactments there was no authority in those organisations to carry out their objects.

It was not, and is not, for the United Kingdom Government to determine unilaterally the nature of an international treaty organisation and whether its member states are liable to third parties. The member states have to determine these questions together in the treaty. To construe the legislation as conferring a general immunity from liability is to extend the scope and effect of the legislation beyond its proper sphere. There has been at least one treaty where member states appear to have recognised at least a liability to third parties: see the International Natural Rubber Agreement 1987. But if it is right for the court to have regard to an express exclusion of liability in the treaty no difficulty arises. [*101]

Section 1(6) of the Act of 1968 shows that Parliament was anxious to ensure that no more “privileges and immunities” be conferred on the organisation than were strictly required by the relevant treaty. It would be surprising if Parliament had intended to confer on members an immunity from the liability that would otherwise attach when there was no need to do so: see also reference to international organisations and their capacities in section 33(5) of the Copyright Act 1956.

The conferment of legal capacities of a body corporate is not to be construed as being the same as deeming a body to be a body corporate. Parliament has deliberately not chosen those words: see Bonsor v. Musicians’ Union [1956] A.C. 104. Compare speeches of Lord MacDermott, at pp. 134, 144, Lord Keith, at p. 149, and Lord Somervell, at p. 155.

On the question of state immunity the banks adopt the submissions of the plaintiffs save to say further that the liability of the states on the contracts of the I.T.C. falls within section 3(1)(a) and/or (b) of the State Immunity Act 1978.

Under the Order in Council of 1972 the immunities conferred by article 6 apply to the organisation as such and not to the liabilities of its members. Article 5 enables the I.T.C. to sue and be sued in its own name. The plan of the Order is to deal separately with immunities of the Council as such and the position of member states. Article 7 provides that the Council, the organisation, shall have inviolability of official archives whereas inviolability of the papers and documents of representatives of member states is dealt with in article 14(1)(b): Shearson Lehman Brothers Inc. v. Maclaine Watson & Co. Ltd. (No. 2) [1988] 1 W.L.R. 16 and Zoernsch v. Waldock [1964] 1 W.L.R. 675.

Non-justiciability arises where the court is unable or is precluded from adjudicating on an issue raised in proceedings before it. The banks adopt Mr. Kentridge’s submission that the plaintiffs’ rights were not created by I.T.A.6 itself. They were created, and arise, under the contracts entered into by the plaintiffs. Similarly, creditors’ rights against partners are not rights under the partnership deed but they arise under the creditor’s contract with the partnership. The plaintiffs’ rights are clearly private law rights justiciable by the court.

However, the conclusion of a treaty establishing an international organisation is a joint exercise of the sovereignty of the member states. There is no reason for the English court to treat this joint act of sovereignty any differently from a comparable exercise of sovereignty by a single foreign state. In the case of foreign municipal legislation the court will not examine an issue as to the propriety or validity of the law of a foreign sovereign state where that is the only issue in the proceedings: Buck v. Attorney-General [1965] Ch. 745, 770, per Diplock L.J. However, the court will examine foreign legislation in order to interpret it and to determine its effect for the purpose of determining private legal claims: Trendtex Trading Corporation v. Central Bank of Nigeria [1977] Q.B. 529. The court will not pass upon the propriety of the conclusion of a treaty: Blackburn v. Attorney-General [1971] 1 W.L.R. 1037 and Ex parte Molyneaux [1986] 1 W.L.R. 331. [*102]

In general the courts are permitted to examine and to construe treaties for the adjudication of private legal claims otherwise within the jurisdiction of the court: McNair, Law of Treaties (1961), ch. 19 (pp. 345-363). Non-justiciability arises in regard to treaties (1) where it is sought to impeach the propriety of the Crown’s treaty-making powers since the courts cannot review the propriety of acts of the Crown done in the exercise of the prerogative. The courts will not and cannot adjudicate where there are “no judicial or manageable standards” where there is “a judicial no-man’s land:” Buttes Gas and Oil Co. v. Hammer (No. 3) [1982] A.C. 888, 938, and Council of Civil Service Unions v. Minister for the Civil Service [1985] A.C. 374, 397, 398, 407, 410, 417-418. (2) Where an adjudication is sought as to the rights of the state parties to a treaty inter se the court will not entertain a claim by one sovereign against another under a treaty. But that does not mean that the court can never make a finding that the Crown is in breach of its treaty obligations.

It is important to distinguish non-justiciability from irrelevance. The Crown cannot legislate by itself: only the Queen in Parliament can legislate. It follows that the conclusion by the Crown of a treaty which requires for its performance the alteration of English law is irrelevant to any private law issue before the courts unless and until appropriate legislation has been passed: Halsbury’s Laws of England, 4th ed., vol. 18 (1977), p. 719, para. 1405. But if a treaty does not require, for its implementation, any change in English law, i.e. any legislation, there ought to be nothing to prevent the court from adjudicating upon the meaning and effect of the treaty: Post Office v. Estuary Radio Ltd. [1967] 1 W.L.R. 1396; Fenton Textile Association Ltd. v. Krassin (1922) 38 T.L.R. 259. [Reference was made to The Dirigo [1919] P. 204 and Porter v. Freudenberg [1915] 1 K.B. 857.]

Barnes following on the question whether the court is precluded by any principle of non-justiciability from looking at I.T.A.6, as it ordinarily would, in accordance with the principles of conflict of laws. That question is dealt with in two ways: first (as has already been submitted), the ordinary principles of English law do not preclude the court from looking at the treaty and giving effect to it in the ordinary way, just as it would look at the articles of association of a foreign domestic company and give effect to them in the manner in which their domestic law would. Secondly, I.T.A.6 is a Community treaty which the court is entitled, and indeed bound, to look at by virtue of section 3 of the European Communities Act 1972. It is not suggested that the treaty confers private rights which creditors are entitled to enforce before the national courts.

Any statement of the rule as to non-justiciability must now be qualified in the light of European law. Various articles of the E.E.C. Treaty allow the E.E.C. to conclude treaties with non-member states and with international organisation: articles 112-114 and 238. In Haegeman v. Belgium (Case 181/73) [1974] E.C.R. 449 and Hauptzollamt Mainz v. C.A. Kupferberg and Cie K. G. aA. (Case 104/81) [1982] E.C.R. 3641 the European Court of Justice held that the provisions of [*103

agreements form an integral part of the Community legal system. That rule applies to “mixed” agreements (agreements that the E.E.C. enters into alongside member states) as much as to “unmixed” agreements: Haegeman v. Belgium and Pabst & Richarz K.G. v. Hauptzollamt Oldenburg (Case 17/81) [1982] E.C.R. 1331.

By sections 2 and 3 of the Act of 1972 “Community treaties,” including the E.E.C. Treaty, are to be given effect in English law in accordance with the decisions of the European Court. The interpretation given to article 228(2) of the Treaty by the European Court means that treaties entered into by the Community form an integral part of English law and that national courts are bound to take them into account and to give effect to them as appropriate. The Act defines “treaties” in section 1 to include treaties entered into by the Communities after the Act was passed. Therefore, sections 2 and 3 apply to these as to the founding treaties. No question of non-justiciability can arise in relation to such treaties. The E.E.C. entered into I.T.A.6. Therefore, it is a Community treaty in respect of which no question of justiciability can arise. Section 1(3) should be construed as applying only to a treaty entered into by the United Kingdom without the E.E.C. Otherwise English law would be inconsistent with the Community law. Moreover, this would satisfy the purpose of the proviso: Reg. v. Her Majesty’s Treasury, Ex parte Smedley [1985] Q.B. 657.

Littman Q.C. interpolating. The premise on which Rayner is proceeding is that the I.T.C. is not a distinct legal entity. The liability of its members, as members of an unincorporated association, is based on the following propositions:

(1) It is accepted that membership of an unincorporated association does not automatically imply liability for its debts. (2) Thus, although the matter has never been finally decided, the present weight of authority is against automatic liability of a member of a trade union for its debts incurred by its officers: Bonsor v. Musicians’ Union [1956] A.C. 104. Similarly, in many of the cases concerning clubs it has been held that members were not automatically liable for debts incurred in respect of goods ordered on credit by the club steward. (3) The test in such cases has been held to be the ordinary principles of agency: Flemyng v. Hector, 2 M. & W. 172. (4) The principles which determine the existence or otherwise of such liability have been most fully and precisely worked out in relation to partnerships and members clubs. (5) In the case of partnerships it is settled law that each partner is agent for each other and hence each is fully liable for the debts of the partnership, whether contracted under the firm name or otherwise, and irrespective of any purported limitations on partnership liability in the partnership deed except as provided by the Limited Partnerships Act 1907. The underlying principle is that of agency: Lindley on Partnership, 3rd ed., p. 248. (6) The same principle of agency is applied in the numerous decisions on the members’ clubs although in these cases the question is not normally whether all the members are bound by the acts of a common employee (e.g. the club steward) who has, characteristically, ordered hogsheads of claret on credit. Members are not liable automatically by virtue of their contract of membership since it is said to [*104] be notorious that persons who join clubs do not expect to be liable for more than their subscriptions or for cash transactions unless they have authorised purchases on credit. Where, however, it is established that they have authorised the relevant transaction they are liable. The principle is applied in this way. The party primarily liable is the person who ordered the goods (e.g. the club secretary or steward). If it is shown that he was acting on the instructions or with the authority of a committee then the committee members will be liable. If it is shown that the members as a whole have authorised the transactions they will also be liable.

The following principles apply to the I.T.C.: (1) The purpose of the I.T.C. are predominantly commercial e.g. to regulate the supply of and demand for tin by buffer stock operations and pricing policies. Its methods are primarily large scale trading activities. Profits are anticipated since there is no provision for dealing with losses and such profits are to be shared amongst members: Delauney v. Strickland, 2 Star. 416. (2) Assuming that the I.T.C. is an unincorporated association its name is simply an umbrella name for individual members as it is for clubs, partnerships or trade unions: Flemyng v. Hector, 2 M. & W. 172. (3) Its members are not numerous. They are about the size of a medium size firm of solicitors. Membership of each International Tin Agreement readily ascertainable. It is not constantly fluctuating: In re St. James’ Club (1852) 2 De G.M. & G. 383. (4) The members are unlike members of a trade union or a club as to which it is well known and judicially recognised that they simply pay a subscription and expect to pay no more generally leaving the management and in particular the purchase of supplies or hiring of staff in the hands of staff or committees or trustees: Steele v. Gourley (1887) 3 T.L.R. 772.

Jonathan Sumption Q.C. and Richard Field, Q.C. for the brokers. The issues are the same as Mr. Littman and Mr. Kentridge have canvassed but are slightly different from Mr. Burnton. The brokers adopt the submissions of Mr. Littman and Mr. Kentridge. The submissions which they presently make are concerned with agency.

Assuming that the I.T.C. is a wholly separate and distinct body from its members the question is whether it is a body under the immediate direction of its members and carries on the objects of its members and is thus carrying on as their agent. Article 4 of I.T.A.6 indicates that the Council is composed of all the members. The individuals transacting the business of the Council are not in the position of directors of a company. They do not owe duty primarily to the Council nor to the membership generally. The Council is itself the supreme directing power within the I.T.C.: articles 7 and 9. The Council appoints the principal officers of the I.T.C. who are responsible to it and is required to give directions as to the manner in which the buffer stock manager is to carry out his duties: articles 11 and 13.

The Court of Appeal in Gramophone and Typewriter Ltd. v. Stanley [1908] 2 K.B. 89, 95-97, 101 and 105, and Atkinson J. in Smith, Stone and Knight Ltd. v. Birmingham Corporation [1939] 4 All E.R. 116, 120-121, formulated the test. As applied here the test is whether the members were really carrying on business. The arrangements made by [*105] the members show that they run the enterprise for their benefit, that the individuals conducting the business are appointed by the members, that the members are the head and brain of, and govern, the venture, that the benefits of the venture are achieved by members’ skill and directions and that the members are in constant and effectual control. The point is illustrated by comparing the directors of a company, who owe their duties to the company and not its members, with the delegates sitting in the Council, who are the agents of members and owe no duties to the I.T.C. as such. Accordingly, the I.T.C. was acting as an agent of the members. [Reference was made to In re International Tin Council [1987] Ch. 419.]

Even if the contracts here were to be construed as providing that the I.T.C. contracted as the principal the brokers may prove without contradicting the written instrument that the members are liable as undisclosed principals in addition to the I.T.C.: Bowstead on Agency, 15th ed. (1985), pp. 320-321 and Higgins v. Senior (1841) 8 M. & W. 834. That case was approved and applied by the Privy Council in Basma v. Weekes [1950] A.C. 441, 454. See also Humble v. Hunter (1848) 12 Q.B. 310 and 20th century authorities, Fred Drughorn Ltd. v. Rederiaktiebolaget Transatlantic [1919] A.C. 203 and Epps v. Rothnie [1945] K.B. 562.

On non-justiciability the brokers adopt Mr. Kentridge’s submissions and add the following point:

The question whether privity of contract has been created between the brokers and states is not a question of international law but is a question of English law. Accordingly, it is justiciable in English courts: Dicey & Morris, The Conflict of Laws, 11th ed., vol. 2, rule 200; Maspons y. Hermano v. Mildred, Goyeneche & Co., 9 Q.B.D. 530; Chatenay v. Brazilian Submarine Telegraph Co. Ltd. [1891] 1 Q.B. 79, 81 and 85. [Reference was made to Ruby Steamship Corporation Ltd. v. Commercial Union Assurance Co. (1933) 150 L.T. 38.]

Gordon Pollock Q.C., Richard Siberry and Alan Boyle for Australia, Japan, Malaysia, Nigeria and Thailand. The plaintiffs identified the issue before the court as, can the members of the I.T.C. walk away without having to pay the debts incurred by their association? That is not a legal issue at all. It is not a legal question capable of legal analysis. It may involve questions of policy. It may involve all sorts of considerations, but it does not pose any legal issues because the court cannot answer that “Yes” or “No” on the basis of legal analysis. If the question is simply posed the answer is “Yes” based on Salomon v. A. Salomon & Co. Ltd. [1897] A.C. 22, where Mr. Salomon was able to walk away without having to pay the debts incurred by his creature.

The action must start from the premise that it is for the plaintiffs to demonstrate, by some known legal route, how it is that each of the defendants is liable, either on or in respect of contracts made by the buffer stock manager. The technique with which the court is concerned, as a matter of legislation as regards international organisations, is one which Parliament has authorised and used in respect of a very large number of organisations in identical terms, covering a very wide spectrum: see Halsbury’s Law of England, 4th ed., vol. 18 (1977), p. [*106

822, para. 1598, under the general title “Foreign Relations Law,” where all those organisations are listed which have been granted privileges and immunities and the status of body corporate. There is a reference to legal capacities of bodies corporate which have been conferred on certain other organisations. The distinction is that the latter category has not been given the immunities and privileges. However, the editor regards “capacity” as interchangeable with “status.” The word “status” denotes “legal capacity.” See also para. 1599.

The analysis of the situation here, and the starting point, is to ask the question, what are the alleged causes of action? One must analyse and deal with each cause of action in turn. The plaintiffs’ primary case and primary cause of action is that the defendants are liable in contract for the non-performance of their contracts for the purchase of tin. This can be described as submission A. In terms of categorisation it is a case of direct primary liability. Under this submission there is no legal entity describable as the I.T.C., no persona juridica, persona ficta, nothing with personality describable as the I.T.C.

To establish the cause of action under submission B the plaintiffs need to show, first, the existence of a rule of English law that members of a certain defined class of legal entities are bound to discharge or to guarantee the debts of that entity and, secondly, that by the rules of English law the I.T.C. falls within that class.

The defendants say: (1) the defendants are not parties to the tin contracts or the bank loans. (2) By endowing the I.T.C. with all the capacities of a body corporate Parliament created a legal personality separate and distinct from the legal personality of each of the members. (3) One of the capacities of that personality was the capacity to enter into a contract as a contracting party. (4) The I.T.C. purported to enter into each contract as a contracting party. (5) There is no material before the court from which one could infer that, in so contracting, the I.T.C. was acting as an agent for its members as undisclosed principals. That, however, does not encompass non-justiciability at this stage. It is important to remember that the only material from which agency can be deduced is I.T.A.6. (6) The terms of the tin contracts themselves exclude the doctrine of the undisclosed principal. That is a point which currently is of relevance against Rayners and is potentially relevant against the brokers and not relevant as regards the banks potentially. (7) And this is non-justiciability, since the alleged and disputed relationship of agent/I.T.C. and principals/members can only be derived from construing I.T.A.6, it raises issues which are non-justiciable. (8) In any event, those of the plaintiffs who are concerned with tin contracts have, by taking awards against the I.T.C., elected to treat the I.T.C. alone as principals and parties to those contracts. They are precluded from contending, for the purposes of the State Immunity Act 1978, that the defendant states entered into these contracts. (9) The defendants cannot be made liable on the contracts themselves. They did not enter into the contracts and did not enter into any commercial transactions within the meaning of section 3 of the Act of 1978. (10) There is no known doctrine of English law which renders the members of an entity with legal personality liable for that entity’s debts. (11) There is nothing in [*107

the International Organisations Act 1968, nor in the International Tin Council (Immunities and Privileges) Order 1972 which imposes such liability. (12) Therefore the defendants have no secondary liability. (13) Even if they did, such liability will not be an exception to the immunity granted by section 1 of the Act of 1978.

The question on the first issue is: “Are the defendants parties to the contracts?” That requires the court to consider the concept of a legal personality, the concept of a persona juridica and one has to answer this question: Was the I.T.C. capable of entering into contracts in its own right? There can said to be two separate issues, namely, first, whether there is an entity which could contract in its own name as a principal and secondly, if it does do that, does that bring in its train a secondary liability of others for some reason other than its personality, but rather to deal with the existence of some different rule of law.

The starting point is to ask, “What is legal personality for these purposes?” The possession of legal personality means simply that the possessor is the subject of the legal system. Putting it another way, the possession of legal personality means that one is an entity recognised by the legal system as being the subject of rights and duties, i.e. the duties and rights are vested in that entity and not in someone else. If that is correct, it must follow that the test for the existence of legal personality is simply the possession of the relevant capacities. If the particular entity is given legal personality it will have all those capacities which enable it to be the subject of rights, duties, obligations, and so on, save to the extent that the exercise of those capacities is limited or excluded by some other rule of law. Conversely, if the relevant capacities are conferred, the recipient will have legal personality. As a matter of theory and of practice in various systems one can have a range of different classes of non-natural entities which have legal personality. Corporations are, as far as English law is concerned, the paradigmatic example. See comments on corporations in Blackstone’s Laws of England, vol. 1, p. 472.

The English courts and the High Court of Australia have plainly recognised that one confers the capacities or the powers or the abilities, and from that one deduces the existence of personality. That is all to be derived from the trade union cases in this country: National Union of General and Municipal Workers v. Gillian [1946] K.B. 81. Bonsor v. Musicians’ Union [1956] A.C. 104 adopted the same approach as the Gillian case but simply came to a different conclusion. See also Chaff and Hay Acquisition Committee v. J. A. Hemphill and Sons Proprietary Ltd. (1947) 74 C.L.R. 375. [Reference was made to Taff Vale Railway Co. v. Amalgamated Society of Railway Servants [1901] A.C. 426 and Kelly v. National Society of Operative Printers’ Assistants (1915) 84 L.J.K.B. 2236.]

R.S.C., Ord. 81 is a purely procedural device which allows the members of a partnership to sue and be sued by means of a name. Rule 1 sets out with clarity that two or more individuals may sue in a name. So the cause of action and the action is the action of the individuals but they are simply using their name to designate themselves. “Persons” could be corporate bodies or individual legal persons: see also rule 2 and [*108] The Supreme Court Practice 1988, vol. 1, pp. 1216-1217, notes 81/1/1, 81/1/5, 81/1/7 and rules 3, 5. It lays down a nice technical code but which makes it quite plain that when there is a partnership one must be very careful not to be lured into thinking that the partnership has any legal existence whatsoever. The rules provide a procedural code which regulates the rights and liabilities of the individuals who compose the partnership for the purposes of convenience.

The next Australian trade union case is Williams v. Hursey (1959) 103 C.L.R. 30. Most of it is concerned with statutory construction of various Australian legislation which is of no interest at all here. But that case is relied on to show that the approach there was exactly the same and that personality is indivisible. See also Dr. David Derham’s article “Theories of Legal Personality,” in Webb, Legal Personality and Political Pluralism (1958) pp. 1-19; Lloyd, The Law Relating to Unincorporated Associations, (1938), pp. 1-27, 97-132, 133-148 and Conservators of the River Tone v. Ash (1829) 10 B. & C. 349. [Reference was made to Inland Revenue Commissioners v. Bew Estates Ltd. [1956] Ch. 407.]

There is then a question of the use of treaties as an interpretational aid to statutory construction. The background to that question is that there is a very large number of international organisations which in international law have legal personality, that is to say, they are the subjects of the international legal system and are able to enjoy rights and incur obligations in their own name. In re Reparation for Injuries Suffered in Service of United Nations [1949] I.C.J.R. 174 decided that where a number of states get together they can confer personality on their creation but that it is only an international personality, that it only operates on the international plane because that is the plane on which they operate. In the real world, however, these organisations need to operate on the level of domestic law. They will need to own or lease property, enter into various contracts. All the treaties provide for those matters because they say that the particular organisation will have personality and in particular the capacity to contract and own property and so on. All of those capacities must relate to a capacity within the domestic sphere because property cannot be owned and contracts cannot be entered into on the international plane: see for example, the United Nations Relief and Rehabilitation Administration, 1943; the International Monetary Fund 1945; Order made under the Breton Woods Agreements 1945; the United Nations 1946: 1947 and there are treaties in respect of specialised agencies which have a different formulation but have legal capacities as necessary for the fulfilment of their functions: for example, International Maritime Consultative Organisation: 1948, 1955. The most common formula in the treaties is juridical personality in particular although there are variations on that theme. If it is held that no personality at all has been conferred on the I.T.C. it will follow that no personality has been conferred on any of those organisations. It must necessarily follow that the United Kingdom will be in breach of a very large number of treaty obligations, simply because the draftsman would have failed to do what treaties required the United Kingdom to do. [Reference was made to Shearson Lehman Brothers Inc. v. Maclaine Watson & Co. Ltd. (No. 2) [1988] 1 W.L.R. 16.] [*109]

If a treaty provides that the states are not to be liable international law imposes an obligation on each individual state to ensure that under its domestic law the states are not liable: Brownlie, Principles of Public International Law, 3rd ed. (1979), pp. 36, 38.

It is plain that Parliament always treated the I.T.C. as it treats any of the other international organisations, because it uses the standard form of statutory instrument to bring it into the English law, as something which exists independently and separately from its members. If one is conferring immunities, as the Order in Council of 1972 is doing, one is conferring immunities on something. Therefore, that something exists or is believed, at least by the draftsman, to exist so as to be a recipient of those immunities and to be able to enjoy the rights which comprise immunities. That must mean that the Council is something other than a foreign sovereign power or other than merely a collection of foreign sovereign powers.

Accordingly, in summary, the I.T.C. is a persona juridica with legal personality and that is the inevitable consequence of the conferral of the capacities. When, therefore, the I.T.C. purported to make contracts the contractual rights and liabilities were vested in the I.T.C. alone. Thus the causes of action which arise on those rights and liabilities ought to be regarded as the causes of action here.

In the case of a partnership, the nature of liability of members is quite straightforward. It is joint and several liability as direct contracting parties, with no one else. There is the existence of no organisation whose actions automatically, while incurring its own liability, bring about the incurral of liabilities of the members. The analysis of a partnership always involves a perfectly straightforward application of the rules of agency. Each partner has, by English law, an unlimited authority conferred on him by each other partner to contract in the name of all of them. So the members are the contracting parties and there is never any secondary liability. There is never any need to formulate any principle about members of trading organisations automatically being liable. The only specific principle which is particular to associations for gain which English law has ever imposed as a matter of common law is that which relates to authority, i.e. agency. There is nothing which says that members of a partnership are liable because they are members of a trading organisation. The relevant rule of English law is that vis-š-vis the outside world each member authorises every other member. So the only issue which is ever relevant in English common law, when one talks about an unincorporated association, is the issue of authority. It is simply the application of ordinary principles of agency and contract: Lloyd, The Law Relating to Unincorporated Associations (1938). The same analysis applies to the creation of concurrent liability. One can take a partnership as an example of concurrent liability being created between the actual partner who contracts and all his co-partners. On the basis that that partner has authority he is deemed to have authority to make the contract.

Coming to the question of international law, suppose under that law, the members of an organisation such as the I.T.C. or N.A.T.O., United Nations retain a liability toward outsiders who deal with that organisation, [*110] as a rule of international law, ex hypothesi, that would only impose obligations on the states on the international level. Those obligations could only be enforced by other subjects of international law, namely, either other states or other international organisations, because it is an inflexible rule of English law that no non-state can derive or enforce any positive right from international law in front of a domestic tribunal. So unless Parliament has expressly translated the international situation into domestic law it really would not help because at the end of the day what one would have would be a plaintiff, such as the brokers or banks here, saying that they have a cause of action against each of the states because in international law there is a cause of action. But that they cannot say. There is no established rule in international law that members are liable whether as direct parties to any engagement made by an international organisation, whether solely or concurrently, or secondarily liable as guarantors. The sources of international law are the treaties, the decisions of international tribunals, the consensus of writers, a category described as the generally accepted principles of law. In the instant case, there is no treaty which sets out the general rule, no decision of any international tribunal, no accepted principles of domestic law. So, one is left effectively with either the practice of states, which does not arise because this kind of situation is somewhat rare, or the consensus of writers: thus, see, Seidl-Hohenveldern, Corporations in and under International Law, (1987), pp. 119, 129-130; Adam, Les Organismes Internationaux Spécialisés, (1965) (Translation, F. A. Mann), paras. 109-110; Shihata, “Role of Law in Economic Development: The Legal Problem of International Public Ventures” in Revue Egyptienne de Droit International (1969), vol. 25, pp. 119-128; Schermers, International Institutional Law; Westland Helicopters Ltd. v. Arab Organisation for Industrialisation (1984) 23 I.L.M. 1071; Fawcett, Trade and Finance in International Law, (1968), pp. 224-241; O’Connell, International Law, 2nd ed. (1970) vol. 1, pp. 80-106 and Jenks, “The Legal Personality of International Organisations” in the British Yearbook of International Law (1945), pp. 267-275.

Historically, by the 16th century English law knew only two categories of organisation: the unincorporated association and the corporation. A corporation had to be created either by charter or by statute and it always had certain capacities and characteristics and incidents attached to it: Blackstone, Commentaries on Laws of England, 8th ed. (1778), vol. 1, p. 472. No rule is to be found to the effect that a corporation is an exception to an otherwise general rule concerning the liability which is imposed upon or attached to the members of a group engaged in any particular activity. There was, however, a recognition that it is the ordinary and normal consequence of incorporation that the debts of the corporation are its debts and, because of that, the members are not liable. A simple division existed between corporations and unincorporated associations. A corporation was prima facie an entirely separate personality and the members were not liable to contribute to it and were not liable for its debts. In an unincorporated association the only persons who could enter into legal relationships with an outsider were the individual members of the body themselves. In the 17th, 18th and [*111] 19th centuries the standard form of unincorporated associations, that is to say, partnerships, were no longer found to be sufficient. Classically, a partnership was a group of partners who knew each other well, and who operated very much as an integrated group. That gave way to joint stock companies. These were very large unincorporated associations in which large numbers of members of the public were invited to subscribe shares which entitled them to participate, presumably in the ratio of their shareholding, in the profits of the enterprise. Those subscribers intended to be sleeping partners and the business was carried on by managers or directors on behalf of the rest. There was no separate legal entity. Where a contract was made by a director on behalf of a joint stock company, every single member of that joint stock company, regardless of their numbers, became joint and several partners to the contract.

By the 19th century joint stock companies gave rise to two main problems. One was that they were very unwieldy and the members were at a considerable disadvantage of having totally unlimited liability. Various attempts were made to limit the liability of members by means of notification but it did not work: In re Sea Fire and Life Assurance Co., Greenwood’s Case, 3 De G.M. & G. 459. These associations faced great difficulty suing in contracts and being sued. During the middle portion of the 19th century there was a great political battle as to how to deal with those problems: Gower, Principles of Modern Company Law, 4th ed. (1979), pp. 97-111, 112-138.

The Joint Stock Companies Act 1844 was designed to deal with the first of the two problems, the unwieldy nature of joint stock companies. A joint stock company registered under that Act had a corporate identity which allowed it to be an entity which owned property, entered into contracts and which could sue and be sued on contracts. But members’ liability at that stage was not limited and they were still treated as if they were members of a partnership. So, the law created no secondary or guarantee liability by a concurrent liability subject to certain restrictions. The next stage in the development was that Parliament then accepted limited liability but if for any reason there was non-compliance with regulations the limited liability was taken away: Pollock and Maitland, History of English Law, vol. 1, pp. 486, 487, 492-493; Holdsworth, A History of English Law, vol. 3, pp. 469-489; In re Sheffield and South Yorkshire Permanent Building Society (In Liquidation), 22 Q.B.D. 470. The consequences of incorporation are those which flow naturally from recognition of the logical effect of creating a separate legal personality. It is simply a working out of those consequences finally grasped in Salomon v. A. Salomon and Co. Ltd. [1897] A.C. 22 which leads to the modern position. See also Palmer, Company Law, vol. 1, pp. 6-10; and Elve v. Boyton [1891] 1 Ch. 501.

If one can identify a type of personality known to English law in which the consequences or incidence of possession of this personality are that the possessor can enter into legal relationships for himself and on his own account but, at the same time, others become primarily or secondarily liable, something like a Scottish partnership, then the Order in Council of 1972, necessarily, excludes the finding that the I.T.C. is one of those classes of personalities. The Order in Council does not say, [*112] “The I.T.C. shall have sufficient personality to contract but insufficient personality to disengage the liabilities of its members.” It does not say the I.T.C. shall have the personality of a Scottish partnership. It does not say it shall be a quasi-partnership, a société en nom collectif, a European Economic Interest Group, or a joint stock company incorporated under the Act of 1844. If, therefore, one is looking for Parliamentary intention, assuming that Parliament had in mind the existence of this range of personalities from which it could choose when it came to decide which one should be enjoyed by the I.T.C., what is found is that out of that range Parliament chooses the corporate personality as the one by reference to which the I.T.C. is to be treated. And the effect of saying in article 5, “The I.T.C. shall have the capacities of a body corporate,” is the same as saying, “When the I.T.C. contracts, it shall do so in the same way as a body corporate does.” It is well known how a body corporate contracts. Parliament has given the plainest indication of intention by use of the phrase “body corporate.” Parliament had available to it other language and other phrases if it intended to identify some different form of personality.

The relevant characterisation of a partnership or quasi-partnership is not the carrying on of activities which can be called “trade,” but the associating together for gain: section 1(1) of the Partnership Act 1890. So the purpose of the association, and the purpose of the activities, is profit. But it must follow that the making of profits, even by buying and selling of commodities, does not make the organisation, which makes those profits, a partnership or a quasi-partnership. It is not the carrying on of activities which can be called “trade,” but the associating together for gain: section 1(1) of the Partnership Act 1890. So the purpose of the association, and the purpose of the activities, is profit. But it must follow that the making of profits, even by buying and selling of commodities, does not make the organisation, which makes those profits, a partnership or a quasi-partnership, or a trading organisation, because many organisations which are quite plainly not partnerships make profits by commercial contracts as an incidental part of their activities. For example, the Inns of Court make all sorts of profits and clubs can let premises.

The I.T.C. is not a body whose purpose at any stage was the making of money or profit. Its purposes were entirely public and international, the regulation of a particular international trade and a particular commodity. It is a body which undoubtedly expected that its most important tool in the regulation of the tin trade worldwide was the control of the movement of the price of tin on the world market. It has two main weapons by which to control the world market. One was a power, although difficult to enforce, to control the movement of tin. The other one was the means by which it could attempt to control the movement of the price of tin. The intention was that the price of tin should be kept within a range so as to avoid, on the one hand, the price of tin dropping too far, which results in considerable difficulties to the developing countries which are the main producers, and on the other hand, the price of the tin going too high, which is to the disadvantage to the consumer countries of the world. Whether or not these activities will [*113

result in a profit is wholly irrelevant to the purposes of the I.T.C. For the purpose of ascertaining the purposes of the I.T.C. the court is entitled to look at I.T.A.6. See also Lindley on Partnership, 15th ed. (1984), pp. 33-57.

It is an abuse of language to describe the I.T.C. as a trading organisation in the sense of equating it with partnerships or quasi-partnerships as described in the textbooks or cases on English domestic law. There is a world of difference between the two types of organisation. No more would one describe the Bank of England or the Federal Reserve Board as trading organisations because they intervene in the market to buy or sell currency in order to stabilise the international value of the currency with which they are concerned.

For the purposes of the argument on agency, the I.T.C.’s personality is being equated with the personality possessed by a body corporate. The scope of the inquiry is whether or not agency can be brought into existence by the existence of I.T.A.6 alone. The plea in the Rayner action is that in the existence of the terms of constitution an agency relationship existed between the I.T.C. and its members. Three separate issues arise. First, assuming the court can look at I.T.A.6 and treating I.T.A.6 as a constitution of an English body corporate, can it be said that the I.T.C. inevitably contracts as an agent for its members, when the buffer stock manager, on its behalf, makes any one of the contracts contemplated in its constitution. Second, if the answer to the first question is, “Yes,” did the I.T.C. contract as agent or was that result excluded by the terms of the tin contracts. Third, if the answer to the second question is that such a result was not excluded, does the doctrine of non-justiciability prevent reliance on I.T.A.6.

The obvious answer to the first issue is that the I.T.C. did not contract as an agent. Any other conclusion would be contrary to the terms of the I.T.C.’s constitution, I.T.A.6, it would be inconsistent with Salomon v. A. Salomon and Co. Ltd. [1897] A.C. 22 and there is no textbook where this proposition has been discussed: Addison, A Treatise on the Law of Contracts, 11th ed. (1911), bk. 1, ch. VII, pp. 372-373; Anson, Principles of the English Law of Contract and of Agency in its Relation to Contract, 18th ed. (1937), pp. 134-137; Lindley, Law of Companies, 6th ed. (1902), vol. 1, pp. 837-838; Palmer, Company Law based on Lecture delivered in the Inner Temple Hall, (1898), pp. 37-39; Pollock, A First Book of Jurisprudence, 5th ed. (1923), pp. 122-129; and In re Weymouth and Channel Islands Steam Packet Co. [1891] 1 Ch. 66. [Reference was made to Edison Sault Electric Co. v. United States (1977) 552 F. 2d 326.]

On the second issue it is common ground between the plaintiffs and the states that the operation of the undisclosed principal doctrine can be excluded by parties to a contract. It is important that one should bear in mind the commercial background of the commodities markets. It is well known that those who operate in those markets deal with each other on a principal to principal basis without any possibility of the intervention of an undisclosed principal. The markets’ rules tend to make it quite plain that those who contract are the only parties who can enforce or be held liable. Furthermore, the liability of an undisclosed principal, in any [*114

event, is alternative to and not additional to that of the agent: Bowstead on Agency, 15th ed. (1985), vol. 2, pp. 346-352, art. 86; and Asty Maritime Co. Ltd. v. Rocco Giuseppe and Figli S.n.c. (The Astyanax) [1985] 2 Lloyd’s Rep. 109, 113. If the undisclosed principal is the principal the agent drops out and becomes an agent and his liability under the contract is no more than if he had contracted as agent only. A natural use of language by any commercial man who knew of the existence of the doctrine, without being a lawyer and without having the refinements of a lawyer who wished to exclude the operation of that doctine, would be to say, “I am contracting as a principal.” See also Humble v. Hunter (1848) 12 Q.B. 310. That case has never been overruled and has been cited approvingly on numerous occasions including up to the House of Lords. From Fred Drughorn Ltd. v. Rederiaktiebolaget Transatlantic [1919] A.C. 203 it is difficult to extract the proposition that it was not enough to say, “I am the principal” in the contract, one has also to say “and no one else is.”

The question under the third issue is non-justiciability. An English court can read and understand a treaty. Obviously, in certain circumstances an English court is entitled, or indeed required, to reach a view as to the meaning of a treaty. The best known example of this is a situation where the United Kingdom is a party to the treaty and that treaty forms the background or motive for a particular piece of legislation. Another example is where a treaty is an exercise by the Crown of its prerogative whereunder individual rights are changed, e.g. a definition of the scope of territorial waters. But what is impermissible is for the court to seek to construe a treaty so as to pronounce upon the rights and obligations inter se of those parties to the treaty or to seek to derive from the treaty domestic law rights and obligations which would not exist but for the court founding itself on the treaty. In itself the treaty cannot be a source of private rights and, therefore, if the particular meaning of a particular treaty is a necessary step in the establishment of a domestic right, then the court enters into an area which is non-justiciable: Blackburn v. Attorney-General [1971] 1 W.L.R. 1037; Pan-American World Airways Inc. v. Department of Trade [1976] 1 Lloyd’s Rep. 257 and British Airways Board v. Laker Airways Ltd. [1984] Q.B. 142; [1985] A.C. 58.

There are in effect two principles which run parallel. First, the English court is prohibited from interpreting non-incorporated treaties because determining the correct construction is not a matter which falls within the court’s interpretative jurisdiction. Those treaties march, so to speak, to the beat of a different drum because they are to be interpreted in the light of the cannons of construction which apply on the international plane. Those cannons of constructions are not necessarily the same as apply on any domestic plane. Secondly, the rule is that no individual can found on a treaty to enforce a right or an obligation. The English court has to ask itself whether the plaintiff or the defendant is seeking a particular legal result which requires necessarily, as part of the reasoning process which leads to the result that the court found itself on the treaty, the provisions of the treaty or the meaning of particular provisions in the treaty. [*115]

On this aspect of the case the issue the court has to deal with is whether or not the I.T.C. was the agent of members. The only way the court can determine whether or not the legal relationship of agent and principal existed between the I.T.C. and its members is to construe I.T.A.6. Furthermore, coming to a conclusion that a contract of agency has been made between principal and agent gives rise to a large number of rights and liabilities, not only with third parties but as between principal and agent themselves. The court is being asked to hold that those rights and obligations exist purely in the context of international law not as a result of any arrangement they have made on the domestic plane but purely as a result of the treaty which brought the I.T.C. into existence. It is difficult to see a more flagrant example of an attempt to use a treaty, an unincorporated treaty, for the purpose of getting this court to pronounce on the existence of international rights among those who are the subjects of international law while at the same time seeking to derive rights on the domestic plane for the benefit of non-subjects of international law. The powers of the I.T.C. are stated in the Order in Council of 1972. Looking at that Order it would appear that the I.T.C. has in effect been given unlimited contractual capacity. One does not look any further.

Suppose one has an unincorporated association, a club. Is it a question of law or fact whether or not, when the club secretary goes out and enters into his contract, he has contracted on behalf of himself, the committee or all the members? If that is the issue in the case, no one would describe that, if it turned on the construction of the club rules, as a question of fact. It would be a question of law for the construction of the rules: Flemyng v. Hector, 2 M. & W. 172. It really cannot be any different whether it is the rules of an unincorporated association or the constitution of an incorporated association, the argument is exactly the same.

There are various examples given by the plaintiffs of cases where the courts have looked at treaties. Philippson v. Imperial Airways Ltd. [1939] A.C. 332 gives rise to no difficulties at all because there the terms of the treaty were incorporated into the contract. The court was simply construing the contract. In Zoernsch v. Waldock [1964] 1 W.L.R. 675 the convention was incorporated into the contract. Nissan v. Attorney-General [1970] A.C. 179 arose by way of preliminary issue on the basis whether, assuming certain pleaded facts to be correct, they would provide a defence for the Crown to the causes of action pleaded by the plaintiff. That was a very different case. It raised all sorts of marvellous issues of prerogative but no support can be derived from it for the present purposes. The issue as to whether or not in due course it would or would not be proper to look at or construe any treaties which had been entered into in that case simply never arose. [Reference was made to Godman v. Winterton (1940) 11 I.L.R. 205 and Post Office v. Estuary Radio Ltd. [1967] 1 W.L.R. 1396.]

On the question of state immunity under the State Immunity Act 1978 the relevant points are: (1) A sovereign state is generally immune from the jurisdiction of United Kingdom courts: section 1(1). (2) A state is only not immune if the case falls within one of the exceptions set out [*116] in the Act. It flows from section 2 that the state must take the issue of sovereign immunity at the earliest possible stage in the proceedings which have been brought against it. (3) In the instant case the relevant exceptions are to be found in section 3 of the Act. (4) It is for the plaintiff to establish, at the stage at which immunity is raised, all the facts necessary to lead to a loss of immunity. The standard is the ordinary civil standard on a balance of probabilities. (5) Both section 3(1)(a) and (b) are concerned with contracts or transactions to which the state is a party.

Turning to the standard of proof, as a matter of principle, when the court is faced with a preliminary issue of jurisdiction, as here, there are three possible alternative solutions. The first is that one would simply look at the formulation of the plaintiffs’ claim as a matter of pleading. In other words, one characterises the allegation, and if that falls within a certain category then the court has jurisdiction to deal with it. That would mean that if the claim related to an alleged commercial transaction that in itself would be sufficient to give the court jurisdiction to deal with the whole substance of the dispute as pleaded. The second possible theoretical solution is to require the plaintiff to produce some, but not full, proof of those facts which are relevant to the founding of the jurisdiction. The third possibility is to require, at the stage at which jurisdiction is in issue, that the facts and any legal conclusions necessarily drawn from them are in fact present to establish the exception which is relied upon. In other words, an issue which goes to the question of jurisdiction has to be determined on a balance of probabilities at the stage at which the jurisdiction issue is raised. The third of the solutions is the correct one and is supported by considerations of principle, considerations of policy and by the construction of the Act.

As a matter of principle, if one is dealing with the question of the court’s jurisdiction that has to be established ex hypothesi before the court goes any further: I Congreso del Partido [1978] Q.B. 500; [1983] A.C. 244 and Vitkovice Horni a Hutni Tezirstvo v. Korner [1951] A.C. 869. [Reference was made to Juan Ysmael & Co. Inc. v. Government of Indonesia [1955] A.C. 72 and Baccus S.R.L. v. Servicio Nacional del Trico [1957] 1 Q.B. 438.]

The natural reading of section 3(1)(a) and (b) is that section 3(1)(a) is dealing with a contract which is a commercial transaction and section 3(1)(b) with a contract which may or may not be a commercial transaction entered into by the state. One would not naturally use the words “an obligation of the state,” except for something which arose out of the contract. One would be talking, if the plaintiffs’ construction is right, as to a liability of the state which arises by virtue of someone else’s contract as a liability. It is very difficult to conceive of a liability of the state which arises by virtue of a contract to which it is not a party. [Reference was made to Forth Tugs Ltd. v. Wilmington Trust Co., 1987 S.L.T. 153, 157, per Lord President, Lord Elmslie.]

Anthony Grabiner Q.C., Nicolas Bratza and David A. S. Richardsfor the Department of Trade and Industry. The position of the department is substantially the same as that of the states. The essential difference is that the department is not concerned with the question of [*117] sovereign immunity. From the point of view of the department there are two fundamental questions here which have to be answered. First, does the I.T.C. possess, as a matter of domestic law, separate legal personality distinct from its members? Secondly, if the I.T.C. has that legal personality, what, as a matter of domestic law, is its effect on the plaintiffs’ claims against the members in respect of the debts of the I.T.C.? It is of no assistance to describe the I.T.C. as the “creature” of the member states or as the “vehicle” through which the members traded directly on the London Metal Exchange. Nor is it of any assistance to ask whether the members have successfully excluded liability for the debts of the I.T.C. before answering the question as to whether there was any such liability in the first place.

These key questions permit of only one answer as a matter of domestic law, namely, that the Order in Council of 1972 did confer separate legal personality on the I.T.C. and that the effect of that grant of legal personality is that the I.T.C., and the I.T.C. alone, is liable for its debts and for its liabilities in the absence of agency or some express provision of law to that effect. There is nothing here to sustain a case of agency and the plaintiffs are unable to point to any provision of domestic law which would have the effect of displacing the ordinary rule and imposing any liability on the members. This remains true whether the case is put as one of primary liability or concurrent liability or secondary liability or contingent liability. Indeed the very fact that those various alternative ways of putting the argument have to be resorted to by the plaintiffs reveals the jurisprudential difficulties with which they are confronted when it comes to formulating their claims. Although the plaintiffs’ submissions have been dealt with under heads of submissions A, B C(1) and (2) the key issue is whether the I.T.C. enjoys legal personality under domestic law, i.e. whether or not it is a separate person in English law.

In relation to submission A four points are made. First, what the trades union cases show is that the legislature may in the absence of express words of incorporation, and even in the absence of express reference to legal personality, create a persona juridica not previously known to the law or confer on some existing association legal personality which is separate and distinct from that of its members. Secondly, what the trades union cases and Chaff and Hay Acquisition Committee v. J. A. Hemphill and Sons Proprietary Ltd., 74 C.L.R. 375, further show is that, in order to determine whether it was the intention of the legislature to confer separate legal personality on some body or organisation, the court will examine the capacities, powers or attributes conferred by the legislature on the body concerned. If such capacities are only consistent with the existence of a separate person in law the courts will draw the conclusion that the legislature has conferred separate legal personality by the grant of those capacities. In other words, the status of a body as a separate legal person is seen by the courts as the product or sum of the capacities. Thirdly, the Order in Council of 1972 by article 5 confers not merely some but all of the capacities of what has been referred to in argument as the quintessential artificial person known to the law, namely the body corporate. Those capacities include the capacity of a body to [*118] contract in its own name and in its own right as principal and thereby to acquire rights and incur liabilities of its own. The inevitable implication of the grant of those legal capacities to the I.T.C. is that the I.T.C. is and was intended to be a separate legal person, distinct from its members. Fourthly, this conclusion is reinforced by two further factors. (a) The Order in Council of 1972 was intended to give effect to the international obligations of the United Kingdom under the Headquarters Agreement, in particular article 3 thereof, which specifically requires the United Kingdom to confer legal personality on the I.T.C. in domestic law. That article sets out in the second sentence some examples of the capacities enjoyed by a body with legal personality. But when the Order in Council of 1972 came to translate performance of its obligation into domestic law one finds, not merely these particular capacities being conferred, but all the capacities of a body corporate. This is the clearest indication that it was the intention of the legislature not merely to give effect to the second sentence of article 3 but to the whole of the provision including the grant of legal personality. (b) Article 6 of the Order of 1972 confers on the I.T.C. itself, not on its members, immunity from suit and legal process except to the extent specified in the article. This provision is only consistent with the recognition by the legislature of the I.T.C. as a separate and distinct body in law.

The question in this case concerns not the status of the I.T.C., in the sense of whether the I.T.C. is a body corporate or not. The question is whether the members of the I.T.C. are liable on the contracts made in name of the I.T.C., or whether, as the defendants submit, the I.T.C. alone is liable on those contracts. That question is inextricably linked with the question whether the I.T.C. has legal personality that is whether it is recognised in domestic law as existing as a separate person.

In relation to this question the plaintiffs argue that every legal person must have a domicile and that, since the I.T.C. has no such domicile, it cannot have a separate personality. It is true that every natural person must have a domicile but it is certainly not true that every legal person must have a domicile. There is no reason why Parliament should not confer legal personality on a body without in any way concerning itself with the separate question of the domicile of that body. In relation to corporations the question of domicile, where it is relevant question, is dealt with by statute: Dicey & Morris, The Conflict of Laws, vol. 2, rule 172. See also the Civil Jurisdiction and Judgments Act 1982. In relation to the I.T.C. the concept of domicile is a complete irrelevance.

Mr. Kentridge’s proposition is that the traditional English approach has consistently been to look to see first whether a body has the status of a body corporate and then to examine the capacities that such a body has. To describe that as the traditional approach wholly ignores the fact that, first of all, bodies have been held to exist as bodies corporate with a separate personality, even in the absence of express words of incorporation and secondly, that in determining whether the legislature intended to incorporate the body or give it legal personality the courts have consistently examined the capacities granted to the body by the legislature: Conservators of the River Tone v. Ash, 10 B. & C. 349. Precisely the same approach is adopted when one looks at Chaff and [*119] Hay Acquisition Committee v. J. A. Hemphill and Sons Proprietary Ltd., 74 C.L.R. 375; National Union of General and Municipal Workers v. Gillian [1946] 1 K.B. 81 and Bonsor v. Musicians’ Union [1956] A.C. 104. In each of those cases the court examined the capacities which had been conferred on the body in question in order to determine whether or not the body enjoyed separate legal personality. See also Inland Revenue Commissioners v. Bew Estates Ltd. [1956] Ch. 407.

The approach adopted by the courts in the trade union cases is quite inconsistent with the plaintiffs’ fundamental case in these appeals, namely, that the grant of capacities to a body tells one nothing about its personality. The fact that a body is granted capacities tells everything about its personality. One of the facts which led Lord MacDermott in Bonsor v. Musicians’ Union [1956] A.C. 104, 142-143, to the conclusion that trade unions did not enjoy legal personality was that the Trade Union Act 1871 (34 & 35 Vict. c. 31) had only conferred some of the gifts and attributes of legal personality and that such attributes as were in fact conferred on unions by the Act were something of less significance than might fairly be expected if it had been the intention of Parliament to create or bring into being a new juridical person. Contrary to the plaintiffs’ contention, the capacity to sue and be sued was not vested in the union; it was vested in the trustees or other officials who were given the power to sue and be sued in the name of the union. The Act of 1871 did not empower unions to contract with, or to sue or be sued by, their own members. Kelly v. National Society of Operative Printers’ Association, 84 L.J.K.B. 2236, decided that the plaintiff could not sue because he would be suing himself. The statute did not even provide expressly that the union could be sued in its own name. That result was held in Taff Vale Railway Co. v. Amalgamated Society of Railway Servants [1901] A.C. 426 to be derived by implication from the language of the statute.

The position of the I.T.C. could not be more different. It was granted by article 5 of the Order in Council of 1972 not merely some of the attributes of legal personality but all the capacities enjoyed by a body corporate. These capacities include: (1) the capacity to contract in its own name and in its own right, including the capacity to contract with its own members; (2) the capacity to acquire and hold property in its own name and as beneficial owner; (3) the capacity to sue and be sued in its own name and in its own right including the capacity to sue and be sued by its own members. There is no comparison at all between the very limited capacities which the House of Lords in Bonsor v. Musicians’ Union [1956] A.C. 104 found, by a bare majority, to be inadequate to clothe a union with legal personality and the fullest capacities which could be enjoyed by an artificial legal person, namely the capacities of a body corporate: see Order in Council of 1972 and the International Organisations Act 1968, section 10(1) and (3).

There are compelling reasons why, in the ease of the I.T.C., neither Parliament nor the Queen in Council should use express words of incorporation or specify the I.T.C. or, for that matter, any of the other international organisations, to be bodies corporate for the purposes of domestic law. As Millett J. said in In re International Tin Council [1987] Ch. 419. 445B-C, it is of the very nature of an international organisation [*120] that it is not incorporated under any municipal system of law. It would be quite inconsistent with its status as a subject of international law for the legislature of one member state to attempt to incorporate it under domestic law. That would not only have subjected the internal workings of the organisation to the jurisdiction of the court of that member state but it would also run the risk of subjecting it to the other provisions of domestic law relating to corporations. [Reference was made to Mackenzie-Kennedy v. Air Council [1927] 2 K.B. 517.]

Article 6 of the Order in Council of 1972 is the clearest pointer apart from article 5 of the Order as to the intention of the legislature in conferring on the I.T.C. the legal capacities of a body corporate. Article 6 unequivocally confers specified immunities on the I.T.C. and it is wholly inconsistent, and indeed irreconcilable, with the plaintiffs’ submission that the I.T.C. has no separate legal personality distinct from its members. The article is consistent, and is consistent only, with the fact that the I.T.C. has, and was intended by the legislature to have, separate legal personality distinct from that of its members.

Submission B proceeds on the assumption that the I.T.C. is a separate legal person but the submission involves the assertion that the members are nevertheless liable for its debts; the liability on the part of the members is put variously, either as a primary and concurrent liability, or as a secondary and contingent liability. The answers are threefold. First, while it is accepted that a legal person may have limited capacities, there is no such thing as partial or limited legal personality: In re Sheffield and South Yorkshire Permanent Building Society (In Liquidation), 22 Q.B.D. 470, 476-477; Salomon v. A. Salomon & Co. Ltd. [1897] A.C. 22, 30-31, 33, 51 and 56 and Lee v. Lee’s Air Farming Ltd. [1961] A.C. 12, 24. [Reference was made to Von Hellfeld v. E. Rechnitzer [1914] 1 Ch. 748.] Secondly, the consequence in United Kingdom law of the conferring on a body of legal personality is that that body alone is liable for its debts, and that body alone owns its assets, unless there is some rule of law or statutory provision which imposes liability on other persons or confers ownership of assets on other persons. In other words, the liability of the members of such a body is the exception and not the rule. Thirdly, the plaintiffs have not been able to identify any rule of law or statutory provision which would create, in the case of the I.T.C., any liability for its debts however expressed, primary, concurrent, secondary or contingent. On the question of the impact of article 6 of the Order in council of 1972 on submission B, the arguments are similar to those in relation to submission A.

Submission C(i) proceeds on the assumption that the I.T.C. possesses no measure of legal personality so that, notwithstanding the conferral of the legal capacities of a body corporate, the I.T.C. could not, acting by the buffer stock manager, make any contracts. The submission assumes, in effect, that despite the grant to the I.T.C. of the legal capacities of a body corporate, when the buffer stock manager made the contracts he was making them for somebody else.

Membership of an unincorporated association does not, per se, make the members liable for debts which have been contracted in the name of the association. The members will be liable ipso facto only if the [*121] association is a partnership. But it is plain, and has been accepted by the plaintiffs, that the I.T.C. has, at all material times, had too many members to constitute a lawful partnership as a matter of English law. The members of what was called “an association for gain,” such as the old joint stock companies before the Act of 1844 were ipso facto liable for the debts of the association. But they were partnerships as a matter of law. At that time there were no limits on the number of partners. In any event, the I.T.C. is self-evidently not an association for gain.

The members of the I.T.C. could only be held jointly and severally liable for debt incurred by the buffer stock manager on proof of express or implied authority granted by them to the buffer stock manager to incur liabilities on their behalf: Bradley Egg Farm Ltd. v. Clifford [1943] 2 All E.R. 378. No express authority is alleged. Moreover, for the reasons given by Millett J. [1987] B.C.L.C. 707, 714-715, (i) no such agency or authority can be inferred from the nature of the organisation or from the provisions of I.T.A.6 and (ii) the officials of the I.T.C. had no ostensible authority to pledge the separare credit of the members of the I.T.C.: the buffer stock manager could under I.T.A.6 do no more than pledge the credit of the collective property held by the I.T.C.

Submission C(ii) is the pure case of constitutional agency. The first point made by the plaintiffs in relation to this submission is that the I.T.C. was merely carrying out the purposes or objectives of the member states. But suppose a group of persons decide that they want to carry on through the medium of a company a particular business. They, therefore, form a company under the Companies Acts. They specify as the object of that company the carrying on of the agreed business. It is true that the company can be said to be carrying on the objects of its members. But, as Salomon v. A. Salomon & Co. Ltd. [1897] A.C. 22 shows, this in no sense has the consequence that the body thereby formed is to be treated as the agent of its members. See also Lee v. Lee’s Air Farming Ltd. [1961] A.C. 12.

The second point made in connection with this submission is that the I.T.C. operated under the immediate direction of all its members. Article 4 of I.T.A.6 was relied on. But this language or similar language is simply the traditional language of incorporation: Lindley, A Treatise on the Law of Partnership, 6th ed. (1893), pp. 1-15, 49-58; Partnership Act 1890, section 4(2) and Companies Act 1985, section 13(3).

The plaintiffs rely on specific provisions of I.T.A.6, in particular articles 28 to 31, as giving rise to an agency relationship between the I.T.C. and its members. Since the provisions of an unincorporated treaty form an essential element in the pleaded case of agency, such a claim is non-justiciable. [The submissions of Mr. Pollock on this aspect are adopted.] Assuming that the relevant pleaded case of agency based on I.T.A.6 is a justiciable claim, no relationship of agency between the I.T.C. and its members can be derived from the constitutional arrangements which are contained in the treaty. The Order in Council of 1972 is itself inconsistent with the notion that the I.T.C. was by virtue of its constitution for all purposes to be treated as the agent of the member states. [Reference was made to Gramophone and Typewriter Ltd. v. [*122] Stanley [1908] 2 K.B. 89 and Smith, Stone and Knight Ltd. v. Birmingham Corporation [1939] 4 All E.R. 116.] In the case of the plaintiff brokers the terms of contract Form B exclude the existence of any undisclosed principal and are, thus, inconsistent in any event with the agency alleged by those plaintiffs: Higgins v. Senior, 8 M. & W. 834; Rederiaktiebolaget Argonaut v. Hani [1918] 2 K.B. 247; Fred Drughorn Ltd. v. Rederiaktiebolaget Transatlantic [1919] A.C. 203.

There is no code of creditor protection in United Kingdom law applicable to all domestic bodies corporate, that is to say, the outsider dealing with such a body. The provisions of the Companies Act 1985 prima facie apply only to companies formed and registered under the Companies Acts: section 735. Certain provisions of the Act of 1985 are applied to certain other bodies corporate: section 718 and also Schedule 22 and the Companies (Unregistered Companies) Regulations 1985 (S.I. 1985 No. 680); sections 73 and 74, 220 and 221 (replacing section 665 of the Act of 1985) of the Insolvency Act 1986 and Lindley, Law of Companies, 6th ed. (1902), p. 837.

Peter Leaver Q.C. for Belgium, Denmark, Greece, Ireland, Italy, Luxembourg and Zaire and Peter Leaver Q.C. and Stuart Isaacs for Finland, Norway, Sweden and Switzerland adopted the submissions of Mr. Pollock and made two additional submissions. The first submission is in relation to the construction of section 3(1)(b) of the State Immunity Act 1978. The long title of the Act states that the Act was in part to enact the European Convention on State Immunity. In Part II it enacts part of the Convention which is concerned with the recognition of judgments against the United Kingdom given in Convention states. If there is an ambiguity in the Act then one is entitled to look at the Convention to see if that clarifies the position: Salomon v. Commissioners of Customs and Excise [1967] 2 Q.B. 116, per Lord Denning M.R., at p. 141, Diplock L.J., at pp. 143-144 and Russell L.J., at p. 152. The Convention was presented to Parliament in September 1972. Article 4(1) of the Convention provides that a contracting state cannot claim immunity from the jurisdiction of the courts of another contracting state if the proceedings relate to an obligation of the state which by virtue of the contract falls to be discharged in the territory of the state of the forum. They are the very words that appear in section 3(1)(b) of the Act of 1978. The Convention was published together with the explanatory reports: those explanatory reports were travaux préparatoires. Therefore, the court is entitled to see them. If the English Act is ambiguous the court can look both at the Convention and at the travaux préparatoires if two conditions are satisfied, namely, the material is public and accessible and, secondly, it clearly and indisputably points to a definite legislative intention: Fothergill v. Monarch Airlines Ltd. [1981] A.C. 251. Looking at section 3(1)(b) in that manner the construction given to it by Mr. Pollock will be seen plainly to be right.

The second submission is this: if the defendant states were parties to the tin contracts as undisclosed principals then section 3 of the Act of 1978 does not apply because the existence of the arbitration clause in the tin contracts means that the parties have otherwise agreed in writing [*123] within the meaning of section 3(2) and that subsection provides that section 3 does not apply if the parties to the dispute are states or have otherwise agreed in writing. So what is being said there is that if there is an arbitration agreement then that is an agreement in writing to arbitrate and the general immunity from jurisdiction of the courts given by section 1 of the Act of 1978 applies. The Order in Council of 1972 contains the procedure in respect of the enforcement of arbitration awards. Section 9 of the Act of 1978 provides that where a state has agreed in writing to submit a dispute which has arisen, or may arise, to arbitration the state is not immune in respect of proceedings in the United Kingdom which relate to the arbitration. That section cannot be relied on and it is not relied on by the defendants, here, because these proceedings do not relate to an arbitration to which states were parties. If the defendant states were parties to the tin contracts, as undisclosed principals, then section 2 would bite. But the award is an award only against the I.T.C.

Patrick Talbot for Canada. The submissions of Mr. Pollock, Mr. Grabiner and Mr. Leaver are adopted.

Richard D. Jacobs for France, Federal Republic of Germany and The Netherlands. We are content to adopt the submissions which have been made by Mr. Pollock, Mr. Grabiner and Mr. Leaver.

E. Huw Davies for india. We would adopt what has been said by Mr. Pollock, Mr. Grabiner and Mr. Leaver.

Howard Page Q.C. for Indonesia. We gratefully adopt the submissions made by Mr. Pollock, Mr. Grabiner and Mr. Leaver.

Peter Irvin for the I.T.C. We are a party to the Multi-Brokers action. That is partly why we are here. The I.T.C. is entirely persuaded by the forceful submissions of Mr. Pollock, Mr. Grabiner and Mr. Leaver, especially as regards the position of the I.T.C. itself, and is content to adopt those submissions.

Kentridge Q.C. in reply. The starting point is that if there was no statute or Order in Council then the members states of the I.T.C. would plainly be liable. Secondly, if there was a prima facie liability in the absence of the Order in Council, it is a form of liability which cannot be evaded simply by agreement between the members of the association. The only statute here is the Order in Council of 1972 and the Act of 1968. That statute does not incorporate the I.T.C. It does not in terms create a new legal personality separate from its members, nor does it in terms release members from a liability which would other vise have been theirs. Consequently, it follows that if it is a fact in law that a legal person separate from its members has been created, and is created in such a way that its members are no longer liable for what would otherwise have been their debts, that can only result from a necessary implication to be derived from the Order in Council and the statutes. But the plaintiffs say that no new legal persona has been created and that the I.T.C. is the collective name for the 24 members and is not the name of a 25th person. That has been called submission A.

But, alternatively, and this has been called B, if the I.T.C. has been given some legal personality it is only a degree of legal personality which has not made it a legal person separate and distinct from its members [*124

and the members would be concurrently or, put another way, primarily liable on the debts incurred or, in the further alternative, contingently or secondarily in the sense that one would first have to pursue remedies against the collective body and against the members’ collective property before going against the members and their individual property. That is what the plaintiffs have done.

One of the strange results of conceding to the I.T.C. a full and separate legal personality would be one of two things: either it would simply be a legal person in this country, but not elsewhere, because, on the face of it, this is not extraterritorial legislation but the I.T.C. is an international organisation. The alternative consequence, just as odd, is that, although this is an international organisation, the result would be that by an Order in Council this country will have made it a legal person anywhere in the world, which could hardly have been intended by the International Organisations Act 1968 and the Order in Council of 1972. That is another reason why the legislature could not have created bodies corporate or legal persons. The more sensible interpretation of the legislation is that the legislation was intended to operate in the United Kingdom and could give the I.T.C. capacities in the United Kingdom without recognising it or making it into a separate legal person.

It is clear that the I.T.C. carries on a business. In section 45 of the Partnership Act 1890, “business” is defined as “includ[ing] every trade.” The principle on which partners are liable is not restricted to a partnership properly so-called under the Act of 1890. It has wider connotation. It is also the case where people carry on business for gain in the wider sense than profits. Wise v. Perpetual Trustee Co. Ltd. [1903] A.C. 139 distinguished not only partnerships properly so-called but associations for gain. An association for gain has a wider connotation than a partnership. In In re Arthur Average Association for British, Foreign & Colonial Ships (1875) L.R. 10 Ch. App. 542, 546-547, it was observed that gain is something obtained or acquired. “It is not limited to pecuniary gain…. And still less is it limited to commercial profits. The word used… is not ‘gains,’ but ‘gain,’ in the singular.” Commercial profits, no doubt, are gain, but there is nothing limiting gain simply to a commercial profit. It does not matter who gets the gain, whether it is the association, qua association, or the members. At the very least the I.T.C., in its trading activities is an association for gain.

If one looks at cases before the Partnership Act 1890 one sees that the basis of the liability of partners was put not so much on the basis of their intention to make a profit, but on the fact that it was an association of people who carried on business on the basis that they shared in the profits and losses: Pooley v. Driver, 5 Ch.D. 458; Cox v. Hickman (1860) 8 H.L.Cas. 268 and In re Sheffield and South Yorkshire Permanent Building Society (In Liquidation), 22 Q.B.D. 470.

Burnton Q.C. in reply. The I.T.C. is a body formed not under English law but under international law. To refer to it as an English partnership may be misleading. To talk about creating legal personality under English law when referring to the I.T.C. is as misleading as to refer to creating legal personality of the United Nations. The headquarters of the United Nations are in New York. Under American law there is [*125] the equivalent of the English International Organisations Act 1968 under which, for the purposes of American law, it may be assumed it is conferred certain capacities. The United Nations, however, is the same personality whether it be in England, France, New York or elsewhere. In International Tin Council v. Amalgamet Inc. (1988) 524 N.Y.S.2d 971 there is not a word about article 5 of the Order in Council of 1972. The reason for that is because article 5 does not create a legal personality. Article 5 relates to a personality, to a thing or an organisation, its qualities or capacities, and it relates to an organisation which, as article 4 says, is already in existence. The answer to the question “What is the nature of the I.T.C.?” just as the answer to the question, “What is the nature of the United Nations, N.A.T.O. or O.P.E.C.?” is to be found, not in the Order in Council of 1972, but under its constitution. Under the law under which it was created, because otherwise, one comes to the conclusion that there are as many different international organisations as there are statutes recognising them for various municipal laws.

The purpose of the conferment of legal personality on an organisation may be functional in the sense of enabling the organisation to effect legal acts in its own name but without thereby effecting what would otherwise be the liability of the members of the association. A view of the treaties gives support to the first view rather than the second view. There is a wide range of international organisations. Many differ as to the means by which they act. The United Nations acts principally jure imperii. Its commercial transactions are very subsidiary to its main objects. The International Whaling Commission makes recommendations to members as binding resolutions concerning whaling and it places limits on whaling. Again, it is not trading and is not using trading to achieve its objects. The I.T.C., however, does use trading in a substantial manner to achieve its objects.

Secondly, the constitutional structure of international organisations differs. Some have share capital. One can see that an international organisation with share capital could be seen to be modelled more on a limited company than on a partnership. It may be that there is not one simple rule of liability or non-liability to be applied to all organisations. The court ought to examine the constitution of the organisation to determine whether or not its members are liable. [Treaties listed in the Annexe to the judgment of Kerr L.J. were referred to.]

The court ought to decide, and have to decide, what is the relevant public international law, albeit that the authorities are not as extensive as they are in other cases. It is recognised that there is not a consensus of authority among the writers, and that there is not a long practice in the shape of judicial decisions or the like on which the court can fall back. But that does not necessarily mean that the court cannot, and should not, ascertain what public international law is in the circumstances: In re Piracy Jure Gentium [1934] A.C. 586; Chung Chi Cheung v. The King [1939] A.C. 160 and Duke of Brunswick v. King of Hanover (1844) 6 Beav. 1; (1848) 2 H.L.Cas. 1.

Sumption Q.C. in reply. In order to succeed on submission C the plaintiffs have to show a factual situation in which the I.T.C. has done acts for its members with their consent and that is all. If it can be [*126] shown, first, that they have done acts for the members and secondly, that they have done them with the consent of the members then agency is simply a legal inference from those facts. It is not even necessary that there should be a contract of agency. An agency may be entirely gratuitous: Bowstead on Agency, 15th ed., pp. 1-4. What is necessary is that there should be shown a business arrangement by which the I.T.C. carried out the members’ purposes rather than its own. It was with a view to answering that question that one should look at the particular circumstances of this case. [Reference was made to John Shaw and Sons (Salford) Ltd. v. Shaw [1935] 2 K.B. 113.]

From a reading of I.T.A.6, which the court should look at, three points emerge. First, the I.T.C. members are its directing mind and its will. If one establishes that a company or corporation or any similar body may be the agent of its members and that that agency may arise from the terms of its constitution, there is no reason at all that those propositions ought, at any rate, to be relatively uncontroversial. The question whether the constitution does have that result is simply a matter of reading it. Secondly, the question which has to be answered is whether the members are organs of the I.T.C. owing duties to it as opposed to simply to themselves and their own interests or to each other. Thirdly, it is necessary to consider whether the particular purposes for which the I.T.C. exists and for which it trades are its own purposes or the members’ purposes. In law the purpose for which a company trades is hardly ever any other purpose than its own. It does not trade for its shareholders’ purposes although indirectly they benefit. But that is not the position of the I.T.C. What the I.T.C. does is not designed to further its own purposes. It is designed to further its members’ purposes and it is described in the agreement as performing simply functions, and it is suggested mechanical functions. Each member is liable as principal irrespective of the extent of his personal participation in the deliberations of the Council, because he has agreed that what the majority approves shall stand as the decision of the whole Council: Cockerell v. Aucompte (1857) 2 C.B.(N.S.) 440.

How does all that affect the State Immunity Act 1978? An undisclosed principal enters into the transaction for the reason made clear in Higgins v. Senior (1841) 8 M. & W. 834, that it is the principal’s act. Contractually it is the agent’s act but in fact it is the principal’s. It is on the contract which he has caused to be made by his agent (that I.T.A.6 is caused to be made) that the undisclosed principal is liable. It is quite absurd to suggest that if an undisclosed principal intervenes on or is held liable on his agent’s contract, it is not because he has entered into that transaction. It must be plain that even if the states are not within section 3(1)(a) they are evidently within section 3(1)(b), a provision which is not limited by reference to the words “entered into by the state.”

Littman Q.C. replied.

Pollock Q.C. replied on new cases and referred to Smith v. Anderson (1880) 15 Ch.D. 247; In re Padstow Total Loss and Collision Assurance Association (1882) 20 Ch.D. 137; West Rand Central Gold Mining Co. Ltd. v. The King [1905] 2 K.B. 391; Reg. v. Keyn (1876) Ex.D. 63 and The Philippine Admiral [1977] A.C. 373. [*127]

Counsel made the following submissions on the E.E.C.’s respondent’s notice: –

Kentridge Q.C. and Hirst for Rayner. The basic issue is that the E.E.C. claims a form of sovereign immunity on the same basis as the foreign sovereign states. The provisions of the State Immunity Act 1978 do not assist the states. The E.E.C. wishes to rely on state immunity on a sort of common law or international law basis. It is common cause that the E.E.C. is not a state, but the suggestion is apparently that because of its nature and functions the court should accept that it should have the same immunities as a foreign state. However, if this is a matter which is now governed by statute in this country the E.E.C. is not within the Act of 1978. It was specifically dealt with in the International Organisations Act 1968, section 3. Section 1(2) and (3) provides for Orders in Council to be made. No order was ever made. Section 3 of the Act of 1968 was repealed by the European Communities Act 1972, section 4, Schedule 3, Part IV. The Act of 1972 itself enacted the E.E.C. Treaty as part of English law.

Under the Protocol on the Privileges and Immunities of the European Communities 1965 there have been grants to the officials and premises of the E.E.C. of express diplomatic immunities: articles 2 and 10. So those are the only privileges accorded. The equivalent of state immunity is not given to the E.E.C. Furthermore, the question of jurisdiction over the E.E.C. is specifically dealt with in the E.E.C. Treaty: articles 178, 215 and 218. Article 218 has been repealed or replaced by article 28 of the Merger Treaty.

Under article 178 the European Court of Justice shall have jurisdiction in disputes relating to the compensation for non-contractual damages. Article 183 provides that save where jurisdiction is conferred on the European Court, disputes to which the Community is a party shall not on that ground be excluded from the jurisdiction of the courts or tribunals of the member states. Here, “on that ground” means “on the ground that the Community is a party.” That is to say that the fact that the defendant in an action is the Community does not exclude the matter from the jurisdiction of the courts of a member state. That is the complete opposite of having immunity and is quite inconsistent with any general immunity. See also article 181.

In Empresa Exportadora de Azucar v. Industria Asucarera Nacional S.A. (The Playa Larga and Marble Islands) [1983] 2 Lloyd’s Rep. 171, 193, Ackner L.J. said that if counsel had relied on sovereign immunity he would have been met with one of the basic principles enunciated in Victory Transport Inc. v. Comisaria General de Abastecimientos y Transportes (1964) 336 F.2d 354 that sovereign immunity is a derogation from the normal exercise of jurisdiction by the courts and should be accorded only in clear cases. That principle was cited with approval in I Congreso del Partido [1983] 1 A.C. 244.

Bernard Eder for the E.E.C. Generally all the submissions made by Mr. Pollock are adopted. If the I.T.C. is no more than a name and the contracts made by it are contracts of the members then the E.E.C. has no more immunity than the states. No question of immunity arises. The question of immunity does arise if the I.T.C. is analogous to a Scottish [*128] partnership. On Mr. Pollock’s submissions there is no parallel liability on the states; equally, no liability attaches to the E.E.C. On the issue of the I.T.C. acting as an agent of the member states the submissions of Mr. Pollock and Mr. Grabiner are adopted.

The question is how should the matter of immunity be resolved. The position is governed by the decision in I Congreso del Partido [1978] Q.B. 500, especially per Robert Goff J., at pp. 532, 535. In other words the question has to be answered under international law which is incorporated in English law and the act complained of took place in connection with a governmental act even if it was taken in connection with a commercial transaction. That arises quite apart from the State Immunity Act 1978. The E.E.C. clearly has an international status. It has been created by the E.E.C. Treaty and under article 210 of the Treaty it has a legal personality: N.V. Algemene Transport- en Expeditie Onderneming van Gend en Loos v. Nederlandse Administratie der Belastingen (Case 26/62) [1963] E.C.R. 1 and Commission of the European Communities v. Council of the European Communities (Case 22/70) [1971] E.C.R. 263. The E.E.C. became a member of the I.T.C. under the express terms of I.T.A.6 and is a co-member with the other sovereign states, including the ten E.E.C. member states. It also has a constitutional position within the European Communities Act 1972. Mr. Pollock’s arguments on non-justiciability are adopted.

The European Court of Justice has been granted jurisdiction over various disputes by article 183 of the E.E.C. Treaty. Where, therefore, the jurisdiction has been given to the European Court then that court has an exclusive jurisdiction. The words “on the grounds” are concerned with and show, although not very clearly, that where the European Court has an exclusive jurisdiction courts of the member states have none. That is as a matter of Community law now. Those words simply mean that the mere fact that proceedings are brought against the E.E.C. and the mere fact that the European Court may not have jurisdiction does not necessarily decide whether or not the member states have a jurisdiction according to their own law. There is nothing in article 183 that tells whether in a case where the E.E.C. is acting externally on an international plane alongside other third party states and the member states themselves, the English court, as a matter of English law, has jurisdiction or not. The E.E.C. acts as a matter of both Community law and English constitutional law, both internally and externally. It acts externally on the international plane by entering into treaties. It acts internally by, for example, levying duties and issuing directives and regulations against individual member states and individuals within those states. It, therefore, constitutionally stands between the defendant states on the one hand, who act wholly externally, and the Department of Trade and Industry, which is an arm of the United Kingdom Government and in respect of which there can be no immunity.

The instant case raises, for the first time, the question concerning the nature of an entity which functions both internally and externally. This situation bears similarity with Duke of Brunswick v. King of Hanover, 2 H.L.Cas. 1, which shows that from very early on in English law immunity has not depended on personality, the personality of the [*129] individual. It has depended on the manner in which that individual is acting. For some purposes he may be acting in a sovereign way, for other purposes he will not. When he is acting in a sovereign way then immunity will be granted: Trendtex Trading Corporation v. Central Bank of Nigeria [1977] Q.B. 529 and Buck v. Attorney-General [1965] Ch. 745.

Article 28 of the Merger Treaty 1965 establishes a single Council and a single Commission of the European Communities. The Communities enjoy in the territories of member states such privileges and immunities as are necessary for the performance of their tasks. Article 1 deals with premises and buildings of the Community and provides that they shall be inviolable. Under article 2 the archives are inviolable. Under article 3 the Communities, their assets, revenues and other property shall be exempt from all direct taxes. Article 4 deals with exemptions from customs duties and the like. Articles 6, 7, 8, 10, 12, 17 and 18 provide further facilities.

It is absolutely right that, although article 12 provides for immunity from legal proceedings in respect of acts performed by officials and other servants of the E.E.C. in their official capacity, there is nothing in the Protocol itself dealing with the immunity of the E.E.C. itself, i.e. immunity from legal proceedings. This is not fatal for two reasons. First in 1965 when the Merger Treaty and the Protocol were entered into nobody thought that there was any need to discuss such an immunity in the context of activities of entering into treaties or whatever. Second, one of the questions that was considered by English courts in the last century was whether the foreign prince had immunity where the prince’s ambassadors were given express immunity. The courts dealt with it as a matter of principle. If the ambassador has an immunity, a fortiori the prince must have it. That is exactly the same with regard to the Treaty and the Protocol.

Section 3 of the International Organisations Act 1968, dealing with the Commission of the European Communities was repealed by the European Communities Act 1972, Schedule 3. According to the preamble of the State Immunities Act 1978 that Act was enacted to make new provision, inter alia, with respect to the immunities and privileges of heads of state and for connected purposes. Section 14(1) defines a “separate entity” as applying to entities other than states and the E.E.C. does not fall within that definition. But the section shows that immunity does also apply to entities other than states.

In the 1970s there was an area of uncertainty as to when the Commission was to act and when the Council was to act. When the Commission acts in a certain manner then the member states do not have a right to act individually or collectively in the conduct of external affairs. Only the Commission has the capacity to act: Commission of the European Communities v. Council of the European Communities (Case 22/70) [1971] E.C.R. 263; Pabst & Richarz K.G. v. Hauptzollamt Oldenburg (Case 17/81) [1982] E.C.R. 1331 and In re International Agreement on Natural Rubber (Opinion 1/78) [1979] E.C.R. 2871.

The conclusions to be drawn as to the nature of the E.E.C. are (i) that the E.E.C. has independent legal personality and, by virtue of that personality, has a capacity to act on the international plane under [*130] international law in its own name and in its own right: (ii) that the international legal personality of the Community is distinct from the legal personalities of the member states. In this sense, the Community has an autonomous personality, analogous to the autonomous personalities of the member states acting internationally; (iii) that the rights and powers of the Community to act as an international personality stem from a limitation of sovereignty or a transfer of powers from the states to the Community; (iv) that acting internationally, in its own name and rights, the Community is carrying out typical sovereign functions, traditionally carried on by the states on the international plane, including participation in treaties and participation in the day to day implementation of treaties.

Schooner Exchange v. McFaddon (1812) 7 Cranch (U.S.) 116 shows that when considering questions of immunity one may be treading an unbeaten path to a certain extent and the cases develop by looking at the principles adopted in the past and applying them to the new situation which has arisen in the particular facts and those circumstances. One of the important factors in deciding whether or not to grant sovereign immunity is that the world is composed of distinct sovereignties, possessing equal right and equal independence. The Parlement Belge (1880) 5 P.D. 197 was concerned with absolute immunity. For a period of years cases proceeded on the basis of an absolute immunity. They became concerned with personality because once it could be established that the relevant defendant was a foreign sovereign that determined everything. See also Mighell v. Sultan of Johore [1894] 1 Q.B. 149; The Odessa [1915] P. 52; Duff Development Co. Ltd. v. Kelantan Government [1924] A.C. 797 and Rahimtoola v. Nizam of Hyderabad [1958] A.C. 379.

The notion of the equality and independence of states, which obviously applies by analogy in the case of the E.E.C. would render it intolerable for one member state to exercise its sovereign power (in the form of the jurisdiction of its courts) over the whole Community when the Community is acting internationally in a sovereign capacity on behalf of the Community as a whole.

Kentridge Q.C. interpolating. The E.E.C. is not unique in exercising functions which traditionally were regarded as the functions of sovereign states alone. For example, other organisations which exercise such functions would be the United Nations and N.A.T.O. But there has never been any suggestion that either the United Nations or N.A.T.O. have some common law claim to sovereign immunity. They are dealt with in this country under the Act of 1968. Nowhere in its founding document or in its resolutions or statements does the E.E.C. ever appear to assert a claim to the form of quasi-sovereignty which is being canvassed here. Nor is there evidence that any state, even a member state, has recognised it as a fellow sovereign.

A claim to immunity from the jurisdiction of English courts in an action which would otherwise be within this jurisdiction can only be made good in two ways. First, by reference to a statutory provision, as in the present case to the Act of 1968 or similar statutes. No such statute has been relied on. On the contrary, the E.E.C. Treaty and the [*131] Protocol, which are now part of the United Kingdom statute law, exclude any such possibility of immunity. Secondly, by proof of the existence of a rule of immunity in international law which is part of English law. In so far as non-statutory immunity is concerned the second basis can be the only basis for a claim to immunity.

What must be shown to establish a common law immunity is, first, it must be shown to be part of the law of nations, of international law; secondly, it must be based on comity and reciprocity between nations and thirdly, the claim must be made by a person or state recognised as sufficient sovereign by the United Kingdom. That recognition is a matter for the executive. In modern times it is evidenced by the executive’s certificate and not by some independent judicial consideration of whether the entity has sovereign status. The starting point is always the recognition of sovereign status. If there is no sovereign status claimed the person claiming the immunity does not pass the first hurdle. [Reference was made to Compania Naviera Vascongado v. S.S. Cristina [1938] A.C. 485.]

Burnton Q.C., Mendelson and Barnes for the banks. Section 21 of the State Immunity Act 1978 provides for a certificate by the Secretary of State to be conclusive evidence on the question whether any country is a state for the purposes of the Act. The E.E.C. is not foreign and is not a state. Duke of Brunswick v. King of Hanover, 2 H.L.Cas. 1, does not deal with that point. The E.E.C.’s courts and its laws are English courts and laws but it has no territory. The E.E.C. Treaty does not mention its jurisdiction. Thus it is not a question of international law.

The E.E.C. is not a sovereign state. Therefore the proposition in Standard Chartered Bank v. International Tin Council [1987] 1 W.L.R. 641 that one sovereign would not insult the dignity or undermine the independence of another by seeking to assert jurisdiction over him, has no application. See also Schooner Exchange v. McFaddon (1812) 7 Cranch (U.S.) 116. There are no general privileges and immunities under section 1(6) of the Act of 1968. Orders in Council would be so framed as to grant privileges and immunities as are required to conferred in accordance with agreements. Section 4 is also inconsistent with any general rule conferring immunities and privileges. Under that section specific provisions were made with regard to the E.E.C. because at that time the United Kingdom was not a member. That matter was later covered by the European Communities Act 1972. The E.E.C. Treaty itself specifically provides for certain limited immunities: article 28 of the Merger Treaty, which replaces article 218 of the E.E.C. Treaty. The E.E.C.’s claim in the instant case is inconsistent with that article.

It makes laws which are part of the law of this country. Whatever the position of the E.E.C. might be in the courts of non-member states it is “at home” in the United Kingdom: article 211 of the E.E.C. Treaty. Furthermore, the claim to immunity is inconsistent with the E.E.C. Treaty which is part of English law and which specifically provides for actions to be brought against the Community in national courts and in the European Court.

The jurisdictional provisions of the E.E.C. Treaty are contained in articles 178, 183 and 215. The scheme of the Treaty is to provide for [*132] legal recourse against the Community in all matters. The only question in any case is whether the action should be brought in national courts or the European Court. In respect of the contractual claims the E.E.C. stands on the same footing as any other defendant before an English court.

The E.E.C. is apparently seeking to avoid the effect of these provisions by claiming immunity only where the claims involve national courts considering the rights and obligations that may exist at the international level under I.T.A.6 between the E.E.C., its members and the sovereign states who are not its members. [Reference was made to In re International Agreement on Natural Rubber (Opinion 1/78) [1979] E.C.R. 2871.]

Field Q.C. and Richard Plender for the brokers. The arguments of Mr. Kentridge and Mr. Burnton are adopted. Sovereign immunity is an immunity ratione personae not ratione materiae. It is a pre-condition for the application of the doctrine that the party claiming it is a state: I Congreso del Partido [1983] 1 A.C. 244, 262, per Lord Wilberforce. See also Trendtex Trading Corporation v. Central Bank of Nigeria [1977] Q.B. 529. The E.E.C. is not a state. It has no territory and no citizens. It is simply an international body established by treaty with a limited executive jurisdiction conferred on it by the constituent states. The recognition of “subject matter” immunity in favour of a non-state would be a wholly novel departure for the common law. Such an immunity can only be derived from international law and there is no material before the court evidencing such an international law rule. There is not even any evidence that some other E.E.C. members apply such a doctrine. It is shown by Buttes Gas and Oil Co. v. Hammer (No. 3) [1982] A.C. 888 that the common law already has rules of treaty non-justiciability and foreign act of state non-justiciability. There is no need for a functional doctrine of sovereign immunity in favour of non-state.

The grant of sovereign immunity to international organisations is exclusively within the province of Parliament: Standard Chartered Bank v. International Tin Council [1987] 1 W.L.R. 641. This is a fortiori in the case of the E.E.C. where Parliament has incorporated into English law the E.E.C. Treaty: see especially articles 181, 183, 211 and 215; the Merger Treaty: see article 28 and the Protocol on the Privileges and Immunities of the European Communities. Article 183 of the E.E.C. Treaty prevents an English court from declining jurisdiction over the E.E.C. where the dispute is not one over which the European Court has exclusive jurisdiction. The words “on that ground” in the article can only mean the ground that “the Community is a party.” They cannot mean “save where jurisdiction is conferred on the court by this treaty.” The article only means that a court of a member state shall not exclude a dispute to which the E.E.C. is a party from its jurisdiction on any ground which flows out of the fact that the E.E.C. is a party.

There are provisions in the Treaty for the E.E.C., through the Commission, to act externally on the international plane: articles 113, 114, 228 (I.T.A.6 is included in that article) and 229. It was plainly contemplated from the outset that the Commission would achieve its objects by acts and agreements externally.

Eder replied.

Cur. adv. vult. [*133]

On 27 April, the court handed down the judgments in these proceedings (“the direct actions”) and the judgments in In re International Tin Council, post, p. 309 (“the winding up appeal”); Maclaine Watson & Co. Ltd. v. International Tin Council, post, p. 253 (“the receivership appeal”); and Maclaine Watson & Co. Ltd. v. International Tin Council (No. 2), post, p. 286 (“the disclosure of assets appeal”). The court also handed down the following statement:

GENERAL INTRODUCTION

by the court

KERR L.J.

Background

In October 1985 the International Tin Council (“I.T.C.”) announced that it was unable to meet its liabilities and collapsed with debts running into hundreds of millions of pounds. The 17 plaintiffs in the actions from which the present appeals arise are a number of large creditors. Eleven are ring-dealing members – known as brokers – of the London Metal Exchange and six are banks. The brokers had entered into contracts with the I.T.C. for the sale or purchase of tin on the standard Form B of the London Metal Exchange. The I.T.C. defaulted on these contracts and the brokers claim some £120 million on account of their breach. The banks had made loans to the I.T.C. totalling some £30 million. None of them has been repaid. It is said that these and other transactions were concluded when it must have been obvious to those in control of the I.T.C. that there were no longer any funds available to meet the resulting liabilities. In other contexts these allegations would be referred to as fraudulent trading on a massive scale. But the court has not seen any evidence on behalf of the defendants dealing with the events which in fact occurred, since the defendants have successfully maintained, on various grounds, that the proceedings are not maintainable. Accordingly, these are not issues with which the present appeals are concerned. Nor are we concerned with any individual transactions or the resulting figures. The claims of the creditors in the present actions appear to be merely a sample from the bulk. But the inference of gross mismanagement, to put it no higher, is overwhelming.

The I.T.C. is an international organisation created and continued in force by treaties known as International Tin Agreements (“I.T.A.”). The first, I.T.A.1, was concluded in 1954. The current one, I.T.A.6, was concluded in 1982. The headquarters of the I.T.C. have been in London throughout. The parties to the treaties and members of the I.T.C. are sovereign states which have changed to some extent from time to time, and the European Economic Community (“E.E.C.”) has become a member of the I.T.C. by becoming a party to I.T.A.6. The members are divided into producers and consumers of tin. The council is composed of the members, and the decisions are taken by a voting system involving distributed majorities between producers and consumers and weighted votes. The objective is to regulate the world production [*134] and consumption of tin in an orderly manner, if necessary (as it was after 1982) by the imposition of export controls, and to maintain a measure of stability in the world price of tin. For this purpose the members contribute to a large “buffer stock” in cash or tin for sales or purchases designed to maintain the world price within a bracket of floor and ceiling figures determined by the council from time to time. In addition the council has power to borrow to finance the buffer stock operations with the authority of the members.

In the traditional terms of international law the objectives of the members of the I.T.C. fall to be regarded as jure imperii. But the attainment of its objectives also necessarily involved trading – on the London Metal Exchange and the Tin Market in Penang – and loan transactions on a massive scale which would in themselves clearly be regarded as operations conducted jure gestionis. And, unlike the practice of states in relation to other treaties creating international organisations whose objectives involve systematic trading, neither I.T.A.6 nor any of its predecessors contain any exclusion or limitation of the liability of the members for the unpaid debts of the organisation, let alone any provision for warning third parties dealing with the organisation that the members would not stand behind it. No such warnings appear to have been given at any time.

International organisations have proliferated since the war, and similar ones to the I.T.C. exist for other commodities, such as sugar, cocoa, coffee and wheat, whose headquarters are also in the United Kingdom. But the scale of operations in the present case is staggering, and the outcome without precedent. On the evidence before us the turnover of the I.T.C. in the year to 30 June 1984 was of the order of £3 billion, equivalent to more than 300,000 tonnes of tin, about twice as much as the I.T.C.’s estimate for the total world consumption for 1983. No figures have so far been published for 1984-85. But it seems clear that production levels thereafter exceeded demand to such an extent that the price of tin could only be maintained at or just above the floor price in force, which remained unaltered, by means of vast purchases by the buffer stock manager (“B.S.M.”) in order to support the price. This appears to have been a hopeless quest despite being fuelled by large scale borrowings. Trading appears only to have been financed by a provision of capital of some 5 per cent. of sales. In the end, on 24 October 1985, the B.S.M. announced that the I.T.C. was unable to meet its obligations. It has not traded since. Its members have evidently left it to its fate, at any rate so far as these proceedings are concerned.

The financial collapse of the I.T.C. is an unprecedented event on the international scene. Other minor international organisations have run into financial difficulties. But none has been abandoned by its members, let alone with emphatic disclaimers of liability to the creditors and failure to put the organisation in funds to meet its undisputed debts. It is said that the present situation is under consideration among the members. But nothing has so far been paid to the creditors, and all attempts at recovery have been strenuously resisted. These have ranged from direct claims against the members to applications for the winding up of the I.T.C., for the appointment of a receiver of the I.T.C., and [*135] for disclosure of the nature, value and location of the I.T.C.’s assets. Only the last of these has so far succeeded; and the outcome of all of them is now under appeal to this court.

The issues in outline

The legal problems involved in these proceedings are unprecedented, not only in our courts but evidently anywhere. It would be inappropriate to consider them solely by reference to English law in isolation. They concern all international organisations operating in similar circumstances and require analysis on the plane of public international law and of the relationship between international law and the domestic law of this country.

Turning to the latter, in pursuance of the I.T.A. treaties and a “Headquarters Agreement” between the I.T.C. and the United Kingdom concluded in 1972, the I.T.C. was granted “the legal capacities of a body corporate” in this country by an Order in Council made in 1972 which continued in force in relation to I.T.A.6. But the I.T.C. was not incorporated. Its status remained formally unchanged, and it was common ground that in international law it had “legal personality.” The conferment of “the legal capacities of a body corporate” is a time honoured phrase which has been in use for more than 30 years in our domestic legislation in relation to the facilities granted in this country to international organisations created by treaty. But its meaning and effect have never been considered. In the present situation it raises acute problems about the status of the I.T.C. and the claims made directly against its members. Are they under any liability, either concurrently with the I.T.C. or secondarily in the event that the I.T.C. defaults on its obligations? Or can they claim to be in the same position as the shareholders of a limited liability company because the I.T.C. has been given the capacity to contract in its own name and did so? Alternatively, can the members be held liable as undisclosed principals on whose behalf the I.T.C. contracted as agent?

Then there are other problems. The I.T.C. was granted immunities from suit and legal process except (so far as relevant) in respect of the enforcement of arbitration awards. The London Metal Exchange contracts contained arbitration clauses and resulted in large awards in favour of the broker plaintiffs against the I.T.C. But only one of the bank loans was made subject to a provision for arbitration, so that the failure to repay the others can only result in judgments against the I.T.C. It now claims immunity in respect of them, and it resists the application for a winding up order on the ground that this would be inappropriate in relation to an international organisation and that such an order would in any event not fall within the exception of enforcement of an arbitration award.

Next, there is the doctrine of the “non-justiciability” in our courts of rights and obligations arising under treaties – such as I.T.A.1 to 6 – which have not been incorporated into our domestic law. The scope and effect of this doctine is uncertain and poses many problems in the present context. In particular it is invoked as a defence to the receivership application on the ground that a receiver, standing in [*136] the shoes of the I.T.C., would be unable to enforce in our courts whatever claims (if any) the I.T.C. might have against its members, since these would require the interpretation and application of I.T.A.6.

Finally, the claims against the members other than the United Kingdom raise problems of sovereign immunity. This doctrine was regarded as absolute when the present technique in our domestic legislation concerning international organisations originated after the last war, and it was still so regarded in 1972, when the relevant Order in Council was made. But the State Immunity Act 1978 created a number of potentially relevant exceptions, in particular in the context of commercial transactions. Are these exceptions applicable to the various ways in which the plaintiffs’ claims are presented, if they can otherwise be maintained? And there is also a claim by the E.E.C., as an appendix to this aspect, that it is equally entitled to sovereign immunity, at any rate in the courts of its member states. This issue had been adjourned below and was argued for the first time in this court.

The proceedings before us occupied some 34 days including the issue concerning the E.E.C., in comparison with 29 days at first instance. The parties were represented by about 30 counsel and 15 firms of solicitors. We were referred to over 200 authorities, statutes and jurisprudential writings, ranging from Blackstone’s Commentaries to the present day publications of international lawyers. Particularly in the direct actions the arguments have been presented far more widely than below. In the judgments which follow we cannot deal with all of the submissions which have been addressed to us. We confine ourselves to those which we consider to be of major relevance for and against our conclusions on the issues which need to be decided, in a forensic scenario which appears to be wholly novel. In this connection we found an echo at the beginning of the famous judgment of Marshall C.J. in Schooner Exchange v. McFaddon (1812) 7 Cranch (U.S.) 116, 136, to which we were referred amidst so much other material:

“In exploring an unbeaten path, with few, if any, aids from precedents or written law, the court has found it necessary to rely much on general principles, and on a train of reasoning founded on cases in some degree analogous to this.”

The Parties

The 17 plaintiffs have already been referred to as 11 brokers and six banks. We only mention some of them by name hereafter, mainly for the purpose of the title of the relevant actions. Their names will appear in the orders made in the light of our judgments. But the judgments themselves will not be concerned with the procedural details of the multifarious orders made at first instance.

The defendants to the proceedings, apart from the I.T.C. itself, are its present members as signatories of I.T.A.6. The United States of America and some others withdrew upon the expiry of I.T.A.5 in 1982. Beginning with the host country, they are as follows in the direct actions brought against all the members: United Kingdom, Australia, Belgium Canada, Denmark, the European Economic Community (E.E.C.), Finland, France, Federal Republic of Germany, Greece, India, Indonesia, [*137] Ireland, Italy, Japan, Luxembourg, Malaysia, Netherlands, Nigeria, Norway, Sweden, Switzerland, Thailand, Zaire. The writs against the foreign states were all served on them outside the jurisdiction pursuant to leave given ex parte under R.S.C., Ord. 11. The states are now challenging the jurisdiction to serve them. In the case of the claims against the United Kingdom it was agreed that the proceedings should be brought against the Department of Trade and Industry pursuant to section 17 of the Crown Proceedings Act 1947. In the case of the E.E.C. all but the first proceedings were brought against the European Commission pursuant to articles 210 and 211 of the E.E.C. Treaty and the European Communities Act 1972, and in these actions the Commission was also served within the jurisdiction. For convenience we will nevertheless often refer to the defendants (apart from the I.T.C.) as “the member states.”

The proceedings under appeal

There are before us some 30 appeals, cross-appeals and applications. But at this stage we are not concerned with the details. Effectively there are appeals against five judgments given in relation to a number of combined actions and other proceedings. The defendants’ response to all of them was that the claims should be struck out, either on the ground that they disclosed no reasonable cause of action, etc., or that the defendants were entitled to sovereign immunity, or both. These pleas succeeded in all cases save in regard to an application that the I.T.C. should disclose the nature, value and location of its assets. With that exception all of the plaintiffs’ claims have been struck out. But, as already mentioned, every party has appealed or cross-appealed against every order of substance made against it, including one aspect of an order for costs in favour of the member states with which they were dissatisfied.

Of the five judgments under appeal two dealt with overlapping issues raised in four actions. These were called the “direct actions” because all involved claims made directly against members of the I.T.C. Three of them were brought against all the members (including in one case the I.T.C. itself, but that is of no consequence) and were struck out in a judgment delivered by Staughton J. The fourth was brought against the department alone and was struck out by Millett J. Although these two judgments in part raise differing issues, both in relation to the plaintiffs and the defendants, the principal issues – as to the nature of the I.T.C. and the possible liability of its members on contracts made in the name of the I.T.C. – are common to both. It is therefore convenient to combine the two resulting appeals into one judgment.

The remaining three judgments were all delivered by Millett J., and in each case the I.T.C. was the sole defendant. The resulting appeals are conveniently described as the “winding up appeal”, the “receivership appeal” and the “disclosure of assets appeal.” The plaintiffs are appealing in the first two and the I.T.C. in the latter.

It follows that the convenient course is to deal with all these appeals by means of four judgments given in that order, which was also the order in which we heard the appeals. The order below was different and [*138] appears from the dates of the judgments mentioned hereafter. We will deal with the E.E.C.’s claim for sovereign immunity at the end of our judgments in the direct action.

Against this background we now turn to our judgments, which must inevitably be lengthy. But before we do so we would like to express our gratitude to all concerned – in particular the solicitors – in giving us so much help with the logistic arrangements for this unusual series of appeals and for the most helpful way in which the documentation – contained in some 80 ring files – was managed and indexed. We must also record our appreciation of the lucidity of the submissions of counsel and the invaluable assistance provided by their “skeleton arguments” and additional summaries of their submissions at various stages of this unusual series of appeals.

Finally, we would like to draw attention to the concluding general remarks in the judgment of the court in the disclosure of assets appeal concerning the deplorable history which has brought the I.T.C. and its unfortunate creditors to the present juncture.

27 April. The following judgments were handed down in the direct action appeals.

INDEX

Kerr L.J.                                                     Page

      Introduction                                            139E

      The main issues                                         141F

      History of international organisations                  143C

      History of the I.T.C.                                   146E

      The Sixth International Tin Agreement (I.T.A.6)         151H

      The Headquarters Agreement                              160F

      The 1972 Order in Council                               161G

      Justiciability                                          163D

      Submission A                                            167C

      Submission B                                            173C

       Secondary liability in English law                     175H

       Secondary liability via the route of international law 177F

      Submission C: agency                                    185H

      State immunity                                          191H

      E.E.C. claim to sovereign immunity                      196G

      Conclusion                                              203C

Nourse L.J.

     Article 4 of the Order of 1972                           205H

 [*139]

     The I.T.C. and its members in international law          206C

     English law and international law                        207B

     The international jurists                                210B

     The Westland Helicopters award                           212F

     The limited liability treaties                           215B

     Application of international law                         215E

     I.T.A.6                                                  216B

     The Headquarters Agreement                               217G

     International law – conclusions                          218A

     Article 5 of the Order of 1972                           220G

     Submissions A, B and C                                   222A

     Justiciability                                           222D

     Immunity                                                 222E

     Conclusion                                               223D

Ralph Gibson L.J.

     Submission A: The I.T.C. as a partnership or unincorporated

                   association of states                      224C

     The Act of 1968 and the Order of 1972                    224H

     The legislative history of the formula                   229C

     Submission B: Secondary and contingent liability         235C

     Mr. Burnton’s alternative: I.T.A.6 and

                   international law                          238D

     Submission C: Agency                                     249B

     State immunity                                           252A

     E.E.C. immunity                                          252G

KERR L.J.

Introduction

These appeals are in the four “direct actions” brought by eleven brokers and six banks against the 24 members of the International Tin Council (“the I.T.C.”). The appeals arise from two judgments. On 24 June 1987 Staughton J. struck out the first three actions in a judgment delivered in the Commercial Court: see [1987] B.C.L.C. 667. Then, on 29 July 1987, Millett J. struck out the fourth action in a judgment in the Chancery Division: see [1987] B.C.L.C. 707. The present judgment deals with the plaintiffs’ appeals against both judgments. The background to this and the other appeals in this series has been set out in the General Introduction by the court: ante p. 133B.

The main action before Staughton J. was the Rayner action which also covers the greatest part of the issues common to all four appeals. The Amalgamated Metal action was known as the Multi-Brokers action since the plaintiffs are nine brokers who had entered into tin contracts with the I.T.C. in the same London Metal Exchange form as Rayner. The Arbuthnot Latham action was one of the Six Banks actions involving claims on banking loans made to the I.T.C. As regards Maclaine Watson, they are equally brokers suing on London Metal Exchange tin contracts, but they issued their writ in the Chancery Division and sued the Department of Trade and Industry alone. [*140]

The primary issue in all the direct actions is whether the members of the I.T.C. can in some way be held liable for the debts of the I.T.C. in respect of contracts made by the plaintiffs with the I.T.C. on which the I.T.C. defaulted. This issue involves a number of alternative allegations of liability advanced by the plaintiffs and applications to strike out the actions on various grounds by all the defendants. Before turning to the issues it is necessary to refer briefly to a number of differing aspects of these various proceedings.

First, as mentioned above, the Multi-Broker and Six Banks actions were joined to the Rayner action, and the relevant issues in all of them were dealt with together. But Staughton J. permitted the joinder of the two later actions only on the basis that no issues were to be raised additional to those raised in the Rayner action. There was some argument about the scope and effect of this order. The question arose because Mr. Sumption for the plaintiffs in the Multi-Broker action sought to rely on an affidavit sworn in that action on behalf of the Department of Trade and Industry, which he claimed contained an admission that the I.T.C. was acting throughout as the agent of its members. On behalf of the member states Mr. Pollock objected to this allegation because it did not arise in the Rayner action and was accordingly inadmissible, at any rate at this stage. Since in my view nothing in the nature of an admission was made in any event, I put this issue on one side.

Secondly, there are certain aspects of the direct actions which are not before us on these appeals and not at present the subject of the members’ striking out applications. These fall into two classes. First, the plaintiffs in the Multi-Broker and Six Banks actions are also suing the member states in tort, and Maclaine Watson is also suing the European Economic Community (“the E.E.C.”) in tort in the European Court pursuant to articles 178 and 215 of the E.E.C. Treaty. Secondly, an allegation that the I.T.C. concluded the relevant contracts as agent on behalf of its members as undisclosed principals is presented in two different ways in the Multi-Broker and the Six Banks actions, but only in the first of these ways in the Rayner action. These were referred to respectively as “constitutional” agency and “factual” agency. The former is based solely on the constitution of the I.T.C. as evidenced by the Sixth International Tin Agreement (“I.T.A.6”). The latter alleges that some or all of the broker contracts were made with the express authority of some or all of the members. It was decided by Staughton J. and affirmed in this court that the allegations laid in tort and the factual allegations of agency should not form part of these hearings, since they formed no part of the Rayner action. We understand that further applications by the member states to strike out the remaining allegations in the direct actions which are not presently before us are due to be heard in due course. It follows that all references to the plaintiffs’ claims are to their claims in contract, and all allegations of agency are based upon I.T.A.6 exclusively.

Finally, there is an important difference between the claims of all the brokers on the one hand and of the banks on the other. As explained hereafter, the I.T.C. enjoys immunity from “suit and legal process,” but [*141] not in respect of the enforcement of arbitration awards. The brokers’ contracts all contained arbitration clauses, and all the brokers obtained awards against the I.T.C. which they are now seeking to enforce. Maclaine Watson also obtained leave to enter judgment in terms of the award under section 26 of the Arbitration Act 1950, but nothing turns on this. However, the plaintiff banks, with the exception of one of them – Kleinwort Benson – had no arbitration clauses in the loan contracts on which they are suing. They are accordingly in no position to overcome the I.T.C.’s immunity by obtaining arbitration awards. As against this, the London Metal Exchange contracts contain provisions which are alleged by the member states to exclude any possibility of their being sued as undisclosed principals, whereas there is no similar provision in the bank loans. These factors led to certain differences in the approach adopted by the brokers and the banks. The counsel whom we heard for the brokers were Mr. Kentridge for Rayner, Mr. Sumption for the Multi-Brokers, Mr. Littman and Mr. Aikens for Maclaine Watson; and Mr. Burnton for the banks.

On the side of the defendants we mainly heard Mr. Pollock on behalf of the member states and Mr. Grabiner on behalf of the Department of Trade and Industry. They were allies throughout, but Mr. Grabiner was not concerned with the defence of sovereign immunity. This defence is of course not open to the department. It follows that the department’s claims to strike out the actions were based solely on R.S.C., Ord. 18, r. 19 as disclosing no reasonable cause of action whereas the parallel contention of the member states is formally based on sovereign immunity, but in effect equally upon the absence of any reasonable cause of action. The same position applies effectively to the E.E.C. They advanced a somewhat surprising claim for sovereign immunity at common law, and we heard Mr. Eder on this on a separate occasion.

The main issues

The plaintiffs advanced three alternative submissions which were called A, B and C. They can be summarised as follows:

A. (Direct liability). The I.T.C. has no legal personality distinct from its members. The members are an unincorporated association who agreed to trade, and traded, in the name of the I.T.C. The plaintiffs’ contracts, although made nominally with the I.T.C., were accordingly made directly with the members, and the members are accordingly jointly and severally liable as trading partners.

B. (Concurrent or secondary liability). Alternatively, if the I.T.C. has legal personality, then this is not such as to absolve its members from liability. This submission is less easy to summarise, but no less cogent. Since it is common ground that the I.T.C. is not a body corporate, but that it merely has “the capacities of a body corporate,” the members cannot claim limited liability as though they were shareholders in a company incorporated under the Companies Acts. If the I.T.C. has legal personality or a degree of legal personality, then this is analogous to that of bodies in the nature of quasi-partnerships well known in the civil law systems, where both the entity and the [*142] members are liable to creditors, or the members are in any event secondarily liable for the debts of the entity. This concept is exemplified in the United Kingdom by a Scottish partnership, in France by a société en nom collectif and in Germany by a Kommanditgesellschaft auf Aktien (“K.G. aA”). I will refer to such bodies for short as “mixed” legal entities to distinguish them from bodies corporate on the one hand and partnership firms under English law or other unincorporated associations on the other hand. The conclusion that this must be the position of the members of the I.T.C. in relation to the creditors of the I.T.C. flows from the members’ association for the purposes of trade and the absence of any limitation of their liability on the lines of shareholders of limited companies. Alternatively, the nature of the I.T.C. in international law is that of a “mixed” entity. Since English law has made no change to the entity as such, but has merely conferred capacities on it, this remains its nature when it enters into contracts in England. Accordingly, the members are either liable concurrently with the I.T.C. on contracts made by the I.T.C. or alternatively – and more importantly – they are secondarily liable for the unpaid debts of the I.T.C.

C. (Agency). Alternatively, if both A and B are wrong and the I.T.C. is to be regarded as a body corporate distinct from its members, in the same way as a company with limited liability incorporated under the Companies Acts, then I.T.A.6 demonstrates that in contracting with third parties the I.T.C. acts as agent for its members as undisclosed principals. It is therefore open to the plaintiffs to enforce the contracts against the members jointly and severally on this basis.

The defendants challenge all these submissions on a number of grounds. They say, first, that the conferment upon the I.T.C. of all the capacities of a body corporate effectively gives it the status of a body corporate in all but name. This was the conclusion of Millett J. and also of Staughton J., although the latter also relied upon another ground to which I refer later in connection with submission B. Secondly, they say that it is clear from I.T.A.6, from the Headquarters Agreement between the I.T.C. and the United Kingdom in 1972 and from the relevant Order in Council also made in 1972, that the I.T.C. is a legal entity which is distinct from its members. Thirdly, since it is undisputed and indisputable that the Order in Council conferred upon the I.T.C. the power to conclude contracts and that the I.T.C. did so in its own name, they say there is no way known to English law whereby the liability of the members can be engaged by such contracts otherwise than on the basis of agency. For all these reasons it follows that submission A is untenable.

As regards submission B, the defendants say that no entity of the kind alleged is known to English law and that there is also no evidence or insufficient evidence to show that this is the juridical nature of the I.T.C. on the plane of international law. And even if the I.T.C. had the alleged juridical nature on the plane of international law, this would be irrelevant in English law and non-justiciable in the English courts.

As regards submission C, the defendants say that the allegation of agency must fail on a number of grounds. First, the interpretation of I.T.A.6 is “non-justiciable” on the ground that the effect of treaties which have not been incorporated into our domestic law cannot be [*143] considered in the English courts. Secondly, no principal/agent relationship between the members and the I.T.C. can be derived from the terms of I.T.A.6 even if their effect is justiciable. Thirdly, as regards the claims by the brokers under the London Metal Exchange contracts, the defendants say that on their true construction the only contracting parties were the brokers and the I.T.C., and the existence of any undisclosed principals on either side was in any event excluded.

Finally, as regards submissions B and C, the member states (other than the United Kingdom) and the E.E.C. rely on sovereign immunity as a ground for contesting any enforcement against them of the awards and judgments obtained or obtainable by the plaintiffs against the I.T.C. The states relied on the State Immunity Act 1978 and the E.E.C. on the position at common law by analogy with the immunity of states.

History of international organisations

Before one can usefully consider these issues it is necessary to examine the nature and history of international organisations generally. Moreover, since such organisations are created on the plane of public international law, the starting point must equally be on this plane. With all due respect to the submissions addressed to Staughton and Millett JJ., on which their judgments were based, as well as the principal submissions addressed to us on these appeals, they placed too much emphasis on the effect in English law of the conferment upon the I.T.C. of “the legal capacities of a body corporate” by the Order in Council of 1972 to which I come shortly. This phrase appeared to be the beginning, middle and end of most of the conflicting submissions. But while the ultimate question must obviously be a question of English law in which the effect of these words will play an important part, the logical starting point must lie in international law.

The expression “international organisation” is a term of art in public international law. It is a body or entity created by agreement between states or other entities in international law. In referring to an international organisation as a body or entity I do not intend to pre-empt its juridical nature. But it was common ground before us, and amply supported by the material on international law to which we were referred, that an international organisation is a legal entity in international law, in the sense of being a juridical person or as having legal personality. No distinction between these terms is intended. Thus, in discussing the legal nature of a registered trade union in Bonsor v. Musicians’ Union [1956] A.C. 104, a case much discussed before us, Lord MacDermott used the expression “juridical person,” at p. 134, Lord Keith of Avonholm referred to a “legal entity,” at p. 149 and Lord Somervell of Harrow warned against the use of any particular expression, at p. 155. But all of them agreed in their analysis at the end of the day. So, for convenience and brevity I will frequently use the expression “legal entity” to denote the possession by international organisations of “legal personality” or of “juridical personality,” which are the terms used in many of the relevant treaties, and to distinguish them from incorporated bodies. Obviously, however, this is in no way intended to pre-empt any conclusions about [*144] the nature or attributes of international organisations as legal entities in international law.

The instruments which create international organisations on the plane of public international law are treaties, though most of them bear other names such as “convention” or “agreement.” Treaties which create international organisations are made between sovereign states or may be “mixed,” in the sense that the participants may include an association of states, such as the E.E.C. or other international organisations. The parties to treaties which create international organisations will usually be members of the organisation. So, in order to reach conclusions about the nature and attributes of any particular international organisation and the relationship (if any) of its members with third parties, one must begin by considering the treaty which created the organisation against the background of international law. In the present instance the treaties are six International Tin Agreements (“I.T.A.1 to 6”) and a Headquarters Agreement between the United Kingdom and the I.T.C. In relation to these, all parties invoked the doctrine of non-justiciability for different purposes to counter the submissions made by their opponents. In my view this doctrine was in many instances taken too far, and I will deal with this question later. For the present I merely set out the history.

Before the last war international organisations were relatively rare. One of the earliest appears to have been an international commission governing the Rhine in 1815. In the 20th century the number increased slightly between the wars, notably of course in the form of the League of Nations. But before 1944 there appears to have been no English legislation dealing with international organisations.

This picture began to change towards the end of the war when plans were made for setting up the United Nations. In the subsequent decades international organisations began to proliferate. One article to which we were referred estimated their present number in hundreds. Lists of those of which the United Kingdom is a member can be found in Halsbury’s Laws of England, 4th ed., vol. 18 (1977), pp. 819-824, paras. 1595-1600, together with some description of their nature, but doubts were expressed about the accuracy of the text in all respects. However, it is interesting to note the vast increase in the list in paragraph 1598 published in the Supplement of 1987 in comparison with the corresponding list of 10 years earlier.

I then turn to the relevant pattern of the treaties and of the consequential English legislation. In using the term “legislation” I do not generally differentiate between Acts of Parliament and Orders in Council, though some of the submissions addressed to us drew distinctions between them.

Taking the treaties first, we were helpfully referred to schedules summarising the relevant aspects of some 64 treaties setting up international organisations between 1943 and 1987. Their pattern can be summarised as follows. The treaties provided in all cases that the international organisation was to have wide ranging capacities, in particular to contract, to acquire, hold and dispose of property, and to institute legal proceedings. Secondly, it became the practice to add expressly that the organisation which the treaty created should have [*145] “legal personality” or “full judicial personality” or words to the same effect, i.e. that it was to be what I have referred to as a legal entity, and the great majority of the treaties contained such a provision. Thirdly, particularly in the more recent treaties, it was provided that the international organisation was to have certain immunities, exemptions and privileges in the territories of each of the members, with particular reference in some cases to privileges and immunities in the territory of the host government. Fourthly, the treaties generally made it clear that the characteristics summarised above were to be recognised by the domestic laws of each of the member states in so far as applicable.

All these aspects apply to the treaties relating to the I.T.C. However, there was also a fifth aspect, but this was only present in some cases. In 16 of the 64 treaties referred to above there were provisions dealing with the exclusion or limitation of the liability of members of international organisations in various ways. Some of these also provided for express warnings to be given to persons dealing with the international organisation, to the effect that the members were not liable for the debts of the organisation. There was no such provision in any of the treaties relating to the I.T.C. throughout its history. The significance of the practice of states in relation to these treaties – which I will call “limited liability” treaties for identification – and the absence of any such provision in relation to the I.T.C. require separate consideration hereafter in the context of the plaintiffs’ submission B.

In an annexe to this judgment, for which I would like to express my gratitude to Ralph Gibson L.J., there are listed the international organisations to which we were referred and the treaties by which they were created. They are divided into the categories there explained. List B, in particular, lists the organisations in respect of which the treaties provided for the organisation to have “juridical personality” or “legal personality” or “full juridical personality” and upon which by United Kingdom legislation there was conferred the “legal capacities of a body corporate.” The 16 treaties in which “limited liability” clauses were included are marked by asterisks.

I then turn to the legislation which was enacted in this country consequentially upon these treaties. There appears to have been no legislation in four of the 64 cases, because the United Kingdom was not a member of the international organisation in question. In other cases, with a few irrelevant exceptions, there was “a consistent practice in domestic legislation,” to use the words of Lord Bridge of Harwich in Shearson Lehman Brothers Inc. v. Maclaine Watson Co. Ltd. (No. 2) [1988] 1 W.L.R. 16, 24D, to which I come back later. The exceptions were instances where Acts of Parliament enacted the treaties creating the organisations in question and provided simply that the treaties were to “have the force of law.” The ones to which we were referred in this category were the Bretton Woods Agreements Act 1945, the International Finance Corporation Act 1955, and the International Development Association Act 1960. But they were exceptional, and the reasons for this mode of legislation were not explored as having any relevance. In all the remaining cases the legislation was by means of Orders in Council. In a few cases these were made pursuant to specific Acts [*146] passed in consequence of the treaty setting up the international organisation in question, such as the Commonwealth Secretariat Act 1966 and the Civil Aviation (Eurocontrol) Act 1962 and now the Civil Aviation Act 1982. In the remaining cases, the vast majority, they were made under various enabling Acts mentioned hereafter, viz. the Diplomatic Privileges (Extension) Acts 1944 to 1950, the International Organisations (Immunities and Privileges) Act 1950 which consolidated these Acts, and thereafter under the International Organisations Act 1968 which remains in force.

The consistent legislative practice lay in the contents of all these Orders in Council. First, they invariably conferred on the international organisation in question “the legal capacities of a body corporate.” Secondly, they conferred such privileges and immunities upon the organisation as were mentioned in the treaty in question. But, thirdly, there was no case in which any Order in Council went further: the provision in the great majority of treaties that the international organisation was to possess legal or juridical personality, or words to that effect, was never mentioned in our domestic legislation. Nor was any international organisation ever incorporated or given the status of a body corporate, although the treaties contain frequent references to the “status” of the international organisations which they created. Finally none of the Orders in Council contained any reflection of the special provisions in the “limited liability” treaties to which I have referred. There was no distinction between these treaties and the remainder.

History of the I.T.C.

This began with I.T.A.1 in 1954. In order to follow it one must see it in the context of the legislation dealing with international organisations.

The earliest was the Diplomatic Privileges (Extension) Act 1944. Its long title was:

“An Act to make provision as to the immunities, privileges and capacities of international organisations of which His Majesty’s Government in the United Kingdom and foreign governments are members…”

Section 1 stated that it should

“apply to any organisation declared by Order in Council to be an organisation of which His Majesty’s Government in the United Kingdom and the government or governments of one or more foreign sovereign powers are members.”

Subsection (2)(a) provided:

“His Majesty may by Order in Council (a) provide that any organisation to which this section applies… shall, to such extent as may be specified in the Order, have the immunities and privileges set out in Part I of the Schedule to this Act, and shall also have the legal capacities of a body corporate…”

This appears to be the first occasion on which these important words were used. The Schedule listed a number of “immunities and privileges” [*147] of the organisation and of persons connected with it, which foreshadowed similar provisions in many subsequent Orders.

The Act of 1944 was amended by the Diplomatic Privileges (Extension) Act 1946

“in connection with the general convention on privileges and immunities of the United Nations approved at the first General Assembly thereof…”

It is worth pausing at this point to see the now familiar pattern of this legislation developing at that stage. Article 1 of the treaty, the “General Convention on the Privileges and Immunities of the United Nations” of 1946, was in the following terms:

“The United Nations shall possess juridical personality. It shall have the capacity – (a) to contract; (b) to acquire and dispose of immovable and movable properties; (c) to institute legal proceedings.”

This was typical of similar provisions in the great majority of the treaties dealing with international organisations to which I have referred. But in the same way as in all subsequent cases, the consequential legislation contained no reflection of the opening words that “the United Nations shall possess juridical personality,” although Parliament then had a clear opportunity to deal with this aspect by primary legislation. The Act of 1946 merely conferred the same powers in relation to the United Nations as had been conferred generally by the Act of 1944. Accordingly, when the relevant Order in Council was made – the Diplomatic Privileges (United Nations and the International Court of Justice) Order in Council 1947 (S.I. 1947 No. 1772) – it merely provided in this context: “2. The United Nations shall have the legal capacity of a body corporate…”

The same pattern followed throughout. Since virtually every treaty in the following decades provided expressly that the international organisation was to have legal personality, or words to that effect, each of these organisations was clearly a legal entity on the plane of international law. But the consequent Orders in Council designed to receive and deal with the organsations in our domestic law never went beyond the conferment of capacities on the organisations. Admittedly, to achieve this purpose no wider words could have been used. It was common ground that “the legal capacities of a body corporate” meant all such capacities. And it was also common ground that in relation to a persona ficta, such as an international organisation, no wider capacities could have been conferred. But two other matters are equally clear. First, Parliament did not intend to effect any change to the juridical character of international organisations on the plane of international law, whatever this might be, upon their arrival on the scene of English law. The nature of the entity, whatever it might be, was to remain unaltered. Secondly, the legislation significantly stops short of granting to the legal entity the status, character or attributes of a body corporate. No international organisation was made a body corporate under our law, nor domestically incorporated in any way. The purpose and effect of the legislation throughout was merely to enable the international entity to function at the level of English law. [*148]

There was a further Diplomatic Privileges (Extension) Act in 1950. This limited the extent to which privileges and immunities could be granted by Order in Council in future, but the effect of this provision can be seen from section 1(6) of the Act of 1968 to which I come later and is not directly relevant. The Diplomatic Privileges (Extension) Acts 1944 to 1950 were then consolidated in the International Organisations (Immunities and Privileges) Act 1950. This was the Act in force when the I.T.C. was first set up by I.T.A.1 in 1954. In 1956 the first of the relevant series of Orders in Council was made pursuant to the Act of 1950, viz. the International Organisations (Immunities and Privileges of the International Tin Council) Order 1956 (S.I. 1956 No. 1214). For present purposes it is unnecessary to consider I.T.A.1 or the Order of 1956 in any detail. The pattern of both of them was similar to what followed. The United Kingdom was the host country throughout and the headquarters were established and remained in London. Only two points require mention. First, I.T.A.1 did not provide expressly that the I.T.C. should have legal personality. That came later with I.T.A.4. In that context, I.T.A.1 et seq. merely contained the following provision, which was then typical of treaties creating international organisations:

“The council shall have in each participating country, to the extent consistent with its law, such legal capacity as may be necessary for the discharge of its functions under this agreement.”

Secondly, I.T.A.1 (as well as I.T.A.2 and 3) did not provide that the I.T.C. was to have any privileges or immunities in the participating countries other than a limited exemption from taxation. Accordingly, while the consequential Orders merely provided in the usual way that the I.T.C. “shall have the legal capacities of a body corporate,” they conferred no privileges or immunities other than “the like exemption or relief from taxes and rates, other than taxes on the importation of goods, as is accorded to a foreign power.”

At this point one must again pause for reflection. One must remind oneself that in 1956, and for a further 20 years or so thereafter, foreign sovereign states were entitled to absolute immunity in the courts of this country, without any qualification in relation to commercial transactions. To put it in the words of Lord Wilberforce in I Congreso del Partido [1983] 1 A.C. 244. 261A:

“Until 1975 [the relevant date in that case] it would have been true to say that England, almost alone of influential trading nations… continued to adhere to a pure, absolute, doctrine of state immunity in all cases.”

The position changed radically with the two “landmark” authorities which Lord Wilberforce went on to consider, The Philippine Admiral [1977] A.C. 373 and Trendtex Trading Corporation v. Central Bank of Nigeria [1977] Q.B. 529. They drew a distinction between acts jure imperii and jure gestionis, such as trading activities, which then led to the State Immunity Act 1978 to which I come later.

If one then considers I.T.A.1 and the Order of 1956, as well as all their successors prior to I.T.A.6 in 1982, against the background of the [*149] pre-1975 position, one can see at once that acceptance of the plaintiffs’ submission A would have led to strange results. One of the main functions of the I.T.C. throughout its history was to engage in trade in connection with its buffer stock operations in order to keep the world price of tin between the floor and ceiling prices laid down from time to time. Inevitably, therefore, the I.T.C. was bound to enter into contracts for the purchase and sale of tin on a very large scale, primarily in this country on the London Metal Exchange, and other commercial transactions, such as heavy borrowings, were also likely. All such contracts were clearly to be concluded by the I.T.C. in its own name, as happened throughout, and would be governed by English law. But if the I.T.C. was not a legal entity but merely a trading name for its members, analogous to the position of a partnership in English law, then the persons contracting with the I.T.C. would have had no enforceable contracts against anyone with the exception of the United Kingdom. Submission A postulates that the only legal entities liable on the contracts are the member states themselves. But although immunity from suit does not imply absence of liability, anyone contracting with the I.T.C. would on that basis have had no enforceable remedy under their contracts except against the government of this country under the Crown Proceedings Act 1947. But why should the position of one member alone be different from all the others? Or was the United Kingdom to be assimilated to foreign states by being granted sovereign immunity by a sidewind? And this position appears even more strange when it is also borne in mind that until 1972 the I.T.C. itself has no immunity of any kind in our courts. The intention must therefore have been that the contracts should be fully enforceable against the I.T.C. in the usual way, since no one could then have thought for one moment that they could have been enforced against any foreign member state.

These historical considerations are bound to cast doubts on the soundness of submission A long before one comes to consider it in detail.

I then return to the history. I.T.A.2 and 3 followed in 1960 and 1965 without any relevant change, and it is also unnecessary to refer to the corresponding Orders in Council. Nor is it relevant that at some stages of the history of the treaties a new I.T.C. was set up, whereas in others the treaties continued the former entity, albeit with some changes in the membership from time to time.

The next landmark is the International Organisations Act 1968. This is still in force and covers the present position. Although it made few relevant changes, it is convenient to refer to it in some detail to bring the position up-to-date. The long title of the Act was as follows:

“An Act to make new provision (in substitution for the International Organisations (Immunities and Privileges) Act 1950 and the European Coal and Steel Community Act 1955) as to privileges, immunities and facilities to be accorded in respect of certain international organisations and in respect of persons connected with such organisations and other persons; and for purposes connected with the matters aforesaid.” [*150]

The change from “capacities” in the long title to the Diplomatic Privileges (Extension) Act 1944 to “facilities” in this Act should perhaps be noted. However, no similar change was made in the wording of the Act. To see the complete picture up-to-date, I set out the relevant provisions of section 1:

“(1) This section shall apply to any organisation declared by Order in Council to be an organisation of which – (a) the United Kingdom or Her Majesty’s Government in the United Kingdom, and (b) one or more foreign sovereign powers, or the government or governments of one or more such powers, are members. (2) Subject to subsection (6) of this section, Her Majesty may by Order in Council made under this subsection specify an organisation to which this section applies and make any one or more of the following provisions in respect of the organisation so specified (in the following provisions of this section referred to as ‘the organisation’), that is to say – (a) confer on the organisation the legal capacities of a body corporate; (b) provide that the organisation shall, to such extent as may be specified in the Order, have the privileges and immunities set out in Part I of Schedule 1 to this Act; (c) confer the privileges and immunities set out in Part II of Schedule 1 to this Act, to such extent as may be specified in the Order, on persons of any such class as is mentioned in the next following subsection; (d) confer the privileges and immunities set out in Part III of Schedule 1 to this Act, to such extent as may be specified in the Order, on such classes of officers and servants of the organisation (not being classes mentioned in the next following subsection) as may be so specified. … (6) Any Order in Council made under subsection (2)… of this section shall be so framed as to secure – (a) that the privileges and immunities conferred by the Order are not greater in extent than those which, at the time when the Order takes effect, are required to be conferred in accordance with any agreement to which the United Kingdom or Her Majesty’s Government in the United Kingdom is then a party (whether made with one or more other foreign sovereign powers or governments or made with one or more organisations such as are mentioned in subsection (1) of this section), and (b) that no privilege or immunity is conferred on any person as the representative of the United Kingdom, or of Her Majesty’s Government in the United Kingdom, or as a member of the staff of such a representative.”

Section 3 conferred power to make provision by Orders in Council in respect of the Commission of the European Communities. Section 4 provided for power to make Orders in Council in relation to international organisations of which two or more foreign sovereign powers were members without the United Kingdom being a member. In such cases, if the organisation maintained or proposed to maintain an establishment in the United Kingdom, effect could be given to any agreement made in that behalf between the United Kingdom and the organisation by an Order in Council conferring on the organisation “the legal capacities of a body corporate” and relief from taxes, etc. as accorded to a foreign [*151] sovereign power. This is only of interest to show the development of international organisations and the consequent need to provide for their activities within the framework of English law even when the United Kingdom was not a member.

I need not refer to any of the provisions in Schedule 1 of the Act of 1968 dealing with privileges and immunities. It will be sufficient to consider these in the context of the Order of 1972 which governs the present position of the I.T.C. But I should set out section 10, since some of the submissions addressed to us contrasted the effect of Orders in Council with primary legislation. This is in the following terms:

“(1) No recommendation shall be made to Her Majesty in Council to make an Order under any provision (other than section 6) of this Act unless a draft of the Order has been laid before Parliament and approved by a resolution of each House of Parliament. (2) Any Order in Council made under section 6 of this Act shall be subject to annulment in pursuance of a resolution of either House of Parliament. (3) Any power conferred by any provision of this Act to make an Order in Council shall include power to revoke or vary the Order by a subsequent Order in Council made under that provision.”

The next event was I.T.A.4 in 1970. This was followed by I.T.A.5 in 1975 and I.T.A.6 in 1982, the treaty presently in force. These differ in certain relevant respects from I.T.A.1, 2 and 3 but not relevantly from each other. Moreover, all three are governed by the International Tin Council (Immunities and Privileges) Order 1972 (S.I. 1972 No. 120), which has been referred to throughout as the Order of 1972. Although made originally in consequence of I.T.A.4, the Order of 1972 provided expressly that it should apply to any succeeding agreement. It is therefore the Order of 1972 which links I.T.A.6 with our domestic law, although made 10 years earlier and before the State Immunity Act 1978 which intervened. Similar considerations apply to the relevant “Headquarters Agreement” between I.T.C. and the Government of the United Kingdom. This was also concluded in 1972 as the result of I.T.A.4, but equally continued to apply to I.T.A.6.

In these circumstances a chronological consideration of these three instruments is not a convenient course. Chronologically one should consider I.T.A.4 in 1970 and then the Headquarters Agreement and the Order in Council in 1972. But I.T.A.6 has now taken the place of I.T.A.4 without any material distinction for present purposes. Logically, therefore, one should consider I.T.A.6, then the Headquarters Agreement and then the Order in Council of 1972. I therefore do so below and will refer throughout to I.T.A.6 as though the Headquarters Agreement and Order of 1972 were made in consequence of I.T.A.6 and not I.T.A.4.

The Sixth International Tin Agreement (I.T.A.6)

The submissions in these appeals, and also in the appeals which follow, made reference to so many provisions of I.T.A.6 – albeit frequently countered by objections on the ground of non-justiciability from any party which contested the submission – that it is convenient at [*152] this stage to set out or to summarise all relevant provisions of I.T.A.6 so that they can be referred to in all the judgments hereafter with the minimum need for repetition. This is the scheme which I adopt below, beginning with the preamble and objectives of the organisation:

“SIXTH INTERNATIONAL TIN AGREEMENT

“Preamble

“The parties to this agreement, recognising: (a) the significant assistance to economic growth, especially in developing producing countries, that can be given by commodity agreements in helping to secure stabilisation of prices and steady development of export earnings and of primary commodity markets; (b) the community and interrelationship of interests of, and the value of continued cooperation between, producing and consuming countries in order to support the purposes and principles of the United Nations and the United Nations Conference on Trade and Development and to resolve problems relevant to tin by means of an international commodity agreement, taking into account the role which the International Tin Agreement can play in the establishment of a new international economic order: (c) the exceptional importance of tin to numerous countries whose economy is heavily dependent upon favourable and equitable conditions for its production, consumption or trade; (d) the need to protect and foster the health and growth of the tin industry, especially in the developing producing countries, and to ensure adequate supplies of tin to safeguard the interests of consumers; (e) the importance to tin producing countries of maintaining and expanding their import purchasing power; and (f) the desirability of improving efficiency in the use of tin in both the developing and industrialised countries, as an aid to the conservation of world tin resources; have agreed as follows:

“Chapter 1 – Objectives

“Article 1

“Objectives

“The objectives of this agreement are: (a) to provide for adjustment between world production and consumption of tin and to alleviate serious difficulties arising from surplus or shortage of tin, whether anticipated or real; (b) to prevent excessive fluctuations in the price of tin and in export earnings from tin; (c) to make arrangements which will help to increase the export earnings from tin, especially those of the developing producing countries, so as to provide such countries with resources for accelerated economic growth and social development, while at the same time taking into account the interests of consumers; (d) to ensure conditions which will help to achieve a dynamic and rising rate of production of tin on the basis of a remunerative return to producers, which will help to secure an adequate supply at prices fair to consumers and to provide a long-term equilibrium between production and consumption; (e) to prevent widespread unemployment or under-employment and other serious difficulties which may result from maladjustments between the supply of and the demand for tin; (f) to improve further the [*153] expansion in the use of tin and the indigenous processing of tin, especially in the developing producing countries; (g) in the event of a shortage of supplies of tin occurring or being expected to occur, to take steps to secure an increase in the production of tin and a fair distribution of tin metal in order to mitigate serious difficulties which consuming countries might encounter; (h) in the event of a surplus of supplies of tin occurring or being expected to occur, to take steps to mitigate serious difficulties which producing countries might encounter; (i) to review disposals of non-commercial stocks of tin by governments and to take steps which would avoid any uncertainties and difficulties which might arise; (j) to keep under review the need for the development and exploitation of new deposits of tin and for the promotion, through inter alia, the technical and financial assistance resources of the United Nations and other organisations within the United Nations system, of the most efficient methods of mining, concentration and smelting of tin ores; (k) to promote the development of the tin market in the developing producing countries in order to encourage a more important role for them in the marketing of tin; and (l) to continue the work of the International Tin Council under the Fifth International Tin Agreement (herinafter referred to as the Fifth Agreement) and previous International Tin Agreements.”

A large number of definitions follow, but it is sufficient to refer to the relevant ones in their context hereafter.

“Part One

“The International Tin Council: Constitutional Provisions

“Chapter III – International Tin Council

“Article 3

“The continuation and the seat of the International Tin Council

“1. The International Tin Council (hereinafter referred to as ‘the council’), established by the previous International Tin Agreements, shall continue in being for the purpose of administering the Sixth International Tin Agreement, with the membership, powers and functions provided for in this agreement. 2. The seat of the council shall be in the territory of a member. 3. Subject to the requirement in paragraph 2 of this article, the seat of the council shall be in London, unless the council, by a two-thirds distributed majority, decides otherwise.

“Article 4

“Composition of the council

“1. The council shall be composed of all the members. 2(a) Each member shall be represented in the council by one delegate and may designate alternates and advisers to attend its sessions. (b) An alternate delegate shall be empowered to act and vote on behalf of the delegate during the latter’s absence or in other special circumstances.” [*154]

Article 5 refers to the two categories of membership, producing members and consuming members. These terms are defined in article 2 as referring to any member which the council has declared, with the consent of that member, to be a producing or consuming member as the case may be.

“Chapter IV – Powers and Functions

“Article 7

“Powers and functions of the council

“The council: (a) shall have such powers and perform such functions as may be necessary for the administration and operation of this agreement; (b) shall have the power to borrow for the purposes of the administrative account established under article 17, or of the buffer stock account in accordance with article 24; (c) shall receive from the executive chairman, whenever it so requests, such information with regard to the holdings and operations of the buffer stock as it considers necessary to fulfil its functions under this agreement… (f) shall publish after the end of each financial year a report on its activities for that year; (g) shall publish after the end of each quarter, but not earlier than three months after the end of that quarter, unless the council decides otherwise, a statement showing the tonnage of tin metal held in the buffer stock at the end of that quarter…

“Article 8

“Procedures of the council

“The council: (a) shall establish its own rules of procedure; (b) may make whatever arrangements it considers necessary to advise the executive chairman when the council is not in session; (c) may at any time: (i) by a two-thirds distributed majority, delegate to any of the subsidiary bodies referred to in article 9 any power which the council may exercise by a simple distributed majority, other than those relating to: – assessment and apportionment of contributions under articles 20 and 22 respectively; – floor and ceiling prices under articles 27 and 31; – assessment of export control under articles 32, 33, 34, 35 and 36; or – action in the event of a tin shortage under article 40; and (ii) by a simple majority, revoke any delegation of powers to any subsidiary body.”

Article 9 deals with subsidiary bodies of the council which include a buffer finance committee.

“Chapter V – Organisation and Administration

“Article 11

“Executive chairman and vice-chairman of the council

“1. The council shall, by a two-thirds distributed majority and by ballot, appoint an independent executive chairman, who may be a national of one of the members. The appointment of the executive chairman shall be considered at the first session of the council after the entry into force of this agreement.”

Article 2 defines a “session” as comprising one or more meetings of the council. This and the following article were mainly referred to in the [*155] context of the submissions concerning agency, on the ground that they were relevant to show the degree of control or lack of direct control exercised by the members over the activities of the council.

“Article 12

“Sessions of the council

“1. The council shall, unless it decides otherwise, hold four sessions a year. 2(a) Sessions shall be convened by the executive chairman or, after consultation with the first vice-chairman, by the acting chief executive officer. The council, in addition to meeting in the other circumstances specifically provided for in this agreement, shall also meet: (i) at the request of any five members; or (ii) at the request of members holding together at least 250 votes; or (iii) at the discretion of the executive chairman.

“Article 13

“The staff of the council

“1. The executive chairman appointed under article 11 shall be responsible to the council for the administration and operation of this agreement in accordance with the decisions of the council. 2. The executive chairman shall also be responsible for the management of the administrative services and staff. 3. The council shall appoint a buffer stock manager (hereinafter referred to as ‘the manager’) and a secretary of the council (hereinafter referred to as ‘the secretary’) and shall determine the terms and conditions of service of those two officers. 4. The council shall give instructions to the executive chairman as to the manner in which the manager is to carry out his responsibilities laid down in this agreement…. 7. In the performance of their duties, neither the executive chairman nor the members of the staff shall seek or receive instructions from any government or person or authority other than the council or a person acting on behalf of the council under the terms of this agreement. They shall refrain from any action which might reflect on their position as international officials responsible only to the council. Each member undertakes to respect the exclusively international character of the responsibilities of the executive chairman and the members of the staff and not to seek to influence them in the discharge of their responsibilities.”

Article 14 deals with the distribution of votes and percentages. An equal number of total votes was allotted to the producing and consuming members respectively and distributed among them according to tables of percentages of production and consumption applicable to each of the members. These were established by the council and revised from time to time. Article 15 lays down the voting procedure of the council. Except where otherwise provided, decisions of the council were to be taken by a simple distributed majority, and any member could authorise any other member to represent its interests and exercise its voting rights. One then comes to article 16, which is important, in particular, paragraph 1: [*156]

“Chapter VII – Privileges and Immunities

“Article 16

“Privileges and immunities

“1. The council shall have legal personality. It shall in particular have the capacity to contract, to acquire and dispose of moveable and immoveable property and to institute legal proceedings. 2. The council shall have in the territory of each member, to the extent consistent with its law, such exemption from taxation on the assets, income and other property of the council as may be necessary for the discharge of its functions under this agreement…. 4. The status, privileges and immunities of the council in the territory of the host government shall be governed by a Headquarters Agreement between the host government and the council.”

Article 17 deals with the “Financial accounts” of the I.T.C. and it is necessary to set out paragraph 1:

“(a) There shall be kept two accounts – the administrative account and the buffer stock account – for the administration and operation of this agreement. (b) The administrative expenses of the council, including the remuneration of the executive chairman, the manager the secretary and the staff, shall be entered into the administrative account. (c) Any expenditure which is solely attributable to buffer stock transactions or operations, including expenses for borrowing arrangements, storage, commission and insurance, shall be entered into the buffer stock account by the manager. (d) The liability of the buffer stock account for any other type of expenditure shall be decided by the executive chairman.”

Article 20 deals with the administrative account under the heading of “The budget” and must again be set out:

“1. The council shall, at its first session after the entry into force of this agreement, approve the budget of income and expenditure of the administrative account for the period between the date of entry into force of this agreement and the end of the first financial year. Thereafter, it shall approve an annual budget for each financial year. If at any time during any financial year, because of unforeseen circumstances which have arisen or are likely to arise, the balance remaining in the administrative account is likely to be inadequate to meet the administrative expenses of the council, the council may approve a supplementary budget for the remainder of that financial year. 2. On the basis of the budgets described in paragraph 1 of this article, the council shall assess in the currency of the host country the contribution to the administrative account of each member, which shall be liable to pay its full contribution to the council on notice of assessment. Each member shall pay in respect of each vote which it holds on the date of assessment, one two-thousandth of the total amount required. 3. Any member which fails to pay its contribution to the administrative account within six months of the date of notice of assessment may be deprived by the council of its right to vote. If such a member fails to pay its contribution within [*157] 12 months of the date of notice of assessment, the council may deprive it of any other rights under this agreement, provided that the council shall, on receipt of any such outstanding contribution, restore to the member concerned the rights of which it has been deprived under this paragraph.”

Chapter X deals with the buffer stock account and it is necessary to set out certain of its provisions:

“Chapter X – The Buffer Stock Account

“Article 21

“Establishment and size of the buffer stock

“In order to achieve the objectives of this agreement there shall be established, inter alia, a buffer stock consisting of a normal stock of 30,000 tonnes of tin metal to be financed from government contributions, and an additional stock of 20,000 tonnes of tin metal to be financed from borrowing, using as security stock warrants and, if necessary, government guarantees/government undertakings.”

In this context there is a relevant definition in article 2:

“‘government guarantees/government undertakings’ means the financial obligations to the council which are committed by members as security for financing the additional buffer stock in accordance with article 21. They may, when relevant, be provided by the appropriate agencies of the members concerned. Members shall be liable to the council up to the amount of their guarantees/undertakings.”

The remaining provisions under the heading of the buffer stock account which should be set out are as follows:

“Article 22

“Financing of the normal buffer stock

“1. The financing of the normal buffer stock shall at all times be shared equally between producing and consuming members. Such financing may, where relevant, be provided by the appropriate agencies of the members concerned. 2. An initial contribution amounting to the cash equivalent of 10,000 tonnes of tin metal shall be due on entry into force of this agreement. Subsequent contributions amounting to the cash equivalent of the remaining 20,000 tonnes of tin metal shall become due on such date or dates as the council may determine. 3. The contributions referred to in paragraph 2 of this article shall be apportioned by the council among members in accordance with their respective percentages of production or consumption as set out in the tables established or revised by the council in accordance with paragraph 3 or paragraph 4 of article 14 which are in effect at the time of the apportionment of contributions.

“Article 24

“Borrowing for the buffer stock

“1. The council may borrow for the purposes of the buffer stock and upon the security of tin warrants held by the buffer stock such [*158] sum or sums as it deems necessary. The terms and conditions of any such borrowings shall be approved by the council. 2. The Council may, by a two-thirds distributed majority, make any other arrangements it sees fit in order to supplement its resources. 3. All charges connected with these borrowings and arrangements shall be assigned to the buffer stock account.

“Article 25

“Relationship with the common fund for commodities

“When the common fund becomes operational the Council shall negotiate with the fund for mutually acceptable terms and modalities for an association agreement with the common fund, in order to seek to take full advantage of the facilities of the fund.”

The reference to the common fund for commodities is of some interest, since this is one of the “limited liability” treaties, as I have called them, to which reference must be made hereafter in connection with submission B.

Article 26 deals with the liquidation of the buffer stock. The precise details do not matter, but it is important to summarise the process of liquidation pursuant to this article. On the termination of I.T.A.6 all buffer stock operations are to cease save for the purpose of financing the liquidation. A sufficient sum remaining in the buffer stock account is to be set aside to repay any outstanding borrowings and to meet the total expenses of liquidation, and if the balance of cash should prove to be inadequate for these purposes, the buffer stock manager was to sell sufficient tin to provide the necessary sum. Thereafter each member’s share in the buffer stock was to be valued in accordance with a prescribed procedure. There was then to be an allocation to each member of an equal ration of tin to cash, with the sum of both making up the value of his share. The tin was either to be transferred to each member in instalments or sold, the proceeds being paid to the member. Finally any balance remaining in the buffer stock account was to be distributed among the members in accordance with their allocated proportions.

In the result, therefore, I.T.A.6 – in the same way as all of its predecessors – only envisages a surplus in the buffer stock account upon its termination, and nowhere deals with the possibility of a deficiency in relation to the I.T.C.’s trading activities.

Article 27 deals with the establishment of floor and ceiling prices. These were initially to be those in effect under I.T.A.5 and were thereafter to be reviewed by the council and revised, if necessary, with a view to attaining the objectives of I.T.A.6.

Chapter XIII deals with the management of buffer stock operations and I must set out part of article 28 and summarise the remainder:

“Article 28

“Operation of the buffer stock

“1. The manager shall, in conformity with article 13 and within the provisions of this agreement and the framework of instructions of the council, be responsible to the executive chairman for the operation of the buffer stock.” [*159]

This article goes on to provide how the manager is to operate the buffer stock in the context of the relationship between the market price of tin at any time and the floor and ceiling prices. Of particular relevance in the present situation is a paragraph which provides that unless otherwise instructed by the council, and subject to certain irrelevant qualifications:

“3. If the market price of tin… (e) is equal to or less than the floor price, the manager shall… if he has funds at his disposal… offer to buy tin on recognised markets at the market price until the market price of tin is above the floor price or the funds at his disposal are exhausted.”

It seems that this may have been the policy which was followed in 1984-85, but evidently far beyond the point when the available funds had in effect become exhausted.

Article 29 deals with the suspension of buffer stock operations when the council considers this necessary to achieve the purposes of the agreement. It is not known whether a formal decision was taken under this article when the manager in effect declared the I.T.C. to be insolvent in October 1985. But this appears to be of no relevance. As already mentioned, it never appears to have been envisaged that the I.T.C. would become unable to meet its liabilities or that it would be allowed to get into this position.

Chapter XIV deals with declarations and impositions of export controls by the council upon the producing members if the volume of tin in the buffer stock reaches a certain percentage of the permissible maximum. We were told that these powers had been used during the currency of I.T.A.6, but nothing turns on them.

Chapter XVI deals with the obligations of members and I must set out parts of article 41:

“Article 41

“General obligations

“1. Members shall during the currency of this agreement use their best endeavours and co-operate to promote the attainment of its objectives. 2. Members shall accept as binding all decisions of the council under this agreement.”

Chapter XVII provides that complaints and disputes between members shall be referred to the council for decision, as well as any disputes concerning the interpretation or application of the treaty. Under article 54 the treaty is open for accession to governments of all states upon conditions to be determined by the council. Article 56 provides that all references to the E.E.C. or to any inter-governmental organisation having responsibilities in relation to international agreements, particularly commodity agreements. Article 58 provides for the withdrawal of members, if they so wish, during the currency of the agreement, but in that event with no right to participate in the liquidation of the buffer stock or the distribution of the assets remaining on termination. Article 59 provides that the treaty should remain in force for five years and for the possibility of extension or renewal. [*160]

Finally, article 60 deals with the procedure on termination, and it is important to set out parts of paragraph 2:

“On termination of this agreement: (a) the buffer stock shall be liquidated in accordance with the provisions of article 26; (b) the council shall assess the obligations into which it has entered in respect of its staff and shall, if necessary take steps to ensure that, by means of a supplementary estimate to the administrative account raised in accordance with article 20, sufficient funds are made available to meet such obligations; (c) after all liabilities incurred by the council, other than those relating to the buffer stock account, have been met, the remaining assets shall be disposed of in the manner laid down in this article…”

The paragraph continues to deal in (d) to (f) with the archives, statistical material and documents of the council, ending with (g) as follows:

“The proceeds and realisation of non-monetary assets and any remaining monetary assets shall then be distributed in such a manner that each member shall receive a share proportionate to the total of the contributions which it has made to the administrative account established under article 20.”

It is important to note that article 60.2(b) envisages the possibility of a deficit in relation to the administrative account on termination whereas nothing similar is envisaged in relation to the buffer stock account under article 26. Moreover, whereas article 60.2(b) provides expressly that the council’s obligations to its staff shall be met, if necessary by means of a supplementary budget and further contributions from members under article 20, there is no similar assumption of liability by the members for any obligations of the I.T.C. which may be owed to any other creditors of the I.T.C. on termination.

The Headquarters Agreement

I then turn to the second treaty which is directly relevant. It will be remembered that article 16.4 of I.T.A.6 provided that the status privileges and immunities of the council in the territory of the host government should be governed by a Headquarters Agreement between the host government and the council. This was concluded in London between the Government of the United Kingdom and the I.T.C. on 9 February 1972. The then executive chairman signed it on behalf of the I.T.C. It was laid before Parliament and published in the Treaty Series as Cmnd. 4938. Its terms naturally refer to I.T.A.4, but it remained in force thereafter so as to be equally applicable in relation to I.T.A.6. I must set out and refer to certain of its provisions. Articles 2 and 3 are of particular importance:

“Article 2

“Interpretation

“This agreement shall be interpreted in the light of the primary objective of enabling the council at its headquarters in the United [*161] Kingdom fully and efficiently to discharge its responsibilities and fulfil its purposes and functions.

“Article 3

“Legal personality

“The council shall have legal personality. It shall in particular have the capacity to contract and to acquire and dispose of movable and immovable property and to institute legal proceedings.”

This is the same wording as article 16.1 of I.T.A.6. The agreement goes on to provide for the inviolability of the archives and premises of the I.T.C. This is relevant to the other appeals in this series but not to this judgment. It then goes on to deal with the immunity of the I.T.C. “from jurisdiction and execution” subject to certain exceptions and with various immunities of representatives of the member states and the I.T.C. But since the relevant provisions appear in the Order in Council of 1972 made in consequence of this agreement it is more convenient to refer to them there. However, I must set out articles 23 and 24, since these are expressly referred to in the Order in Council but not there set out:

“Article 23

“Contracts

“Where the council enters into contracts (other than contracts concluded in accordance with staff regulations) with a person resident in the United Kingdom or a body incorporated or having its principal place of business in the United Kingdom and embodies the terms of the contract in a formal instrument, that instrument shall include an arbitration clause whereby any disputes arising out of the interpretation or execution of the contract may at the request of either party be submitted to private arbitration.

“Article 24

“Submission to an international arbitration tribunal

“The council shall, at the instance of the government, submit to an international arbitration tribunal any dispute (other than a dispute concerning the interpretation or application of the Fourth International Tin Agreement or any succeeding agreement): (a) arising out of damage caused by the council; (b) involving any other non-contractual responsibility of the council; or (c) involving the executive chairman, a staff member or expert of the council, and in which the person concerned can claim immunity from jurisdiction under this agreement, if this immunity is not waived.”

The Order in Council of 1972

Its full title is the International Tin Council (Immunities and Privileges) Order 1972 (S.I. 1972 No. 120). It was made pursuant to section 10 of the International Organisations Act 1968. Since I.T.A.6 and the Headquarters Agreement are treaties, this Order in Council is the only instrument presently in force which operates directly at the level of English law, or, perhaps more appropriately in the present [*162] context, at the level of the domestic or municipal law of the United Kingdom. It was therefore given predominant, and sometimes exclusive, weight in the submissions addressed to us. But I have already explained why in my view its effect cannot properly be considered in isolation from the underlying position in international law, albeit subject to the limits of the doctrine of non-justiciability to which I turn later. Thus, the terms of the Order themselves incorporate or point to I.T.A.6 and the Headquarters Agreement in various respects, as set out below.

With this introduction I must set out the relevant provisions from Parts I and II of the Order. For the reasons already explained references to the I.T.A.4 in the Order in Council must be read throughout as references to I.T.A.6.

“Part I

“General

“Citation and entry into force

“1. This Order may be cited as the International Tin Council (Immunities and Privileges) Order 1972. It shall come into operation on the date on which the Headquarters Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the International Tin Council enters into force. This date shall be notified in the ‘London, Edinburgh and Belfast Gazettes.’

“Interpretation

“2(1) For the purposes of this Order, the official activities of the International Tin Council shall include its administrative activities and those undertaken pursuant to the Fourth International Tin Agreement or any succeeding agreement. (2) In this Order ‘the 1961 Convention articles’ means the articles (being certain articles of the Vienna Convention on Diplomatic Relations signed in 1961) which are set out in Schedule 1 to the Diplomatic Privileges Act 1964. (3) The Interpretation Act 1889 shall apply for the interpretation of this Order as it applies for the interpretation of an Act of Parliament, and as if this Order and the Order hereby revoked were Acts of Parliament.

“Part II

“The council

“4. The International Tin Council (hereinafter referred to as the council) is an organisation of which Her Majesty’s Government in the United Kingdom and the governments of foreign sovereign powers are members.

“5. The council shall have the legal capacities of a body corporate.

“6(1) The council shall have immunity from suit and legal process except: (a) to the extent that the council shall have expressly waived such immunity in a particular case; (b) in respect of a civil action by a third party for damage arising from an accident caused by a motor vehicle belonging to or operated on behalf of the council, or in respect of a motor traffic offence involving such a [*163] vehicle; and (c) in respect of the enforcement of an arbitration award made under article 23 or article 24 of the Headquarters Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the International Tin Council.”

The remaining contents can be summarised. Article 7 deals with the inviolability of the I.T.C.’s official archives and premises, but these are not presently relevant. Articles 8, 10, 11, 12 and 13 provide for exemptions from rates, customs duties and taxes, in each case by reference to the “official activities” of the I.T.C. as mentioned in article 2, which in its turn refers one expressly to I.T.A.6. Finally, Parts III and IV deal with the privileges and immunities of the representatives of member states and of officers of the I.T.C. which are also not relevant to the present appeal. But it should be noted that the wording of the Order distinguishes throughout between the I.T.C. on the one hand and the members on the other, in the same way as I.T.A.6 and the Headquarters Agreement. There is nowhere any provision which would enable references to the I.T.C. to be read as intended to include the members.

I then turn to the issues.

Justiciability

Various aspects of the limits of justiciability fall to be considered in different contexts in these appeals. The topic is usually referred to as “the doctrine of non-justiciability.” It is convenient to discuss this doctrine in general terms at this stage in the context of unincorporated treaties, i.e. treaties which have not been incorporated into our law, bearing in mind that in our law – unlike in the case of many other systems – treaties are not self-executing.

Many of the leading cases and dicta on the non-justiciability of unincorporated treaties are referred to in the judgment of Staughton J. [1987] B.C.L.C. 667, 687 et seq. and 701 et seq. I do not think that it is necessary to review these again here. But some general considerations should be borne in mind.

The main one is that any question whether or not a matter connected with an unincorporated treaty is justiciable must depend on the nature of the issue which is under consideration and not on whether the arguments or evidence placed before the court require reference to the contents of an unincorporated treaty. Thus, with all respect to the passage in the judgment of Staughton J., at p. 703B-F, as well as to many of the submissions addressed to us on these appeals, reliance on the doctrine of non-justiciability may all too easily involve an approach which tends to preclude all reference to the terms of a treaty and to inhibit the duty of the court to decide justiciable issues. This carries non-justiciability much too far. In considering the limits of the doctrine one must remember that it only rests on two general principles, leaving aside any overlap with non-justiciability in relation to acts of state, etc. of the kind discussed in Buttes Gas and Oil Co. v. Hammer (No. 3) [1982] A.C. 888. The first is that since unincorporated treaties have no [*164] legislative effect, they do not form part of the law of this country: see e.g. Attorney-General for Canada v. Attorney-General for Ontario [1937] A.C. 326, 347, per Lord Atkin. No private rights or obligations can therefore be derived from the provisions of such treaties. Secondly although treaties are agreements intended to be binding upon the parties to them, they are not contracts which our courts can enforce: see e.g. Cook v. Sprigg [1899] A.C. 572, 578, and British Airways Board v. Laker Airways Ltd. [1984] Q.B. 142, 192D, C.A. and [1985] A.C. 58, 85H and 86A, H.L.(E.). Any issue between the parties to an unincorporated treaty is a non-justiciable issue in our courts.

But that is as far as the doctrine goes. It does not preclude the decision of justiciable issues which arise against the background of an unincorporated treaty in a way which renders it necessary or convenient to refer to, and consider, the contents of the treaty. Indeed, any contest as to whether or not an issue connected with an unincorporated treaty is justiciable will usually require some reference to the treaty. Apart from this, a court must be free to inform itself fully of the contents of a treaty whenever these are relevant to the decision of any issue which is not in itself a non-justiciable issue. There are many precedents of high authority which demonstrate this, e.g. Philippson v. Imperial Airways Ltd. [1939] A.C. 332, 346, per Lord Atkin, Zoernsch v. Waldock [1964] 1 W.L.R. 675, 682, per Willmer L.J. and Nissan v. Attorney-General [1970] A.C. 179, in particular per Lord Reid, at pp. 206 and 211, Lord Morris of Borth-y-Gest, at pp. 215-217, and Lord Pearce, at pp. 225 and 226.

To keep in mind the proper bounds of non-justiciability in relation to unincorporated treaties is in my view of importance for the consideration of all three of the plaintiffs’ submissions A, B and C.

First, submissions A and B necessarily involve consideration of the legal nature of the I.T.C., using this expression in the widest sense and for the present without distinguishing between its nature in international law and municipal law. However, the court has no means of informing itself about the nature of the I.T.C. otherwise than by looking at its constitution, which is only to be found in I.T.A.6. The only instrument having direct effect in our municipal law is the Order in Council of 1972. But article 4 tells us no more than that the I.T.C. is “an organisation” in international law, and article 5 does no more than to confer “capacities” upon this organisation without purporting to define, or to alter, its legal nature in any way, whatever this might be. So the court must consider I.T.A.6 against the background of international law in order to inform itself about the nature of the I.T.C. And for that purpose one must also reject any suggestion that when a court looks at an unincorporated treaty, it is then precluded from applying any process of interpretation to its provisions. This was submitted on all sides from time to time in different contexts. However, reading a treaty involves seeking to understand it, and this may necessarily involve some interpretation of its terms.

The second reason why the principles of non-justiciability do not preclude resort to I.T.A.6 or to the Headquarters Agreement is that both are of assistance in the interpretation of the Order in Council of 1972. In relation to articles 4 and 5 of the Order this may only be a [*165] restatement of what I have said above. But article 6.1(c) refers expressly to articles of the Headquarters Agreement which have not been incorporated in the Order and which cannot therefore be applied without reference to that treaty. And articles 8 and 10 to 13 inclusive, read together with article 2, necessarily require consideration of I.T.A.6.

I have not found it necessary to cite from any of the numerous authorities to which we were referred in order to support these conclusions. They are in line with the dicta of Diplock L.J. in Salomon v. Commissioners of Customs and Excise [1967] 2 Q.B. 116, 132, and of Lord Diplock in Garland v. British Railway Engineering Ltd. [1983] 2 A.C. 751, 771. But in the present peculiarly international context one should in any event not shrink from adopting a liberal approach to the right to consider unincorporated treaties in order to interpret our consequential domestic legislation. Thus, given the problems and uncertainties of interpreting the Order in Council of 1972, passed in consequence of I.T.A.4 and the Headquarters Agreement, in the same way mutatis mutandis as numerous other similar Orders in consequence of numerous other similar treaties, it appears excessively insular, and perhaps in these times almost absurd, to prohibit reference to the underlying international instruments as an aid to the intended effect of the Orders. But in case this might be thought to be going too far I should refer to two statements of high authority which are of particular assistance in the present context, and I take them chronologically. In Pan-American World Airways Inc. v. Department of Trade [1976] 1 Lloyd’s Rep. 257, 261, Scarman L.J. said:

“There is one other situation in which, in my opinion, it is proper for our courts to take note of an international convention. It arises when two courses are reasonably open to the court: but one would lead to a decision inconsistent with Her Majesty’s international obligations under the convention while the other would lead to a result consistent with those obligations. If statutory words have to be construed or a legal principle formulated in an area of the law where Her Majesty has accepted international obligations, our courts – who, of course, take notice of the acts of Her Majesty done in the exercise of her sovereign power – will have regard to the convention as part of the full content or background of the law. Such a convention, especially a multilateral one, should then be considered by courts even though no statute expressly or impliedly incorporates it into our law.”

Secondly, there is a passage in the speech of Lord Bridge of Harwich in Shearson Lehman Brothers Inc. v. Maclaine Watson & Co. Ltd. (No. 2) [1988] 1 W.L.R. 16, 24D, which is of direct assistance. It was concerned with article 7 of the Order in Council of 1972 but is of general application for present purposes. Apart from appearing to indicate that in his view reference to the Headquarters Agreement was not precluded, Lord Bridge (in whose speech all their Lordships concurred) said that he derived assistance from “a consistent practice in domestic legislation, enacted to give effect to treaties concluded by the United Kingdom with international organisations…” [*166]

The importance of these passages is that they call for the rejection of a major argument on behalf of the plaintiffs made at the outset of these appeals in support of submission A. This was founded on the fact that the words in articles 4 and 5 of the Order of 1972 were the same as those which had originally been used in the Diplomatic Privileges (Extension) Act 1944 and that they must therefore have the same meaning in 1972 as they had in 1944. In consequence, to quote from the “skeleton argument” of Maclaine Watson: “the instruments… relating to other international organisations and which are all subsequent to the Act of 1944 are not admissible to construe [the Order of 1972].” Furthermore, it was said that the legislation beginning in 1944 which culminated in the International Organisations Act 1968 effectively prescribed the wording of articles 4 and 5 for the purposes of the Order of 1972 relating to the I.T.C., and therefore precluded any consideration of the nature of the I.T.C. under I.T.A.6, the Headquarters Agreement and international law generally.

I had difficulty in following these submissions and hope that I do not do them any injustice. But their purpose was to seek to compel the court to ignore entirely that I.T.A.6 and the Headquarters Agreement provided expressly that the I.T.C. “shall have legal personality,” in articles 3 and 16.1 respectively. Equally, their purpose was to render it impermissible for the court to know and take into account that the great majority of treaties setting up international organisations has expressly provided, by the use of the same or similar words, that the organisation was to be a legal entity on the plane of international law. It was said that the English courts are allowed to know no more about the I.T.C. than that it was an “organisation” as mentioned in article 4 of the Order of 1972 and that the courts therefore had to remain wholly uninformed about the nature of this organisation on the plane of international law.

I have already said enough to make it clear that in my view all these submissions are untenable. The court is under a duty to inform itself as best it can about the juridical nature of the I.T.C. in order to consider upon what legal entity, body, organisation or concept the capacities of a body corporate have been conferred by article 5 of the Order, and for the purpose of deciding the justiciable issues raised by the contention that the members of the I.T.C. are liable to the plaintiffs for the contractual debts of the I.T.C. This not only permits, but requires, the court to consider I.T.A.6 and the Headquarters Agreement so far as necessary. It also requires the court to determine what are the relevant principles of international law in so far as their ascertainment may be necessary for the determination of the issues between the parties. While these must of course ultimately be decided by English law, it does not by any means follow that international law is irrelevant in deciding upon the position of the parties under English law.

I have spent some time on these initial submissions of the plaintiffs because in my view they involve an erroneous application of the doctrine of non-justiciability in relation to unincorporated treaties, and because the proper scope of this doctrine bears upon so many aspects of these appeals. But in fairness to the plaintiffs it should be noted that these extreme submissions were only advanced for the purposes of submission [*167] A, and that submissions A, B and C are wholly alternative and therefore permissibly inconsistent with each other. Thus, as will be seen later, the plaintiffs’ approach to non-justiciability in relation to submission B – particularly as advanced by Mr. Burnton on behalf of the banks – was wholly in line with the views expressed above and not seriously contested by the defendants. On the other hand, in relation to submission C the roles were reversed, since it was the concern of the defendants to seek to exclude recourse to I.T.A.6 when the plaintiffs were claiming that this was permissible.

Against this background I then consider the plaintiffs’ submissions A, B and C in turn.

Submission A: direct liability of the member states

This submission is based on the contention that the I.T.C. is not a legal entity with legal personality distinct from its members. The only legal entitites are the 24 members. They alone are the legal and beneficial joint owners of the premises and other assets of the I.T.C. They have joined together in a venture in the nature of a partnership, using this term in a general sense, which involves or includes trading in this country and elsewhere by using the description “International Tin Council” as a collective name for the members themselves. It follows that when the I.T.C. enters into contracts with third parties it does so only in name and not as a legal entity. The third parties contracting with the I.T.C. are in law entering into contracts with the 24 members of the I.T.C. jointly and severally, there being no other legal entity with which these contracts could have been concluded. The conferment upon the I.T.C. of the legal capacities of a body corporate by the Order of 1972 was merely designed to enable the members to carry out their trading objectives in the name of the I.T.C. There are only 24 legal entities, not 25. Under the law of this country a legal entity in the form of a persona ficta can only be created by legislation or Royal Charter, and no such entities are known to English law other than bodies corporate.

Accordingly, since it is common ground that the I.T.C. is not a corporation, the conferment upon it of the legal capacities of a body corporate cannot have the effect of making it equivalent to a body corporate whose members have no liability for contracts concluded by the body corporate in its own name. In the upshot, therefore, the members are an unincorporated association of trading partners who are all jointly and severally liable on contracts made in their trading or partnership name of “I.T.C.”

These submission were supported by a wealth of learning ranging from the history of bodies corporate in Blackstone’s Commentaries and Pollock and Maitland’s History of English Law to Sir Carleton Allen’s essay on “Status and Capacity” (1930) 46 L.Q.R. 277. The plaintiffs also relied on numerous authorities showing that a body which has not been incorporated must not be treated as a legal entity distinct from its members, which is the hallmark of a corporation. In particular they relied on the following authorities: In re Sea Fire and Life Assurance Co., Greenwood Case (1854) 3 De G.M. & G. 459, 486-488; In re Sheffield and South Yorkshire Permanent Building Society (In Liquidation) [*168] (1889) 22 Q.B.D. 470, 476; Salford Corporation v. County Council of Lancashire (1890) 25 Q.B.D. 384, 389, per Lindley L.J.; and the speech of Lord MacDermott, with whose analysis of the nature of a registered trade union Lord Keith of Avonholm and Lord Somervell of Harrow agreed, in Bonsor v. Musicians’ Union [1956] A.C. 104, in particular at p. 144. They countered the defendants’ reliance in the same context on the Australian case of Chaff and Hay Acquisition Committee v. J. A. Hemphill and Sons Proprietary Ltd. (1947) 74 C.L.R. 375, where a body was held to be a legal entity although not incorporated, by pointing out that under its statute the liability of its members was expressly excluded. Finally, they relied throughout on the fundamental principle of the law of partnership that persons associated with each other for the purposes of trade are jointly and severally liable for the liabilities incurred by any of them as agents for the others: see e.g. Sir George Jessel M.R. in Pooley v. Driver (1876) 5 Ch.D. 458, 475, 476.

On the basis of these and many other authorities the plaintiffs criticised, in particular, the reasoning of Millett J. which had followed the same jurisprudential path as their own but then arrived at the opposite conclusion. Having emphasised that Parliament had clearly deliberately stopped short of incorporating the I.T.C. (for reasons with which I respectfully agree and to which I will return later) and that the I.T.C. accordingly did not have the status of a body corporate, he nevertheless concluded as follows in Maclaine Watson & Co. Ltd. v. Department of Trade and Industry [1987] B.C.L.C 707, 712F:

“These cases confirm me in my view that the separate legal existence of an artificial person is simply the sum or consequence of its characteristics or attributes, and is seen in terms of its capacity to acquire legal rights and duties of its own. In my judgment, the dichotomy between status and capacity is false.”

Having listened to many days of citations and arguments in this context I am inclined to doubt whether this conclusion, expressed in such general terms, is wholly correct as a matter of pure jurisprudence. I do not think that the conferment of capacities, however wide, upon an unincorporated body of persons has the same effect as if it had been incorporated, and that in that sense there is no difference between capacity and status. This can perhaps be seen if one takes the following illustration as a summary of the effect of the plaintiffs’ submissions. Given the fact that in English law a parternship or firm is not in itself a legal entity, although the Partnership Act 1890 and what is now R.S.C., Ord. 81, have conferred upon it a number of the capacities and attributes of a legal entity, imagine an Act of Parliament which provided that “without prejudice to any enactment, law or rule concerning partnerships in English law, a firm shall have the capacities of a body corporate.” If such a curious piece of legislation could be imagined, then it seems to me that contracts concluded in the name of the firm would continue to bind the partners jointly and severally as agents for each other as at present, notwithstanding the conferment upon the firm of the “capacities” of a body corporate. That is really the essence of the plaintiffs’ submission A. And if this illustration of their argument is [*169] correct as a matter of construction and jurisprudence, which it may well be, then it would run counter to the analysis expressed in this passage from the judgment of Millett J.

However, in my view there are overwhelming reasons for rejecting the plaintiffs’ submission A which have nothing or little to do with any of the foregoing matters. Indeed, despite the ingenuity of the advocacy of Mr. Littman and Mr. Kentridge, it seemed to me that the more one thought about submission A, the less plausible it became. While the I.T.C. is obviously not a body corporate in terms of English law, to maintain that it therefore cannot be, and is not, a legal entity distinct from its members is in my view untenable. I summarise my reasons in paragraphs (1) to (5) below, with apologies for any overlap with the earlier comments on “Justiciability.”

(1) Submission A disregards that the I.T.C., in the same way as virtually every other international organisation, is a legal entity on the plane of international law. Contrary to the passages from the judgment of Scarman L.J. in Pan-American World Airways Inc. v. Department of Trade [1976] 1 Lloyd’s Rep. 257 and the speech of Lord Bridge of Harwich in Shearson Lehman Brothers Inc. v. Maclaine Watson & Co. Ltd. (No. 2) [1988] 1 W.L.R. 16, 24, this submission ignores the consistent pattern of the treaties on the one hand and of our domestic legislation in response to the treaties on the other. This is the reason for the tortuous and unacceptable argument that the phrase “the legal capacities of a body corporate” in the Order of 1972 must have the same meaning as in the Act of 1944, and that all subsequent treaties, statutes and Orders in Council must therefore be ignored altogether. In my view this approach is erroneous. There is a consistent parallelism between treaties creating international organisations on the one hand and the consequential statutes and Orders in Council enacted in this country on the other and both must be considered together. The position regarding the I.T.C. is entirely typical in this respect. Without apology for their repetition, it is necessary to set out once more the salient provisions. On the one hand, one has article 16.1 of I.T.A.6 and article 3 of the Headquarters Agreement, both in similar terms:

“The council shall have legal personality. It shall in particular have the capacity to contract, [and] to acquire and dispose of movable and immovable property and to institute legal proceedings.”

On the other hand one has articles 4 and 5 of the Order in Council of 1972:

“4. The International Tin Council (hereinafter referred to as the council) is an organisation of which Her Majesty’s Government in the United Kingdom and the governments of foreign sovereign powers are members. 5. The council shall have the legal capacities of a body corporate.”

The objective of the latter provisions was to give effect to the former. That was the treaty obligation of Her Majesty’s Government. The purpose of the domestic legislation was to give recognition to the international organisation as a legal entity in international law and to [*170] enable it to function as a legal entity, or as if it were a legal entity, within the framework of English law.

Admittedly, compliance with our treaty obligations concerning international organisations must have presented a legislative problem. As both Staughton J. and Millett J. pointed out, there were obvious reasons for not incorporating international organisations or legislating to the effect that they should be treated as if they were bodies corporate. To have done so would have been to domesticate or naturalise international legal entities by subjecting them to the requirements of municipal laws which would be inconsistent with their international character. Thus, it might well have been considered contrary to international comity to subject international organisations to the national framework of the Companies Acts as regards registration, inspection, filing of accounts, disclosure of assets, winding up, etc. Given this problem, and given the fact that English legislation does not generally refer to personae fictae merely as legal entities or as possessing legal personality, the form of words chosen in 1944 and used in virtually every case since then is the combination of articles 4 and 5 of the Order of 1972. But the objective of this formulation was not merely to enable the members of an international organisation, in most cases sovereign states, to function within the framework of English law under a collective name as individual legal entities. The objective must also have been to give recognition to the fact that all the members, including the United Kingdom itself, intended that the international organisation “shall have legal personality.”

(2) In this context there is a valuable article by the late Dr. C. W. Jenks on “The Legal Personality of International Organisations” published in the British Year Book of International Law (1945), p. 267. It was written at the formative time when these problems were beginning to be debated by international jurists, and the sources to which he refers are formidable. To do justice to this paper would require too lengthy citations, but his conclusions are of great value in the present context and largely consistent with the modern literature in international law to which we were referred. He regarded the then recently evolved formula in the Diplomatic Privileges (Extension) Act 1944, of conferring upon international organisations “the capacities of a body corporate,” “as declaratory of international law as part of the common law.” And viewing the position in 1945, when treaties creating international organisations had not yet evolved the subsequently commonplace formula that the organisation should have legal personality, or words to that effect, Dr. Jenks was then already writing prophetically, at p. 272:

“It therefore appears desirable that future international constituent instruments should specifically confer legal personality on the organisations created thereunder in all appropriate cases.”

That suggestion became the standard practice. It therefore seems clear that when treaties creating international organisations provide expressly that the organisation “shall have legal personality,” as subsequently happened in virtually all cases including that of the I.T.C., the effect of the common form of words found in the present case in [*171] articles 4 and 5 of the Order of 1972 must have been intended to recognise organisations, such as the I.T.C., as legal entities for the purposes of our law. If it had been thought that this form of legislation would not be appropriate or sufficient for this purpose, then some other formula would no doubt have been adopted for the purpose of such treaties. But this was not done: the same form of words was retained in the International Organisations Act 1968 as the basis for future Orders in Council and used consistently thereafter.

Mr. Kentridge countered this by reminding us of the remarks in the opinion of Lord Atkin giving the advice of the Privy Council in Attorney-General for Canada v. Attorney-General for Ontario [1937] A.C. 326, 347, 348, to the effect that parliamentary approval of Orders in Council is not equivalent to primary legislation and that it may turn out that treaty obligations assumed by the executive have been left in default. But the Act of 1968 was a piece of primary legislation and was clearly designed for general use in relation to international organisations whose constituent treaties provided that they were to have legal personality. On Mr. Kentridge’s argument this country would have been in breach of its treaty obligations in respect of international organisations in the great majority of cases. I can see no warrant for such a conclusion.

(3) The contrary conclusion, that international organisations like the I.T.C. are recognised as legal entities in our law even though they have only been given “the legal capacities of a body corporate”, is supported by the dictum of Lord Pearce in Nissan v. Attorney General [1970] A.C. 179, 225, 226, in relation to the United Nations. This appears to be the only reported instance of this point having been judicially considered in this country, but in terms suggesting that the conclusion was regarded as almost self-evident. It will be remembered that the legislation concerning the United Nations follows the same pattern as the present case save that the corresponding Order in Council had been made under the Diplomatic Privileges (Extension) Act 1946. It will also be remembered that the Convention of 1946, pursuant to which the Order was made, provided in article 1: “The United Nations shall possess juridical personality. It shall have the capacity… to contract.” Thereafter, in its advisory opinion of 11 April 1949 in In re Reparation for Injuries Suffered in Service of United Nations [1949] I.C.J.R. 174, 179, the International Court of Justice concluded that “the organisation is an international person:” the full passage is quoted in the judgment of Ralph Gibson L.J. (post, pp. 233H – 234C). In the Nissan case the House of Lords was referred to this opinion, at p. 200A and, at p. 201C, to the Diplomatic Privileges (United Nations and International Court of Justice) Order in Council 1947 (S.I. 1947 No. 1772), made under the Act of 1946 in substantially the same terms as articles 4 and 5 of the Order of 1972 in the present case. It is against that background that it is important to note the following short passage from the speech of Lord Pearce, at p. 223C:

“The United Nations is not a super-state nor even a sovereign state. It is a unique legal person or corporation. [My italics] It is based on the sovereignty of its respective members.” [*172]

Of course, the constitution and objectives of the United Nations are wholly different from those of more commonplace international organisations such as the I.T.C. But the fact that the I.T.C. is largely designed to conduct trading activities in order to achieve its objectives, whereas the United Nations will presumably enter into contracts mainly for administrative and similar purposes only, is no reason for differentiating between them as legal entities. Lord Pearce was no doubt using the term “corporation” in a loose sense; that is why he prefaced it with the words “a unique legal person.” But he clearly had no doubt that it was a legal entity.

Mutatis mutandis the same reasoning must apply to the I.T.C. Thus, in a recent decision of the Supreme Court of the State of New York on 25 January 1988 (International Tin Council v. Amalgamet Inc. (1988) 524 N.Y.S.2d 971) the court clearly took it for granted that the I.T.C. is a legal entity, inter alia because it had entered into the Headquarters Agreement with the United Kingdom. And if the I.T.C. is recognised as a legal entity under the laws in force in the United States, where there is evidently no legislation applicable to it, this same body must a fortiori be recognised as a legal entity by our law in the light of the Order in Council of 1972. The only astonishing aspect of the New York proceedings was that the I.T.C. was seeking the stay of an arbitration against it on the ground that it was not merely a legal entity but entitled to sovereign immunity, in contrast to the matters referred to in (5) below. How it could have been thought proper even to put forward such a claim was not explained to us, and it is not surprising that it was roundly rejected by the court.

(4) In reviewing the history, I have already pointed out that until 1977, before the modification of the doctrine of absolute sovereign immunity in our law, submission A would have led to the strange result that if the I.T.C. were merely a collective name for its members, anyone dealing with the I.T.C. would have had no enforceable contracts against anyone, other than, presumably, the British Government. The same would apply in relation to all other international organisations subject to the same common form of legislation. It requires no elaboration to conclude that it is highly unlikely that this was the legislative intention and I need not repeat what I said earlier. However all these difficulties disappear if the I.T.C. is recognised as a legal entity separate from its members.

(5) From I.T.A.4 in 1970 onwards the I.T.C. became entitled to certain immunities “from suit and legal process.” These are set out in article 6 of the Order in Council of 1972. But there was no immunity in respect of the enforcement of arbitration awards. Against that background, as pointed out by Mr. Grabiner in particular, article 6 really makes no sense if the I.T.C. is not a legal entity. It contains no reference whatsover to the members of the I.T.C. How then can immunity from suit sensibly have been granted to a body which had no legal existence? How can one contemplate such a body entering into contracts containing arbitration clauses pursuant to this legislation, participating in arbitrations and obtaining awards or having awards made against it? How can the legislation sensibly refer to the enforcement of [*173] awards against the I.T.C. if the I.T.C. has no legal existence apart from the collectivity of its members as an unincorporated association? On that basis, what is the point of providing for any immunity from legal process for the I.T.C., since the member states were in any event already immune at the time? Or was the intention of article 6 to abrogate the sovereign immunity of the member states as early as 1972 to the extent referred to in it, but without in fact referring to the member states at all?

In my view an analysis leading to such conclusions makes no sense. Article 6 only makes sense, and indeed good sense, if the I.T.C. is a legal entity in its own right. It is indisputable that the I.T.C. can contract, even with its own members; and it is also indisputable that the I.T.C. is liable on awards and judgments obtained against it. As Mr. Pollock put it in reply to Mr. Kentridge’s reliance on Descartes (for some purpose which now escapes me): “Debeo ergo sum.”

For all these reasons I have no hesitation in rejecting submission A.

Submission B: concurrent or secondary liability of the member states

This submission has been summarised at the beginning of this judgment. Its essence is that, contrary to submission A, it accepts that the I.T.C. is a legal entity, both in international and in English law, but claims that its nature does not exclude the concurrent or secondary direct liability of its members to the creditors of the I.T.C. for the contractual obligations of the I.T.C. For convenience I have referred to such a legal entity as a “mixed” entity in order to distinguish it from the only two concepts of associations presently known to English law, viz. corporations on the one hand and unincorporated associations on the other. In English law, only bodies corporate can be legal entities in the form of personae fictae. While having some of the attributes and capacities of a legal entity by virtue of the Partnership Act 1890 and R.S.C., Ord. 81, a firm is not a legal entity but must be classified as an unincorporated association. The I.T.C. cannot be an English partnership, since it has more than 20 members who do not fall within the professional exceptions for which a greater number is permitted by section 716 of the Companies Act 1985. For the purposes of this submission it was therefore frequently referred to as a quasi-partnership.

In my view submission B raises the most difficult problems and the only real prospect of success for the plaintiffs in these cases. This may well appear improbable to an English lawyer, at any rate at first sight. But lawyers versed in systems based on the civil law would not have the same reaction, even as close as in Scotland. It was common ground that “mixed” entities of the kind relied on in submission B are prevalent in civil law systems. The relevance of this fact was high-lighted by Mr. Kentridge at the beginning of his submissions. As he pointed out, only two of the 24 members of the I.T.C., Australia and Ireland, are known to be subject to the common law system alone. Many of the others are certainly civil law countries, and in others, such as the United Kingdom and Canada, a mixture of the two systems prevails in Scotland and Quebec respectively. In considering the nature of the “legal personality” which the I.T.C. was intended to have pursuant to article 16.1 of [*174] I.T.A.6, there must accordingly be no predisposition to assume that the member states intended to accord to the I.T.C. legal personality in international law based upon common law rather than civil law concepts. On the contrary, judging by the membership of the I.T.C. and the prevalence of civil law over common law systems throughout the world generally, the contrary would be a better assumption if any assumption is to be made.

Although it was common ground that “mixed” entities are prevalent in civil law systems, I should briefly mention the illustrations to which we were specifically referred. Closest to home one has section 4(2) of the Partnership Act 1890, and I set out the whole section:

“(1) Persons who have entered into partnership with one another are for the purposes of this Act called collectively a firm, and the name under which their business is carried on is called the firm-name. (2) In Scotland a firm is a legal person distinct from the partners of whom it is composed, but an individual partner may be charged on a decree or diligence directed against the firm, and on payment of the debts is entitled to relief pro rata from the firm and its other members.”

In German law the position appears to be similar to the approach in this country. We were referred to Horn, Kštz and Leser, German Private and Commercial Law: An Introduction (1982), p. 241:

“For continental lawyers limited liability is a natural consequence of the company’s having juristic personality, but it is not a necessary one. In the K.G. aA., the general partners are personally liable for the debts of the company, while shareholders are liable only to pay in the unpaid amounts of their shares.”

The similar position in French law of a “sociéte en nom collectif” was discussed in two English cases, Von Hellfeld v. E. Rechnitzer [1914] 1 Ch. 748 and Dreyfus v. Inland Revenue Commissioners (1929) 14 Tax Cas. 560, but both turned on the evidence as to French law and it is unnecessary to refer to them in detail. A similar “mixed” entity exists in systems of law derived from Spain, evidently known as “sociedad en comandita”; see Puerto Rico v. Russell & Co. (1933) 288 U.S. 476. The nature of a similar body under the Jordanian Companies Law (No. 12 of 1964) was recently considered by the Court of Appeal: Johnson Matthey & Wallace Ltd. v. Alloush (unreported) 24 May 1984; Court of Appeal (Civil Division) Transcript No. 234 of 1984. And it is also interesting to see the same legal concept underlying the proposed European Economic Interest Grouping (E.E.I.G.) pursuant to Council Regulation (E.E.C.) No. 2137/85. This is not yet in force, but when it is it will introduce a “mixed” legal entity into the law of this country. Finally, one should remember that during the middle of the last century, pursuant to the Joint Stock Companies Act 1844 (7 & 8 Vict. c. 110) until the repeal of the relevant provisions by the Limited Liability Act 1855 (18 & 19 Vict. c. 133), a “mixed” body corporate existed in English law. For 11 years there was a legislative regime of direct liability on the part of the shareholders of a corporation to the creditors of the corporation. This [*175] historical staging post between corporations with large numbers of members, but who were still treated as partnerships, and the modern limited liability company formed a large part of the discussion concerning submission A, with particular reference to In re Sea Fire and Life Assurance Co., Greenwood’s Case (1854) 3 De G.M. & G. 459.

Accordingly, while no such “mixed” entity exists in English law today, these illustrations show that it would not be surprising if the legal personality of the I.T.C. in international law had been intended to take a similar form.

That was the starting point of submission B. It would then follow that the members would be directly liable to the creditors of the I.T.C. for the contractual obligations of the I.T.C., either concurrently with the I.T.C. or secondarily and contingently in the event of the I.T.C. failing to honour its obligations. However, it is only necessary to consider the latter alternative, for two reasons. First, while at any rate some of the “mixed” entities mentioned in argument have the characteristic of exposing their members to concurrent liability with the entity, secondary liability appears to exist in all such cases and to be an inherent part of this concept. Secondly, this must represent the only realistic possibility in the present cases when one considers the position of the I.T.C. under the Headquarters Agreement and the Order in Council of 1972. There is no trace in either of any indication that actions might be brought against the member states concurrently with the I.T.C., and the prevailing doctrine of absolute state immunity would have precluded any consideration of such a possibility before 1977. On the contrary, both the Headquarters Agreement and the Order in Council clearly envisage that in the event of disputes arising out of contractual liabilities undertaken by the I.T.C., these will be submitted to arbitration and that any resulting awards against the I.T.C. will be enforced against the I.T.C. alone. On that basis there could be no possibility of any concurrent liability in the members. In the upshot, therefore, it is only profitable to consider the possibility of their secondary liability. If the plaintiffs cannot succeed on that basis, then they must fail in any event.

I then turn to analyse the various ways in which counsel for the plaintiffs submitted that on its true analysis the legal nature of the I.T.C. and its members was that of an unincorporated association, but which had the character of a “mixed” entity with secondary liability on the part of the members for the debts of the entity. Their arguments can be grouped by reference to English law on the one hand and via the route of international law on the other. The latter was emphasised in particular by Mr. Burnton on behalf of the banks, but not adopted with the same conviction by the other counsel for the plaintiffs. Nevertheless, as it seems to me, the latter route must be the plaintiffs’ only hope. I will deal with both approaches in turn.

Secondary liability of the members in English law

I will assume that the plaintiffs are correct in their basic contention that if one ignores the I.T.C. as a legal entity, and merely considers the association and activities of the member states in England, then they would be jointly and severally liable for the contracts made in the name [*176] of the I.T.C. with the plaintiffs, both as regards the tin trading contracts and the bank loans. In other words, I will assume that the plaintiffs’ contentions under submission A based on authorities such as Pooley v. Driver, 5 Ch. D. 458, would have succeeded but for the fact that, contrary to their submission, the I.T.C. is a legal entity in its own right. The defendants did not accept the correctness of this analysis even on this limited basis. Having regard to the objectives of the I.T.C., which they characterised as jure imperii and not jure gestionis, they did not accept that the member states could properly be treated as trading partners who would be jointly and severally liable on contracts made in the name of the I.T.C. pursuant to I.T.A.6 even if the I.T.C. were only a collective contractual name for the members. Had it been necessary to decide this issue, I think that I would have come down in favour of the plaintiffs’ contentions, and for present purposes I will assume that to be right.

But while this analysis obviously remains central to submission B as well, one is now dealing with an entirely different situation in which it is accepted that the I.T.C. is itself a legal entity, albeit not a corporation. On that basis, with all respect to the learning and ingenuity displayed in the advocacy on behalf of the plaintiffs, I could never see for one moment how they could succeed in establishing secondary liability as a matter of English law. As Mr. Pollock pointed out in the first minutes of his submission, given the concession for present purposes that the I.T.C. is a legal entity, and given the indisputable fact that the conferment upon it of the legal capacities of a body corporate empowers it to contract in its own name, there is no way in which contracts made by the I.T.C. in its own name can engage the liability of anyone else, whether its members or others, save under the doctrine of agency. But that is submission C. In other words, as a matter of English law there is simply no half-way house between submissions A and C.

In my view this is unanswerable. The plaintiffs sought to answer it by contending that although for the purposes of this submission the I.T.C. must be assumed to be a legal entity, since it is not a body corporate it does not follow that its members are entitled to claim to be in the same position as the shareholders of a corporation with limited liability. Their argument assumed that limited liability of the members of a legal entity can only be conferred by legislation. But this is not true. The position is simply that unlike the position under the civil law in Scotland, the English common law has not developed any concept similar to a Scottish partnership. The interposition of a legal entity between an unincorporated group of persons on the one hand, and third parties who enter into contracts with the legal entity on the other, has the consequence under the common law that the members of the group have no liability for the contracts made by the entity, unless these were made on their behalf pursuant to the doctrine of agency. As Professor Gower put the matter in one sentence in his Principles of Modern Company Law, 4th ed. (1979), p. 100: “It follows from the fact that a corporation is a separate person that its members are not as such liable for its debts.”

There were also other fallacies in the plaintiffs’ submissions in this context. They elided the legislative position concerning the limited [*177] liability of the members of corporations by presenting a picture suggesting that this was the consequence of provisions enacted in the Companies Acts. But in fact there is no provision which provides that the shareholders of a company have no liability for the debts of the company. The effect of the legislation is merely that the liability of shareholders will only be limited if certain formal requirements of incorporation are complied with. And what is then limited is not the liability of the shareholders to the creditors of the company but to the company itself. As Mr. Pollock repeatedly pointed out, it is meaningless to discuss the question whether the liability of the members of a legal entity is limited or excluded unless and until the basis for the existence of any liability has been established. But, for the reasons already stated, there is simply no such basis in English law.

It follows that there is no way whereby articles 4 and 5 of the Order of 1972 can be construed as though they provided that the I.T.C. and its members were to be in the same legal position as a Scottish partnership. Although one may have sympathy with the plaintiffs and regret the comparative rigidity of our jurisprudence which leads to this consequence, I can seen no escape from this conclusion. Nor was I able to be moved by a brief plea ad misericordiam from Mr. Littman, referring to one sentence in the speech of Viscount Simonds in National Bank of Greece and Athens S.A. v. Metliss [1958] A.C. 509, 525:

“But, my Lords, in the end and in the absence of authority binding this House, the question is simply: what does justice demand in such a case as this?”

But we cannot make forensic bricks without jurisprudential straw. There was an ample quantity of the latter commodity in that case, whereas I can find none here. On the contrary, the jurisprudence drives one firmly to the opposite conclusion.

Secondary liability via the route of international law

For a long time I was persuaded, as I think we all were, that this would provide the answer which justice requires in these deplorable cases. But in the end, with reluctance and regret, I was driven to the conclusion that the edifice will not stand up. Since then I have had the opportunity of reading in draft the dissenting judgment of Nourse L.J. and the judgment of Ralph Gibson L.J. which follow. As will be seen, my views lie somewhere between theirs. I feel able to follow the path indicated by Nourse L.J. up to a certain point. Thereafter, however, I find myself entirely in agreement with Ralph Gibson L.J.

The essence of this way of putting submission B is deceptively simple. The constitution of a corporation and the rights and obligations derived from it are governed by the system of law under which it is incorporated. For the I.T.C. the constituent document is I.T.A.6 and the system of law is international law. These lead to the conclusion that the legal nature of the I.T.C. is that of a “mixed” entity whose members are secondarily liable for the entity’s debts. The Order in Council of 1972 has recognised this entity and received it into the framework of English law, as shown by article 4. Article 5 has conferred the widest [*178] legal capacities on it, but its juridical nature has not been altered and therefore remains what it is in international law. Accordingly, the members are secondarily liable for the breaches of the contracts concluded by the I.T.C., and these are of course justiciable in the English courts.

This formulation appears attractive, plausible and in accordance with justice. However, in order to get from its beginning to the end the following three questions must be faced. (1) Is it permissible for an English court to consider I.T.A.6 and its interpretation in accordance with international law, in order to seek to determine the legal nature of the I.T.C.? (2) If the answer to (1) is yes, is the legal nature of the I.T.C. in international law that of a “mixed” entity whose members are secondarily liable for its debts? (3) If the answer to (2) is also yes, does it follow that the member states have submitted the determination and enforcement of such secondary liabilities to the national courts of a member state; in this case to the appropriate court in the United Kingdom? It may be that (3) is only a facet of (2), since both involve consideration of I.T.A.6 and of international law.

My conclusion, though with some doubt because of the novelty of the issue, is that it is possible to answer (1) in the affirmative in favour of the plaintiffs. This is the part of the path taken by Nourse L.J. which I am able to share. But thereafter my conclusions are in line with those of Ralph Gibson L.J. In my view an affirmative answer to (2) has not been established; and the answer to (3) is in the negative.

I will deal with these aspects in turn.

Question (1)

The problem is that this question involves a novel conflict between two principles of our law which it has never been necessary to consider in conjunction, let alone to choose between them for the decision of a particular case. Is it permissible to consider the terms and effect of I.T.A.6 in order to determine whether or not the members of the I.T.C. are secondarily liable for its debts? Since I.T.A.6 is an unincorporated treaty, any issue as to its effect is non-justiciable. That is the first principle. The second is stated in rule 174 of Dicey & Morris, The Conflict of Laws, 11th ed. (1987), vol. 2, p. 1134:

“(1) The capacity of a corporation to enter into any legal transaction is governed both by the constitution of the corporation and by the law of the country which governs the transaction in question. (2) All matters concerning the constitution of a corporation are governed by the law of the place of incorporation.”

The comment which follows shows that these statements apply inter alia to “the extent of an individual member’s liability for the debts or engagements of the corporation:” p. 1136. While the authority cited is scanty, the text rightly submits that “the rule is soundly based in that reference to any other legal system would be absurd:” p. 1135.

How is this conflict to be resolved? The application of rule 174, as a principle of the conflict of laws, has of course so far only arisen in the context of bodies constituted under the domestic laws of foreign states. [*179]

No similar question appears ever to have arisen between English law (not including the law of the E.E.C.) on the one hand and international law on the other. But this is perhaps not surprising. Not only should there be no conflict between our law and international law, but, on the contrary, international law is often said to form part of, or to be incorporated into, English law.

On this aspect I agree with the judgment of Nourse L.J. I think that the position resulting from the Order in Council of 1972 in this regard can be summarised as follows.

(a) Article 4 recites and recognises the fact that the I.T.C. is an international organisation.

(b) There can be no doubt that this organisation is a legal entity in international law.

(c) The Order in Council deliberately stops short of incorporating it, for understandable reasons which have already been mentioned. It merely confers capacities on an entity existing in international law in order to enable that entity to function within the framework of English law, but without changing the nature of the entity.

(d) As already explained, there is at least as great a presumption in favour of the I.T.C. having the character of a “mixed” entity in international law as that of a body corporate. There can be no presumption that its legal nature was to be the same as a persona ficta in English law. Thus, while it was no doubt anticipated that the main trading activities of the I.T.C. would be carried out in London, it is clear that this country and English law were not envisaged as the exclusive setting for these purposes. Apart from trading on the London Metal Exchange, many transactions were to be carried out on the Kuala Lumpur Tin Market in Penang, and article 27 of I.T.A.6 provided that the floor and ceiling prices of tin were to be expressed in Malaysian ringgit or in any other currency which the council might decide. It follows that there is no reason why an English court should necessarily attribute to the I.T.C. the same characteristics as those of a corporation solely because no other persona ficta happens to be known to English law.

(e) It is therefore necessary to consider the constitution of the I.T.C. in order to determine whether or not the I.T.C. is a “mixed” entity whose members are secondarily liable on contracts made by the I.T.C.

(f) Since this can only be done by considering I.T.A.6 and its effect in international law, in accordance with the principles stated in rule 174 of Dicey & Morris, The Conflict of Laws, resort to I.T.A.6 is permissible and indeed necessary.

In so far as this analysis may conflict with the doctrine of non-justiciability it seems to me that this doctrine must give way. There has never been any occasion when its scope has fallen to be considered in a context like the present. In the section headed “Justiciability” I suggested that there were two relevant principles in the context of unincorporated treaties. The second, dealing with the determination of rights and obligations of the parties to unincorporated treaties, really has no relevance to the present problem. The problem is created by the first, that unincorporated treaties do not form part of the law of this country [*180] and that no rights or obligations arising under them can therefore provide any basis for a justiciable claim. But the limits of this doctrine are not yet clearly drawn: see the discussion in the judgment of Staughton J. [1987] B.C.L.C. 667, 701F-703A. The constitutional reason underlying it is the historical predominance of Parliament over the executive in relation to the power to make laws. Viewed in that way, there seems no harm in permitting resort to I.T.A.6 for the purpose of establishing who, on the plane of international law, is liable for the debts of the I.T.C.; on the contrary, justice and good sense point to the contrary conclusion. Moreover, the claims of the doctrine of non-justiciability are particularly weak in cases such as the present, since the Order in Council of 1972 refers expressly to the Headquarters Agreement and I.T.A.6 (to be read for I.T.A.4). That appears to be an unprecedented hybrid situation between an incorporated and wholly unincorporated treaty.

In this novel situation I do not think that the doctrine of non-justiciability should properly preclude consideration of I.T.A.6 and of its effect in international law. Otherwise our courts would run the risk of attributing to the I.T.C. the characteristics of a persona ficta under the rules of English law when it should be their function to ascertain its true nature in international law.

Questions (2) and (3)

I therefore proceed on the basis that it is permissible for the court to consider the effect of I.T.A.6 in international law in order to determine whether the I.T.C. is a “mixed” entity, as the plaintiffs contend. Although one must then begin by considering I.T.A.6 as though it were the constitution of a foreign corporation, it is convenient to take questions (2) and (3) together, since both involve general questions of international law. It is at this point that I regretfully part company from Nourse L.J.

Beginning with I.T.A.6, I cannot find anything in it to support the suggestion that the parties to this treaty intended that they should be liable for the contractual obligations of the I.T.C. if these should remain unperformed. On the contrary, such indications as there are point firmly in the opposite direction. As already mentioned, there is an express obligation to make available sufficient funds to enable the I.T.C. to meet its obligations to its staff: see article 60.2(b). But there is nothing equivalent in relation to the I.T.C.’s obligations to any other creditors. In particular, there is no provision to the effect that sufficient funds will be made available to meet any deficiency on the liquidation of the buffer stock account under article 26. Admittedly, it appears to have been assumed throughout that no deficiency would arise or be allowed to arise, or it may be that this possibility simply did not cross anyone’s mind. But the fact that a situation such as the present had not been envisaged, for whatever reason, cannot support the conclusion that the member states tacitly assumed some obligation to deal with it if it should arise.

The only provisions in I.T.A.6 dealing with the financing of the buffer stock account beyond the members’ liability for contributions [*181] under article 22 are to be found in articles 21 and 24. Article 21 provides for borrowing to finance part of the buffer stock of 20,000 tonnes “using as security… if necessary, government guarantees/government undertakings.” As shown by the definition in article 2, these were to be provided to the council, not to the lenders; and this article merely provides that in that event “Members shall be liable to the council up to the amount of their guarantees/undertakings.” Article 24 is equally of no assistance. It provides that the council may borrow for the purpose of the buffer stock on the security of tin warrants such sum or sums as it deems necessary on terms and conditions to be approved by the council, and that, by a two-thirds distributed majority, the council may “make any other arrangements it sees fit in order to supplement its resources.” But there is no mention of any consequential liability of the members in any of those events. Apart from articles 60.2(b) and 21 read with the definition in article 2, there is no provision for the liability of members to pay anything beyond their allocated contributions to the administrative and buffer stock accounts.

The second crucial aspect of I.T.A.6 is that all references to contributions, payments or other obligations on the part of the members show that no more was contemplated than obligations by the members towards the council. It may be, of course, that those referred to expressly should not be regarded as exhaustive. There may be additional implied obligations to the council in international law entitling the council to make “calls” or to claim an indemnity from the members if it has insufficient funds to meet obligations incurred on the instructions of the members pursuant to I.T.A.6. These aspects are referred to in the judgment of Ralph Gibson L.J. in the receivership appeal [1988] 3 W.L.R. 1169, where it is pointed out that the enforcement of such obligations, if any, would clearly be non-justiciable. The important point for present purposes, however, is that I.T.A.6 nowhere envisages any liability by the members to anyone other than the council or the members inter se. There is nothing which points to the assumption of any obligation to any creditor of the council. On the contrary, everything points in the opposite direction.

On this analysis of I.T.A.6 it is obviously unlikely that it will prove possible to extract from the general principles of international law the conclusion that the members of the I.T.C. nevertheless have some direct liability to the creditors of the I.T.C. Moreover, in that context it is necessary to sound a note of caution in relation to the citations set out in the judgment of Nourse L.J. One must also bear in mind some important passages from the judgment of the court of the King’s Bench Division (Lord Alverstone C.J., Wills and Kennedy JJ.) delivered by the Lord Chief Justice in West Rand Central Gold Mining Ltd. v. The King [1905] 2 K.B. 391. The relevant extracts refer to two of three propositions argued by Lord Robert Cecil for the petitioners, mentioned on p. 401. First, that by international law the sovereign of a conquering state is liable for the conquered, and secondly, that international law forms part of the law of England. I only refer to these to render intelligible the following passages from the judgment of the court. The first follows on, at pp. 401-402: [*182]

“In support of his first proposition Lord robert Cecil cited passages from various writers on international law. In regard to this class of authority it is important to remember certain necessary limitations to its value. There is an essential difference, as to certainty and definiteness, between municipal law and a system or body of rules in regard to international conduct, which, so far as it exists at all (and its existence is assumed by the phrase ‘international law’), rests upon a consensus of civilised states, not expressed in any code or pact, not possessing, in case of dispute, any authorised or authoritative interpreter; and capable, indeed, of proof, in the absence of some express international agreement, only by evidence of usage to be obtained from the action of nations in similar cases in the course of their history. It is obvious that, in respect of many questions that may arise, there will be room for difference of opinion as to whether such a consensus could be shewn to exist. Perhaps it is in regard to the extra-territorial privileges of ambassadors, and in regard to the system of limits as to territorial waters, that it is least open to doubt or question. The views expressed by learned writers on international law have done in the past, and will do in the future, valuable service in helping to create the opinion by which the range of the consensus of civilised nations is enlarged. But in many instances their pronouncements must be regarded rather as the embodiments of their views as to what ought to be, from an ethical standpoint, the conduct of nations inter se, than the enunciation of a rule or practice so universally approved or assented to as to be fairly termed, even in the qualified sense in which that word can be understood in reference to the relations between independent political communities, ‘law.’ The reference which these writers not infrequently make to stipulations in particular treaties as acceptable evidence of international law is as little convincing as the attempt, not unknown to our courts, to establish a trade custom which is binding without being stated, by adducing evidence of express stipulations to be found in a number of particular contracts.”

The second passage, at pp. 406-408:

“The second proposition urged by Lord Robert Cecil, that international law forms part of the law of England, requires a word of explanation and comment. It is quite true that whatever has received the common consent of civilised nations must have received the assent of our country, and that to which we have assented along with other nations in general may properly be called international law, and as such will be acknowledged and applied by our municipal tribunals when legitimate occasion arises for those tribunals to decide questions to which doctrines of international law may be relevant. But any doctrine so invoked must be one really accepted as binding between nations, and the international law sought to be applied must, like anything else, be proved by satisfactory evidence, which must show either that the particular proposition put forward has been recognised and acted upon by our own country, or that it [*183] is of such a nature, and has been so widely and generally accepted that it can hardly be supposed that any civilised state would repudiate it. The mere opinions of jurists, however eminent or learned, that it ought to be so recognised, are not in themselves sufficient. They must have received the express sanction of international agreement, or gradually have grown to be part of international law by their frequent practical recognition in dealings between various nations. We adopt the language used by Lord Russell of Killowen in his address at Saratoga in 1896 on the subject of international law and arbitration: ‘What, then, is international law? I know no better definition of it than that it is the sum of the rules or usages which civilised states have agreed shall be binding upon them in their dealings with one another.’ In our judgment, the second proposition for which Lord Robert Cecil contended in his argument before us ought to be treated as correct only if the term ‘international law’ is understood in the sense, and subject to the limitations of application, which we have explained…. But the expressions used by Lord Mansfield when dealing with the particular and recognised rule of international law on this subject, that the law of nations forms part of the law of England, ought not to be construed so as to include as part of the law of England opinions of text-writers upon a question as to which there is no evidence that Great Britain has ever assented, and a fortiori if they are contrary to the principles of her laws as declared by her courts.”

If one bears in mind these passages as well as those which have been cited by Nourse L.J., what relevant principles of international law can be extracted from the voluminous material which has been presented to us? Without repeating any of the references to the writers and treaties, etc. referred to in the judgments of Nourse and Ralph Gibson L.JJ., it seems to me that the position can be summarised as follows:

(i) It is clear that an international organisation such as the I.T.C. is a legal entity in international law and that it has far-reaching capacities, including in particular the capacity to enter into contracts in its own name.

(ii) Contrary to the position in English law, the combination of the facts that the I.T.C. is a legal entity and that it can contract in its own name does not necessarily imply that its members may not be secondarily liable for non-performance of the I.T.C.’s contractual obligations. Thus, if one substitutes “legal entity” for “corporation” in the sentence which I have cited from Gower, Modern Company Law, at p. 100, in dealing with submission B under English law, it would not be true in international law to say: “It follows from the fact that a legal entity is a separate person that its members are not as such liable for its debts.” The logical consequence is that at least some international organisations are likely to have the character of “mixed” entities.

(iii) The preponderant view of the relatively few international jurists to whose writings we were referred, since we were told that there are no others, appears to be in favour of international organisations being treated in international law as “mixed” entities rather than bodies [*184] corporate. But their views, however learned, are based on their personal opinions; and in many cases they are expressed with a degree of understandable uncertainty. As yet there is clearly no settled jurisprudence about these aspects of international organisations.

(iv) There is no other source from which the position in international law can be deduced with any confidence. Mr. Burnton’s best point – indeed, the only point apart from the published writings – was the practice of states as evidenced by the 16 “limited liability” treaties analysed in the judgment of Ralph Gibson L.J. But I agree with him that one cannot deduce an acceptance of liability by the members of the I.T.C. from the absence of any similar limitation of liability in I.T.A.6. These treaties cannot in themselves provide sufficient evidence of the practice of states for that purpose. Mr. Pollock rightly conceded, on the other hand, that in all the circumstances the emphatic denial of liability on the part of the 24 members in the present cases can equally not be treated as any evidence of state practice for the purposes of these appeals. But it is of some significance to note that the International Natural Rubber Agreement 1987 provided in article 48 under the heading “General obligations and liabilities of members:”

“4. The liability of members arising from the operation of this agreement, whether to the organisation or to third parties, shall be limited to the extent of their obligations regarding contributions to the administrative budget and to financing of the buffer stock…”

I appreciate, of course, that this treaty was concluded after the present situation had arisen, and obviously with it in mind. But it does not follow that this provision is therefore wholly irrelevant. We were not told who the parties to this treaty are, and I do not speculate to what extent its membership may or may not overlap with the present one. But what must never be overlooked is that international law is not concerned with ordinary litigants who are subject to rules imposed upon them by national legislation or the pronouncements of national courts. The ultimate basis of international law is the consensus of its own subjects, who are sovereign states.

(v) I agree with Nourse L.J. that on the available material the better view may well be that the characteristics of an international organisation are those of a “mixed” entity rather than of a body corporate unless, of course, there is an express disclaimer of liability as in the 16 “limited liability” treaties of which the Natural Rubber Agreement 1987 is now a pre-eminent example. But even if this be so, it does not follow that the parties to other treaties creating international organisations, such as I.T.A.6, can thereby be taken to have accepted any obligations within the framework of municipal laws and the jurisdiction of national courts. I do not think that any of the writers go so far as to say so. Their views, such as those of Professor Schermers which Nourse L.J. has quoted, are consistent with their application on the plane of international law alone. Thus, it may well be that if an international association were to default upon an obligation to a state or association of states or to another international organisation, then the regime of secondary liability on the part of its members would apply as a matter of international law. But it [*185] does not by any means follow that any similar acceptance of obligations by the members can be assumed within the framework of municipal systems of law. Certainly, as I see it, the plaintiffs have gone nowhere near being able to establish this. The interim award in Westland Helicopters Ltd. v. Arab Organisation for Industrialisation (1984) 23 I.L.M. 1071, was made in an international arbitration pursuant to an international arbitration agreement. Its reasoning cannot simply be transposed to found an acceptance of obligations to the creditors of the I.T.C. at the level of municipal law. In any event, on the basis of what we were told about the fate of this award in the Swiss courts until now, it cannot be regarded as a satisfactory precedent for any purposes, at any rate at present.

(vi) In sum, I cannot find any basis for concluding that it has been shown that there is any rule of international law, binding upon the member states of the I.T.C., whereby they can be held liable – let alone jointly and severally – in any national court to the creditors of the I.T.C. for the debts of the I.T.C. resulting from contracts concluded by the I.T.C. in its own name. I say “let alone jointly and severally” because the assumption, or imposition, of such a basis of liability involves further problems which are quite uncharted. Given that there is no such liability in English law for the reasons stated in the earlier section dealing with submission B, on what basis could an English court conclude that each of the member states can somehow be held liable in solidum for all the debts of the I.T.C. in the English courts? Such a conclusion would be tantamount to legislating on the plane of international law; an impossible concept, unfortunately.

I am therefore regretfully driven to the conclusion that submission B must fail as well. However, for the sake of completeness I should add that I agree with Ralph Gibson L.J. that Staughton J. [1987] B.C.L.C. 667, 696B-697G was mistaken in concluding that the plaintiffs must fail in this submission on the ground that the United Kingdom would have been in breach of its treaty obligations arising from the limited liability treaties to which he referred, if their interpretation of article 5 of the Order in Council of 1972 were correct. On the true construction of the relevant treaties there was no breach, because there was no obligation to make any reference in our domestic law to the provisions dealing with limited liability. In that connection it is interesting to note that the Order in Council made pursuant to the International Natural Rubber Agreement 1987 followed the usual course of being made pursuant to the International Organisations Act 1968 and therefore in the form of articles 4 and 5 of the Order in Council of 1972. In my view the adoption of this course would not be open to criticism even if the legal nature of the Natural Rubber Organisation were that of a “mixed” entity.

For these reasons I must reject submission B.

Submission C: agency

This is the plaintiffs’ third alternative submission. It proceeds on the basis that, contrary to submissions A and B, the I.T.C. falls to be treated as a legal entity which is distinct from its members in the same [*186] way as a body corporate, and that the I.T.C. alone is accordingly liable on the contracts made by it unless it also contracted on behalf of its members as undisclosed principals.

This submission was not argued before Millett J. in Maclaine Watson & Co. Ltd. v. Department of Trade and Industry [1987] B.C.L.C. 707. But in the last part of his judgment Millett J. discussed a different aspect of agency in the context of submission A, i.e. on the assumption that the I.T.C. is not a legal entity but merely a collective name for its members as an unincorporated association. He rejected submission A but nevertheless went on to consider whether, even if it were correct, the states could be held jointly and severally liable, without proof of express authority by them to the I.T.C. to enter into the contracts in question. He rejected this suggestion as well: see at pp. 714A-715G. I have equally rejected submission A, but I do not find it necessary to prolong this judgment by considering whether the plaintiffs would also have had to show that the contracts in question were made with the authority of one, some or all of the individual defendants if submission A had otherwise succeeded.

To complete these introductory aspects, it will then be seen from the final paragraph, on p. 715, of the judgment of Millett J. that he disallowed an application by Maclaine Watson to amend their claim to plead what was referred to as “factual” agency. The circumstances of that application and the reasons for its rejection by Millett J. are now no longer material, since we gave leave to Maclaine Watson to make an amendment alleging actual authority in their claim against the Department of Trade and Industry. In making it, Maclaine Watson aligned themselves with the plaintiffs in the Multi-Broker and Six Banksactions, which were dealt with by Staughton J. together with the Rayner action.

So I turn to the position in that regard as it was before Staughton J. As mentioned in the early part of this judgment, the issues before him included two grounds on which agency was alleged, viz. “constitutional” agency implicit in, or to be derived from, I.T.A.6 alone, and “factual” agency to be derived from allegations of express authority by the members to enter into the contracts in question. The latter allegation, which Maclaine Watson have now also raised, did not proceed before Staughton J. and is accordingly not comprised in these appeals. It follows that all that is before us is “constitutional” agency as discussed in the judgment of Staughton J. [1987] B.C.L.C. 667. He dealt with this issue at pp. 698-701. Having concluded, at p. 699F, that “there is a good deal to be said for the argument of agency” he went on to hold that it nevertheless failed on two grounds. First, he concluded that the brokers, i.e. all the plaintiffs other than the banks, must fail on the issue of agency, since London Metal Exchange Standard Tin Contract, Form B, operated only as between the parties who contracted on its face, to the exclusion of any possible undisclosed principals on either side: see p. 701C. Secondly, that all the plaintiffs must fail on “constitutional” agency in any event, since it is solely derived from I.T.A.6 and accordingly non-justiciable: see p. 703G.

Logically the contention of non-justiciability comes first. The arguments on this are nicely balanced and no authority appears to be directly in point. [*187] Mr. Sumption, who was mainly responsible for arguing this issue on behalf of the plaintiffs, submitted that it was open to him to found an allegation of agency on the contents of I.T.A.6 without offending against the doctrine of non-justiciability. He said that he merely relied on the contents of I.T.A.6 as facts to show what the relationship between the members and the I.T.C. actually was, just as though he were relying on the structure of the I.T.C. and the way in which it worked as matters of fact established by evidence in the normal way. He referred to the cases which I have cited under “Justiciability” to show that for such a purpose resort to an unincorporated treaty was permissible. The cause of action or issue on which the plaintiffs were suing was clearly justiciable, being based in all cases on undisputed breaches of contracts within the jurisdiction. The only issue was whether the other party to the contracts was only the I.T.C. or also the member states as undisclosed principals. For that purpose, in relation to the issues presently before the court, reference to I.T.A.6 was admittedly necessary, but not barred by the doctrine of non-justiciability.

Mr. Pollock and Mr. Grabiner challenged these submissions on the ground that they over-simplified and elided the true nature of the relationship between the I.T.C. and its members as alleged agent on the one hand and undisclosed principals on the other. They pointed out that although the contracts between the I.T.C. and the plaintiffs were clearly governed by English law, the alleged agent/principal relationship between the I.T.C. and its members was a separate contract of agency governed by its own proper law. In the present case this could only be international law, since no other law could be applicable to the interpretation of I.T.A.6. On that basis the existence or non-existence of the alleged agent/principal relationship was a non-justiciable issue. Accordingly, since the plaintiffs could certainly not refer to I.T.A.6 for the purpose of inviting the court to interpret the nature of the contractual relationship between the I.T.C. and its members, the plaintiffs’ allegation that the members were the undisclosed principals of the I.T.C. could not get off the ground. To show that the contract between an agent (A) and a principal (P) is governed by its own proper law, even when A’s authority is to conclude a contract with a third party (C) which might be subject to a different system of law, they referred to Dicey & Morris, The Conflict of Laws, rules 200 and 201 and the comments and cases referred to at pp. 1339-1347. But since the legal analysis as there presented was not really in dispute, I will assume its correctness without the need for further discussion.

I find this issue as to non-justiciability difficult to resolve. However, Mr. Pollock frankly admitted, as he had to, that the plaintiffs would be unable to establish the alleged agency even if I.T.A.6 had said expressly: “The council shall enter into all contracts in its own name but as agent for the members jointly and severally.” This is the logical consequence of the defendants’ argument. But that, as it seems to me, shows that the defendants’ claim to non-justiciability goes too far to be accepted as a matter of good sense. The plaintiffs’ submission, on the other hand, can perhaps be rationalised with the doctrine of non-justiciability by saying that they only need to refer to I.T.A.6 to establish the alleged authority [*188] of the members as a fact, without having to transgress into any analysis and determination of the rights and obligations of the I.T.C. and the members inter se resulting from I.T.A.6. On that basis, though with some doubt, I will proceed on the basis of Mr. Sumption’s analysis.

However, I do not think that this can affect the outcome. Even if the plaintiffs are entitled to refer to I.T.A.6 in order to establish the alleged authority from the members to the I.T.C. to enter into contracts as their agent, I cannot see any basis for extracting any agency/principal relationship from I.T.A.6.

As Mr. Pollock rightly said, to succeed on this allegation the plaintiffs must show that the structure set up by I.T.A.6 is such that it is only consistent with the alleged agency and not with any other interpretation. It is not open to the plaintiffs to say that the way in which the I.T.C. in fact worked internally was, or may have been, consistent with the council contracting on behalf of the members. Those are aspects of the allegations of “factual” agency put forward by the plaintiffs other than Rayner which have been adjourned and are not before us at present.

So what is there in I.T.A.6 which demonstrates that in entering into buffer stock contracts or bank loans, or into any other transactions, the council must have been contracting as agent for the members as undisclosed principals? Mr. Sumption referred to many provisions of I.T.A.6 for this purpose. But in my view none of them suggest that in contracting in its own name the council was acting as agent for the members as undisclosed principals under the contracts. What it all came to was that (a) article 4 provides that “the council shall be composed of all the members,” (b) all the members are represented on the council by one delegate, and (c) everything done by the council is therefore effectively done or directly controlled by the members and solely for the members’ benefit.

But it must be remembered that we are not now dealing with submission A, to the effect that the council is merely a collective name for the members themselves. We are dealing with submission C based on the contrary assumption that the I.T.C. is a legal entity wholly distinct from its members. Its contracts are therefore prima facie made on its own behalf alone, without engaging the liability of its members, in the same way as contracts made by a company subject to the Companies Acts. In submitting that when entering into contracts the I.T.C. nevertheless contracted as agent for its own members, the plaintiffs are therefore faced with the fundamental jurisprudence enshrined in the decision of the House of Lords in Salomon v. A. Salomon & Co. Ltd. [1897] A.C. 22. The crucial point on which the House of Lords overruled the Court of Appeal in that landmark case was precisely the rejection of the doctrine that agency between a corporation and its members in relation to the corporation’s contracts can be inferred from the control exercisable by the members over the corporation or from the fact that the sole objective of the corporation’s contracts was to benefit the members. That rejection of the doctrine of agency to impugn the non-liability of the members for the acts of the corporation is the foundation of our modern company law. The fallacy of the existence of any such [*189] agency relationship is particularly clearly exposed in the speech of Lord Hershell, at pp. 42-43, but there is no need to cite from it.

Mr. Sumption put forward two answers. First, he said that the structure of the I.T.C. is quite different from that of a company with shareholders, because the business and objects of the I.T.C. are exclusively those of its members and the I.T.C. acts directly on the instructions of the members. In this connection he referred to many provisions of I.T.A.6 in addition to article 4, such as articles 7, 13, 21 and 28. In particular, he relied on the fact that the I.T.C. has no board of directors like an ordinary company, but that the shareholders are in effect themselves the board of directors. But Mr. Pollock and Mr. Grabiner were quite right in submitting that this is no basis for distinguishing the analysis of Salomon v. A. Salomon & Co. Ltd. The existence of a board of directors in that case played no part in the decision. Whether a corporation acts directly on the instructions of the members as directors, or merely indirectly by reason of the overriding control which the members can exercise in general meeting, makes no difference in principle. And the fact that the business objectives of the body corporate were those of its members was precisely the point which was held in Salomon v. A. Salomon & Co. Ltd. to make no difference.

Furthermore, the defendants disagreed with Mr. Sumption’s analysis of I.T.A.6. They pointed out that the everyday management of the I.T.C.’s activities and contracts was not controlled by the delegates of the members, meeting in council sessions from time to time, but by the executive chairman and buffer stock manager. They also disputed Mr. Sumption’s assertion that the council owed no obligations to the I.T.C. of the same kind as a board of directors owes to its company. On the contrary, being divided into producers and consumers, the members had opposing interests. In relation to these it was the function of the council to hold the balance, in order to achieve the overall objectives of the I.T.C. Finally, the defendants pointed out that neither the council nor any of the officers had authority to pledge the credit of the members as opposed to the limits of the assets of the I.T.C. itself, and that article 21 showed that for borrowings, government guarantees or undertakings might be provided. In my view, although they do not affect the result, these comments are justified.

Finally, Mr. Sumption relied on two cases by way of analogy in order to show that there was an agent/principal relationship between the I.T.C. and its members. These were Gramophone and Typewriter Ltd. v. Stanley [1908] 2 K.B. 89 and the decision of Atkinson J. in Smith, Stone and Knight Ltd. v. Birmingham Corporation [1939] 4 All E.R. 116. But neither of these cases is of any assistance to the plaintiffs. In the first it was held that there was no principal/agent relationship between a parent company and its wholly-owned subsidiary even though the business of the subsidiary was wholly under the control of the parent. Buckley L.J. pointed out expressly, at p. 106, that “obviously” only the German company, and not its English shareholders, would be liable on the German company’s contracts. If anything, the decision runs counter to Mr. Sumption’s submission. In the second case the facts were so unusual that they cannot form any basis of principle. A company [*190] acquired a partnership concern, registered it as a subsidiary company but carried on its business as part of the parent company’s own business exactly as if the subsidiary were still a partnership. The profits of the subsidiary were treated as the profits of the parent company. When the premises of the subsidiary were compulsorily acquired it was held that the parent – and not merely the subsidiary – was entitled to claim compensation, on the ground that the subsidiary had in fact been operating on behalf of the parent. In my view no conclusion of principle can be derived from that case.

It follows that the relationship between the member states and the I.T.C. under the provisions of I.T.A.6 is not that of principals and agent but in the nature of a contract of association or membership similar to that which arises upon the formation of a company between the shareholders inter se and the legal entity which they have created by their contract of association. The correct analysis of I.T.A.6 is in line with the decision of the House of Lords in Salomon v. A. Salomon & Co. Ltd. [1897] A.C. 22 and not with any contract of agency between the members as principals and the council as the members’ agent.

In these circumstances it is not strictly necessary to decide the additional ground on which the defendants contended that submission C must fail in any event in relation to the claims by the brokers. But since this issue was fully argued before us and was also decided, adversely to the plaintiffs, by Staughton J., I will briefly express my views about it.

It was common ground that the application of the doctrine of the undisclosed principal (P) can be excluded by the terms of the agreement made between the alleged agent (A) and the third party (C). The agreement between A and C may preclude any possibility of anyone in the position of P being involved. The defendants submitted that this was the effect of the London Metal Exchange’s form of contract on which all the brokers’ claims against the member states were based. They said that on its true construction it excluded the possibility of the existence of P, the alleged undisclosed principals.

Inevitably, as always happens when this issue arises, we were referred to a well known but never very helpful series of cases: Humble v. Hunter (1848) 12 Q.B. 310; Rederiaktiebolaget Argonaut v. Hani [1918] 2 K.B. 247; Fred Drughorn Ltd. v. Rederiaktiebolaget Transatlantic [1919] A.C. 203 and Epps v. Rothnie [1945] K.B. 562. But they are all merely instances of particular contracts which raised the question whether on their true construction the existence of any alleged undisclosed principal had been excluded. While that is equally the issue here, none of those cases are of any assistance for the interpretation of the present form of contract.

Staughton J. [1987] B.C.L.C. 667, 669I-701C, dealt with this question in his judgment and concluded that on the true construction of the London Metal Exchange form of contract, agency was excluded, in the sense that the contracting parties on the face of the contract were the only contracting parties, and that it was not open to the plaintiffs to claim that the members were also parties, or in the position of additional parties, as undisclosed principals. I agree with his conclusion and can state my reasons fairly briefly. [*191] London Metal Exchange Tin Contract B takes the form of a sold/bought note emanating from a ring dealing broker addressed to the other contracting party, the customer; in this case the I.T.C. alone. In the contract, the word “we” accordingly refers to the plaintiff brokers and “you” to the I.T.C. The arguments centred mainly on one sentence of this form on which the decision of Staughton J. was based. This is in the following terms: “This contract is made between ourselves and yourselves as principals, we alone being liable to you for its performance.”

Mr. Sumption’s point was that the important words are “as principals” and not “as sole principals.” Accordingly, although the second part of the sentence excluded the possibility of any undisclosed principals standing behind the brokers, there was nothing to exclude this possibility in relation to the customer, the I.T.C. Although the I.T.C. was of course clearly described as contracting “as principals,” this did not preclude the existence of other undisclosed principals as well, for whom the I.T.C. was acting as agent, since a person acting as agent for an undisclosed principal is himself also properly describable as a principal.

The forensic subtlety of this argument is no doubt to be admired. But it does not enhance its commercial plausibility, which appears to me to be non-existent. As Mr. Pollock put it, if two businessmen agree that they are contracting “as principals” they mean that they are not acting as anyone’s agents. They would be amazed to hear from a court that this would only have been the effect of their agreement if they had said “as sole principals” or “as principals only.” But the matter goes considerably further when one looks at other provisions of the contract. These give far-reaching rights to the brokers (a) to require cash or other deposits from the customer in the brokers’ discretion as security for the customer’s performance of the contract, (b) to demand further “margin” in many eventualities and (c) to “close out” the contract at any time against the customer if he fails to meet any of his obligations and in a number of other events. None of these provisions make commercial sense unless they are seen as addressed by the broker to the named customer with whom he contracts and not also to some unknown possible other parties of whom he knows nothing. On Mr. Sumption’s submission the brokers could have called on any of the members at any time, out of the blue, to comply with any of these provisions. I cannot accept such an unbusinesslike construction of the contract. Furthermore, the clause dealing with disputes provides that any question or dispute arising from the contract should be notified to the executive secretary of the London Metal Exchange Committee in writing “by either of the parties or both of them jointly.” This is consistent with the reference to the parties contracting “as principals,” on the basis that there are only two parties to this form of contract, and not a further number of possible unknown parties.

Accordingly I agree with the conclusion of Staughton J. on this aspect, and in the upshot I would uphold his rejection of submission C as well.

State immunity

This was the final fall back position in the course of the argument of the defendants who are individual sovereign states other than the United [*192] Kingdom, although it was of course their basic ground throughout for contesting the jurisdiction of our courts to permit service of these proceedings upon them. They rely on the State Immunity Act 1978 as precluding any enforcement against them of the liabilities of the I.T.C. in any event. On my conclusion that the plaintiffs’ submissions A, B and C all fail, this issue does not arise. But it was fully argued both here and below and is of general importance. I will therefore deal with it on the assumption that, contrary to my view, the plaintiffs succeed on A or B or C. I begin by setting out the relevant provisions of the Act:

“General immunity from jurisdiction

“1(1) A state is immune from the jurisdiction of the courts of the United Kingdom except as provided in the following provisions of this Part of this Act. (2) A court shall give effect to the immunity conferred by this section even though the state does not appear in the proceedings in question.

“Submission to jurisdiction

“2(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 or by a prior written agreement; but a provison in any agreement that it is to be governed by the law of the United Kingdom is not to be regarded as a submission. (3) A state is deemed to have submitted – (a) if it has instituted the proceedings; or (b) subject to subsections (4) and (5) 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; or (b) asserting an interest in property in circumstances such that the state would have been entitled to immunity if the proceedings had been brought against it.

“Commercial transactions and contracts to be performed in United Kingdom

“3(1) A state is not immune as respects proceedings relating to – (a) a commercial transaction, entered into by the state; or (b) an obligation of the state which by virtue of a contract (whether a commercial transaction or not) falls to be performed wholly or partly in the United Kingdom…. (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…”

Sections 4 to 8 and 11 contain exceptions to immunity in relation to other claims. It is unnecessary to set them out save to note that the opening words are in each case: “A state is not immune as respects [*193] proceedings relating to…” Finally I should set out section 9 for completeness:

“Arbitrations

“9(1) Where a state has agreed in writing to submit a dispute which has arisen, or may arise, to arbitration, the state is not immune as respects proceedings in the courts of the United Kingdom which relate to the arbitration. (2) This section has effect subject to any contrary provision in the arbitration agreement and does not apply to any arbitration agreement between states.”

The main issue between the parties is of course whether the present proceedings fall within any of the exceptions to immunity under section 3(1)(a) or (b). But on behalf of the member states Mr. Pollock raised a preliminary question which became a lively issue between him and Mr. Kentridge on behalf of the plaintiffs other than Maclaine Watson, who are only suing the Department of Trade and Industry. Since the member states deny that they entered into any commercial transaction with the plaintiffs under section 3(1)(a) or assumed any obligation falling within section 3(1)(b), they say that they cannot be subjected to the jurisdiction of the court unless and until it has first been established by the plaintiffs, by way of a preliminary issue, that either (a) or (b) applies to their claim in fact and/or law. It is only if and after an issue as to whether or not there is sovereign immunity has been decided against a state that our courts are entitled to invoke the Act to exercise jurisdiction over the state by proceeding to consider the merits of the plaintiffs’ claim. In effect, if a defendant sovereign state relies on its immunity and challenges the plaintiffs’ claim that one of the exceptions applies, then at that stage the only justiciable issue is as to the state’s immunity.

Mr. Kentridge, on the other hand, challenged this approach entirely. He submitted that all that was required in relation to a contested issue on immunity was what Lord Radcliffe described as “a strong case for argument” in Vitkovice Horni a Hutni Tezirstvo v. Korner [1951] A.C. 869, 884, in the context of R.S.C., Ord. 11. This was the conclusion which Staughton J. accepted: see [1987] B.C.L.C. 667, 675B-679B.

Before dealing with this issue it should be noted that in the present cases it is largely academic and a matter of form rather than substance. The reason is that the plaintiffs’ claims against the member states which are presently before us do not depend on any facts or contractual claims or defences on the merits, but solely on issues of law as to whether or not the direct actions are maintainable. Subject to two qualifications mentioned at the end of this section, a decision denying immunity, combined with a decision in the plaintiffs’ favour on submission A or B or C, would effectively entitle the plaintiffs to proceed to judgment against the member states. In other cases, however, the test of “good arguable case” or “preliminary issue” could be of considerable importance. Thus, the claims and defences may be complex on the merits, or there may be other defendants to the action apart from a sovereign state claiming immunity. In such situations it would be important for the state to be able to assert its right, if this exists, to object to the jurisdiction of the court to deal with the substantive issues [*194] unless and until one of the exceptions to its sovereign immunity has first been established under the Act of 1978.

In the early stages of the argument on this issue, in the same way as Staughton J., I was persuaded by Mr. Kentridge’s submission that no more than a good arguable case needs to be established. Since leave to serve the foreign state in accordance with the procedure laid down in section 12 of the Act of 1978 would in any event first have to be obtained under R.S.C., Ord. 11, at which stage a good arguable case against immunity is certainly the test, it would be cumbersome and somewhat surprising if this were then merely the precursor to a formal preliminary issue on immunity or otherwise. Moreover, it appeared to me for some time that support for the judge’s view could be derived from the phrase “proceedings relating to” which introduce all the exceptions from immunity in the Act, with the result that the character of the proceedings rather than the establishment or otherwise of the exception to the immunity may be the dominant factor. At the same time, however, it is clear that the decision of the House of Lords in Vitkovice Horni a Hutni Tezirstvo v. Korner [1951] A.C. 869 cannot itself provide any authority for present purposes, since it was based on the interpretation of R.S.C., Ord. 11, r. 4 which provides that leave for service “shall not be granted unless it shall be made sufficiently to appear to the court… that the case is a proper one for service out of the jurisdiction…” No similar words introducing a discretion are to be found in the Act of 1978.

However, in the end I was persuaded that the judge’s conclusion in favour of a good arguable case could not be supported. Although not a decision under the Act of 1978, that was the conclusion of Robert Goff J. in I Congreso del Partido [1978] Q.B. 500, 535-537, in a similar context of an issue as to the court’s jurisdiction in the face of a claim to sovereign immunity. Mr. Pollock also pointed to the complications which would arise if a “good arguable case” in favour of an exception to immunity under, say, section 3 were then to lead directly to a trial of the merits of the action, as Mr. Kentridge contends. The defendant state could in that event not defend the substantive claims without taking steps in the proceedings, which would involve a submission to the jurisdiction under section 2(3)(b).

In the upshot, therefore, I am persuaded that whenever the question arises under the Act of 1978 whether a defendant state is immune by virtue of section 1 or not immune by virtue of one of the exceptions, then this question must be decided as a preliminary issue in favour of the plaintiff, in whatever form and by whatever procedure the court may consider appropriate, before the substantive action can proceed.

I then turn to the question, treating it formally as a preliminary issue, whether the plaintiffs’ claims in these actions are “proceedings relating to” (a) or (b) of section 3(1). This question has to be considered separately in relation to the plaintiffs’ submissions A, B and C respectively.

It is conceded that if the plaintiffs can succeed on submission A, then section 3(1)(a) obviously applies. The contracts would in that event have been made between the plaintiffs and the member states directly, albeit [*195] collectively in the name of the I.T.C., and both the tin contracts and the bank loans were clearly “commercial transactions.”

But Mr. Pollock contended that the member states were immune as regards the claims under submissions B and C. As regards B, if the states were concurrently or – more probably – secondarily liable to the plaintiffs in relation to contracts concluded by the I.T.C. in its name, then the contracts were not commercial transactions “entered into by the state” but only by the I.T.C. The same applies to submission C: if the member states were liable as undisclosed principals of the I.T.C., then the exception under section 3(1)(a) would again not apply. An undisclosed principal is not a party who “enters into” the contract made by his agent. Indeed, Mr. Pollock went further to suggest that an undisclosed principal is not a “party” to the contract in question at all, but merely someone who can enforce its terms or have the contract enforced against him as though he were a party.

In my view it is unnecessary to consider these refinements in relation to the exception under section 3(1)(a) since none of them avail the member states under section 3(1)(b). There is no equivalent in (b) to the words “entered into by the state” which appear in (a). As it seems to me, a concurrent or secondary liability to the plaintiffs under submission B, or the liability of undisclosed principals under submission C, would, on the undisputed facts of these cases, both constitute “an obligation of the state which by virtue of a contract… falls to be performed wholly or partly in the United Kingdom.”

Accordingly, if I had held in favour of the plaintiffs on any of their submissions, I would have decided, as a preliminary issue under the Act of 1978, that none of the member states were immune from the jurisdiction of the court.

However, two qualifications remain to be mentioned at this stage. Neither is concerned directly with the Act of 1978 nor any issue as to immunity. But it is convenient to mention them at this point since they are relevant to the plaintiffs’ right to proceed to judgment if they had succeeded on one of their submissions.

The first concerns the claims by the five banks other than Kleinwort Benson. They are in the unfortunate position of having no arbitration clauses in the contracts for the loans which they made. They are therefore unable to obtain an arbitration award against anyone. This would not matter if the plaintiffs can establish either submission A or C, since both involve the direct liability of the member states. But it seems to me that the banks must face an insuperable problem if they are only entitled to succeed on the basis of submission B, that the members of the I.T.C. are under a concurrent or – more probably – secondary liability with or to the liability of the I.T.C. to the plaintiffs. The liability of the defendants under submission B involves liability on the part of the I.T.C. as a prerequisite. However, article 6 of the Order in Council of 1972 clearly provides the I.T.C. with complete immunity for present purposes other than in respect of the enforcement of arbitration awards. Accordingly, unless the I.T.C. waives its immunity pursuant to article 6(1)(a) of the Order of 1972, there is no way whereby the I.T.C. can be held primarily liable to the five banks in question, since there is no [*196] means whereby they can obtain arbitration awards against it. In these circumstances I cannot see the possibility of any concurrent or secondary liability arising in relation to the member states.

This would be a most unfortunate conclusion if, contrary to my view, liability in the member states can be established on the basis of submission B. But I can see no way round it. Admittedly, by not including arbitration clauses in the loan contracts, the I.T.C. was in breach of article 23 of the Headquarters Agreement concluded with the United Kingdom. This may well entitle the United Kingdom to claim some remedy against the I.T.C., if it chooses to do so, on behalf of the five banks in question and any other United Kingdom creditors who may be in the same position. Clearly, however, any such complaint could only be raised at the level of international law or through diplomatic channels. These questions do not arise before us and were rightly not referred to in argument.

The second qualification relates to the broker plaintiffs who have obtained arbitration awards against the I.T.C. Since they were able to adopt, and duly followed, the procedure for asserting their claims pursuant to article 6(1)(c) of the Order of 1972, one would have thought that the member states would not seek to raise any further difficulty in their way if either submission A or B or C were established against them. Such an assumption, however, would underestimate the ingenuity of the legal advisers of the member states or the desire of their clients to resist to the utmost. What is said on behalf of the defendants is that by obtaining awards, and in at least one case judgment in terms of the award, against the I.T.C., the plaintiffs have elected to look exclusively to the I.T.C. for the satisfaction of their claims and are no longer entitled to pursue these or any alternative remedy or means of enforcement against the member states. I have deliberately phrased this contention in wide terms. It was not formulated precisely, since it was agreed that this line of argument, unattractive as it may be, is a matter for defence and not a ground for striking out the plaintiffs’ actions. Here again I may not be expressing accurately the true state of play in this connection. For present purposes it is sufficient to say that if the brokers’ actions proceed, then a further issue on these lines may fall to be determined hereafter.

The E.E.C.’s claim to sovereign immunity

The E.E.C. is a party to I.T.A.6 and consequently a member of the I.T.C. Under the heading “Membership by inter-governmental organisations” article 56.1 of I.T.A.6 provides:

“Any reference… to a ‘government’ or ‘governments’ shall be construed as including a reference to the European Economic Community and to any inter-governmental organisation having responsibilities in respect of the negotiation, conclusion and application of international agreements, in particular commodity agreements.” [*197]

For convenience I will continue to refer to the Community as the E.E.C., and in this section references to “the Council” are to the Council of the E.E.C.; not to the I.T.C.

The E.E.C. was created by the E.E.C. Treaty in 1957. Article 8.1 provided that the common market should be progressively established during a transitional period of 12 years. Article 113 provided that after the end of the transitional period the common commercial policy should be based, inter alia, on the conclusion of trade agreements, and by article 114 these were to be concluded by the Council on behalf of the E.E.C. It was pursuant to these provisions and to a Council Decision of 31 March 1982 that it was decided that the E.E.C. should become a party to I.T.A.6. The E.E.C. joined as a consumer member, and we were told that it did not contribute to the buffer stock. As mentioned in the General Introduction, with the exception of Maclaine Watson, who only sued the Department of Trade and Industry, the E.E.C. was sued by all the plaintiffs in these actions as one of the members of the I.T.C. In the Rayner action, the writ was served abroad pursuant to R.S.C., Ord. 11. However, in the Six Banks actions and the Multi-Brokersactions the writs were served on the Commission within the jurisdiction pursuant to articles 210 and 211 of the Treaty to which I come later. In these latter actions, therefore, the E.E.C. was in a different position from the foreign states who had been served abroad pursuant to R.S.C., Ord. 11. In all three sets of proceedings, the E.E.C. issued summonses under Ord. 12, r. 8. In support of those applications, the E.E.C. relied upon various grounds similar to those relied upon by the Department of Trade and Industry in respect of their application under Ord. 18, r. 19. In addition, the E.E.C. relied upon a further ground, viz. that they were immune in respect of the subject matter of the actions. This contention was not dealt with at first instance before Staughton J. because it was unnecessary to do so in the light of the conclusions which he reached on the other issues. However, the E.E.C. insisted on maintaining this alternative contention as well. In view of this, Rayner applied for a direction that this aspect should be dealt with in this court and not be left in limbo any longer, and I granted this application last term.

The E.E.C.’s claim to sovereign immunity is not the same as that raised by the foreign states under the State Immunity Act 1978 with which I have dealt in the foregoing section. It was conceded by Mr. Eder on behalf of the E.E.C. that the E.E.C. was not a state and that it could not rely on the Act of 1978. His contention was that the E.E.C. was entitled to sovereign immunity analogous to that of foreign states under the principles of the common law. At the same time, however, he also conceded that the E.E.C. could not be in a better position than the foreign states under the Act of 1978. This concession was presumably based on the qualifications to the doctrine of absolute sovereign immunity at common law resulting from the decisions in The Philippine Admiral [1977] A.C. 373 and Trendtex Trading Corporation v. Central Bank of Nigeria [1977] Q.B. 529 in 1977 which are reflected in the exceptions to state immunity referred to in section 3 of the Act of 1978.

Since I have held that the foreign states were not protected by immunity, because the plaintiffs’ claims against them were proceedings [*198] relating to exceptions (a) or (b) of section 3(1) of the Act of 1978, it follows that, in my view, the E.E.C.’s claim to sovereign immunity does not arise. But we had over two days of argument about it, and it would of course be a matter of considerable importance if the E.E.C. were immune from the jurisdiction of the courts of its member states. So it is right to deal with this contention. But in my view it is entirely misconceived.

There can be no doubt that the E.E.C. has legal personality in international law. This is provided in the E.E.C. Treaty to which I come shortly, and is therefore part of the law of the member states. In the case of the United Kingdom the relevant article is incorporated into our law by section 2 of the European Communities Act 1972. No doubt the E.E.C. would also be recognised as a legal entity under the laws of nonmember states, but we are not concerned with this question and I only mention it for the sake of completeness.

Next, there is equally no doubt that the E.E.C. exercises powers and functions which are analogous to those of sovereign states. In particular it has the jus missionis in the sense that it has permanent delegations in many non-member states and receives permanent representatives from many countries, and that all these missions have diplomatic status. Furthermore, apart from the right of legation, the E.E.C. also has the jus tractatus as instanced by I.T.A.6 itself, i.e. the power to conclude or participate in treaties with sovereign states and international organisations. This power has also been widely used. Finally, the E.E.C. enjoys certain sovereign powers to the extent to which these have been ceded to it by its members under the various E.E.C. treaties, and from this cession it has derived its own legislative, executive and judicial organs whose acts and decisions take effect within the member states. On the other hand, the E.E.C. differs from sovereign states in that it has no sovereignty over territory as such and no nationals or citizens.

Mr. Eder’s claim of sovereign immunity for the E.E.C. was based upon the possession and exercise of these important powers and functions, analogous to those of sovereign states. And there can of course be no doubt that the international role of the E.E.C. is of outstanding importance and far greater than that of many states whose right to sovereign immunity in our courts is not open to question. But the test of immunity which is under consideration for present purposes does not depend upon the international importance of the body which claims it or of the functions which it exercises. Mr. Eder’s submissions were constantly confusing two kinds of immunity, as illustrated by the remarks of Lord Wilberforce in Buttes Gas and Oil Co. v. Hammer (No. 3) [1982] A.C. 888, 932E, when he said about the decision in Duke of Brunswick v. King of Hanover (1844) 6 Beav. 1:

“There are two elements in the case, not always clearly separated, that of sovereign immunity ratione personae, and that of immunity from jurisdiction ratione materiae…”

Buttes Gas and Oil Co. v. Hammer (No. 3) was concerned with the latter kind of immunity. As Lord Wilberforce went on: “the courts in England will not adjudicate upon acts done abroad by virtue of sovereign [*199] authority.” In situations where this principle applies, the transactions of the E.E.C. would certainly be entitled to the same “judicial restraint or abstention,” to quote again from Lord Wilberforce, at p. 931H, as those of sovereign states, if and in so far as the issues raised in any particular litigation rendered it clearly inappropriate for our courts to pronounce upon them. But that aspect is more appropriately categorised as non-justiciability in relation to acts of state or other transactions of international entities. In the main, such entities would of course be foreign sovereign states, as referred to in these passages from the speech of Lord Wilberforce. But in appropriate situations they might well include associations of states, such as the E.E.C., and even international organisations. These are all possible aspects of immunity, or of non-justiciability, ratione materiae.

However, none of these topics have anything to do with the present issue. Thus, while the foreign member states of the I.T.C. contended that they enjoyed sovereign immunity notwithstanding the exceptions of the State Immunity Act 1978, they rightly did not contend, in the context of the present contractual claims by the plaintiffs against them, that, failing immunity ratione personae, they might still be entitled to immunity ratione materiae. The latter aspect arises in particular in the receivership appeal. But in my view it does not arise in the context of the direct actions by the plaintiffs against the members of the I.T.C. in contract. In that context we are only concerned with immunity ratione personae. I can see no basis for introducing into the E.E.C.’s claim for immunity any application, let alone extension, of the aspects of non-justiciability ratione materiae which were under discussion in Buttes Gas and Oil Co. v. Hammer (No. 3) [1982] A.C. 888.

So the issue is whether the English courts are obliged to accord to the E.E.C. the same personal immunity from its processes as they are bound to accord to a foreign state, subject now to the Act of 1978. In that regard certain basic principles must be borne in mind.

First, there is an important statement in Victory Transport Inc. v. Comisaria General de Abastecimientos y Transportes (1964) 336 F.2d 354, which was cited with approval by Lord Edmund-Davies in I Congreso del Partido [1983] 1 A.C. 244, 276D, and repeated by Ackner L.J. in Empresa Exportadora de Azucar v. Industria Azucarera Nacional S.A. (The Playa Larga and Marble Islands) [1983] 2 Lloyd’s Rep. 171, 193: “Sovereign immunity is a derogation from the normal exercise of jurisdiction by the courts and should be accorded only in clear cases.”

Secondly, one must remind oneself of the basis of sovereign immunity ratione personae. In I Congreso del Partido [1983] 1 A.C. 244, 262C, Lord Wilberforce said:

“It is necessary to start from first principle. The basis upon which one state is considered to be immune from the territorial jurisdiction of the courts of another state is that of ‘par in parem’ which effectively means that the sovereign or governmental acts of one state are not matters upon which the courts of other states will adjudicate.” [*200]

But the existence of a “par in parem” relationship must depend upon the recognition of such a relationship, and of the claimant’s consequent right to immunity, by the executive or the legislature of the state in whose courts the claim to immunity is asserted, and generally also upon some degree of international recognition of the immunity claimed: see Duff Development Co. Ltd. v. Kelantan Government [1924] A.C. 797, in particular Lord Dunedin, at p. 820, and Compania Naviera Vascongado v. S.S. Cristina [1938] A.C. 485, 518, per Lord Maugham. In the present case there has been no recognition of any immunity of the E.E.C. by anyone. It was not suggested that any foreign state, or any foreign courts, have recognised such a claim. Nor has any such recognition been indicated on behalf of the executive organs of the Government of the United Kingdom. No certificate about the status of the E.E.C. in this connection was asked for or provided by the Secretary of State for Foreign Affairs. And although the Attorney-General was represented in the winding up and receivership appeals on behalf of the United Kingdom, he has not appeared in support of the E.E.C.’s claim to sovereign immunity. Indeed, as Mr. Eder conceded, this is the first occasion on which any claim to sovereign immunity has been made anywhere on behalf of the E.E.C. Sovereign states can at least generally be sued in their own courts. But, as forcibly pointed out on behalf of the plaintiffs, if there were any substance in this claim, then the E.E.C. would evidently be immune everywhere. There was no concession that the position in Luxembourg would be any different.

Accordingly, all that remains of this strange submission is the question whether some recognition of the E.E.C.’s claim to sovereign immunity is to be derived from any legislative source in this country which it is the function of our courts to interpret. I therefore turn to this aspect, but say at once that the whole of the relevant legislation points in precisely the opposite direction.

I begin with the E.E.C. Treaty, setting out the relevant provisions in logical rather than numerical order:

“Article 210

“The Community shall have legal personality.

“Article 211

“In each of the member states, the Community shall enjoy the most extensive legal capacity accorded to legal persons under their laws; it may, in particular, acquire or dispose of movable and immovable property and may be a party to legal proceedings. To this end, the Community shall be represented by the Commission.

“Article 215

“The contractual liability of the Community shall be governed by the law applicable to the contract in question.

“In the case of non-contractual liability, the Community shall, in accordance with the general principles common to the laws of the member states, make good any damage caused by its institutions or by its servants in the performance of their duties.” [*201]

It is then convenient to go back to two earlier articles dealing with jurisdiction in relation to disputes involving the E.E.C.:

“Article 178

“The Court of Justice shall have jurisdiction in disputes relating to the compensation for damage provided for in the second paragraph of article 215.

“Article 183

“Save where jurisdiction is conferred on the Court of Justice by this Treaty, disputes to which the Community is a party shall not on that ground be excluded from the jurisdiction of the courts or tribunals of the member states.”

This forms a more or less self-contained group of articles for present purposes and it is convenient to pause at this point.

Articles 210 and 211 make it clear that the E.E.C. has legal personality and that it can take part in legal proceedings through the Commission, without any suggestion of any immunity. Article 215 is only consistent with the E.E.C. having contractual liability and at any rate some degree of non-contractual liability. The function of articles 178 and 183 is then to allocate the jurisdictions in which these respective heads of liability can be pursued. Non-contractual liability within the terms of the second paragraph of article 215 is reserved to the Court of Justice, and it may be that it is pursuant to these provisions that Maclaine Watson are suing the E.E.C. in Luxembourg, as we were told. That leaves article 183 which clearly deals with jurisdiction relating to all other disputes. At first sight it appears to be saying plainly enough that in all cases not covered by the second paragraph of article 215, the courts of the member states shall have jurisdiction. However, its wording is not as clear as it might be, and Mr. Eder may well be right in saying that it does not go quite far enough to have this positive effect. There was some discussion and uncertainty about the meaning of the words “on that ground.” I think that they mean “on that ground alone.” The purpose was to make it clear that the jurisdiction of the courts of the member states should not be excluded merely on the ground of the E.E.C. being a party to the dispute, but of course without prejudice to any other ground on which the jurisdiction of the court might be excluded in any given case. Nevertheless, although the article virtually says that the E.E.C. shall have no immunity in the courts of the member states in cases of disputes not covered by the second paragraph of article 215, I agree that it may go too far to treat it as conclusive as though it contained an exhaustive and unequivocal submission to the jurisdiction of the courts of the member states in all such cases.

But any remaining doubt is then removed by the Treaty provisions which deal specifically with privileges and immunities. Originally the relevant provision was article 218, but this was repealed and replaced by article 28 of the Treaty establishing “a single Council and a single Commission of the European Communities” of 8 April 1965, commonly known as the “Merger Treaty.” The relevant provision in this is: [*202]

“Article 28

“The European Communities shall enjoy in the territories of the member states such privileges and immunities as are necessary for the performance of their tasks, under the conditions laid down in the Protocol annexed to this Treaty.”

If one then turns to the annexed “Protocol on the Privileges and Immunities of the European Communities,” one finds a substantial list of these, applicable to the E.E.C. itself, its officials and other servants, members of the European Parliament, etc. But there is no suggestion of any jurisdictional immunity whatever. As regards the E.E.C. itself, which is all that we are concerned with, the privileges and immunities follow the same pattern as in our International Organisations Act 1968 and the Orders in Council made thereunder, including the Order of 1972 in the present case. Thus, one finds that the premises and buildings and archives of the E.E.C. are inviolable and that there are far reaching exemptions from taxes, customs duties, etc. But no immunity from any legal process.

Nevertheless, even in the face of these provisions, Mr. Eder would not give up. He maintained that the wording of article 28 of the Merger Treaty, referring to the privileges and immunities in the Protocol, was equally no more conclusive or exhaustive than article 183 of the E.E.C. Treaty, in particular the words in article 28 “under the conditions laid down” in the Protocol. He said that these words made the provisions of the Protocol applicable to the situations referred to in it, and no more. In my view, this is plainly not the intended meaning and almost senseless. The words “under the conditions” mean “on the terms of” or “as provided in,” the Protocol, and these provisions leave no further room for doubt.

For the sake of completeness I should add that there is equally nothing in the United Kingdom legislation which could possibly confer any immunity on the E.E.C. beyond what is in the treaties. As mentioned much earlier in this judgment, section 3 of the International Organisations Act 1968 had provided for a power to make Orders in Council in the standard form in relation to the European Commission, and in the same year an Order was duly made conferring privileges and immunities upon and in relation to the Commission on a pattern similar to that of the Protocol to the Merger Treaty. But section 3 of the Act of 1968 was repealed by section 4 of and Schedule 3 to the European Communities Act 1972, and the Order in Council fell with it. Thereafter the only relevant provisions in our law were the Treaty provisions discussed above, which became incorporated into our law by the Act of 1972.

Finally, Mr. Eder went so far as to submit that the provisions of the E.E.C. Treaty in 1957 and of the Merger Treaty in 1965 can no longer be regarded as applicable to present day circumstances. He said that in 1965, let alone in 1957, no one could have foreseen the immense expansion of the powers and functions exercised by the E.E.C. internationally. That may well be true. But in the face of the treaties and legislation, which have remained unaltered in all relevant respects, [*203] how can that produce some previously non-existent personal immunity? In any event, as stated at the beginning of this section, the provision pursuant to which the Council decided in 1982 that the E.E.C. should become a party to I.T.A.6 dates from 1957, viz. article 113 of the E.E.C. Treaty, as appears expressly from the decision.

In my view, this claim to sovereign immunity was ill-judged and is untenable. In fairness to the officers of the E.E.C. it should however be pointed out that we were referred to no affidavit or other document emanating from the E.E.C. itself which put forward any such claim.

Conclusion

The last two sections of this judgment have dealt with matters which do not affect the outcome of these appeals in the direct actions. This depends on the fate of the plaintiffs’ submissions A, B and C. Since, in my judgment, all three submissions fail, and Ralph Gibson L.J. has reached the same conclusion, it follows that the plaintiffs’ appeals from the judgments of Staughton J. dated 24 June 1987 and Millett J. dated 29 July 1987 must be dismissed.

Annexe to judgment of Kerr L.J.

International organisations and the treaties by which they were established.

NOTE: The initial numbers are those in the schedule submitted on behalf of the respondent foreign states. Those marked with asterisks are the 16 organisations in respect of which the treaties contained non-liability clauses and which were listed in the schedule submitted on behalf of the appellant banks. The number of the organisation in the banks’ schedule is added in brackets.

List A

Organisations in respect of which the treaties contained no express provision for the organisation to have legal personality but required it to have such capacity as was necessary for the fulfilment of the purposes of the organisation, or in one case (No. 47) contained no relevant express provisions. The dates given are those of the treaty and of the making of the order by which the “legal capacities of a body corporate” were conferred on the organisation.

1.   U.N.R.R.A.: 9.11.43: 1945.

7A:  International Maritime Consultative Organisation: 6.3.48: 1955.

9.:  Customs Co-operation Council: 15.12.50: 1974.

12:  Commission for Technical Co-operation in Africa South of Sahara: 18.1.54: 1955.

19:  O.E.C.D.: 14.12.60: 1974.

25:  World Intellectual Property Organisation: 14.7.67 – 13.1.68: 1968.

47:  INMARSAT: 3.9.76: 1980.

List B

Organisations in respect of which the treaties provided for the organisation to have “juridical personality” or “legal personality” or “full juridical personality” and provision was made for the organisation to have “the legal capacities of a body corporate” by order made under the Acts of 1944-1968 and, in two cases, by separate Acts. The years stated are those of the making of the treaty and of the order. [*204]

5:     The United Nations: 1946: 1947.

6:     Specialised Agencies of the U.N.: 1947: 1974.

7B:    International Maritime Consultative Organisation: 1947: 1959.

8:     Council of Europe: 1949: 1960.

10.    N.A.T.O.: 1951: 1974.

11:    European Organisation for Nuclear Research: 1953: 1972.

13:    Western European Union: 1955: 1960.

15:    Inter-American Development Bank: 1959: 1976.

*16:   (16) International Atomic Energy Agency: 1959: 1974.

18:    Central Treaty Organisation: 1960: 1974.

20:    International Union for the Protection of New Varieties of Plant: 1961: 1985.

21:    European Space Research Organisation: 1963: 1974.

22:    S.E.A.T.O.: 1965: 1974.

*23:   (6) Asian Development Bank: 1965: 1974.

24:    International Hydrographic Organisation: 1967: 1972.

26:    International Wheat Council: 1968: 1968.

27:    International Coffee Organisation: 1969: 1969.

*28:   (11) International Sugar Organisation: 1969: 1969.

*29:   (7) Caribbean Development Bank: 1969: 1972.

30:    INTELSAT: 1971: 1979.

31:    International Institute for the Management of Technology: 1971: 1972.

*32.:  (5) African Development Fund: 1972: 1973.

33:    European Molecular Biology Laboratory: 1973: 1974.

34:    European Patent Organisation: 1973: 1978.

35:    European Centre for Medium Range Weather Forecasts: 1973: 1975.

*36:   (12) International Cocoa Organisation: 1975: 1975.

37:    European Space Agency: 1975: 1978.

38:    O.E.C.D. Financial Support Fund: 1975: 1976.

39:    International Whaling Commission: 1975: 1975.

41:    International Rubber Study Group: 1978: 1978.

*42:   (4) African Development Bank: 1978: 1983.

43:    International Lead and Zinc Study Group: 1978: 1978.

*44    (15) International Natural Rubber Organisation: 1979: 1987.

45:    Oslo and Paris Commissions: 1972: 1979.

46:    International Oil Pollution Compensation Fund: 1979: 1979.

48:    Commission for the Conservation of Antarctic Marine Living   Resources: 1980: 1981.

*49:   (13) Common Fund for Commodities: 1981: 1981.

50:    Commonwealth Fund: 1982: 1983.

51:    EUTELSAT: 1982: 1984.

52:    International Tropical Timber Organisation: 1983: 1984.

53:    International Jute Association: 1983: 1983.

54:    Commonwealth Telecommunications Organisation: 1983: 1983.

55:    EUMETSAT: 1983: 1985.

56:    International Fund for Ireland: 1986: 1986.

57:    International Refugee Organisation: 1947: 1949.

58:    European Launcher Development Organisation: 1962: 1965.

59:    Euroncontrol: 1960: 1982: By special Act.

60:    Commonwealth Secretariat: 1965: 1966: By special Act.

List C

Organisations in respect of which the treaties required members to recognise the “international personality and legal capacity” of the organisation, or provided that the organisation shall possess “international legal personality.” The “legal [*205] capacities of a body corporate” were conferred upon these organisations by order under the Act of 1944 and the Act of 1968 respectively.

2:   European Central Inland Transport Organisation: 1945: 1945.

40:  International Fund for Agricultural Development: 1976: 1977.

List D

Organisations in respect of which the treaties contained provisions for the organisation to possess full juridical personality and the relevant treaty provisions were given “force of law” by United Kingdom legislation without use of the formula “legal capacities of a body corporate.”

3:   International Monetary Fund: 1945: Order made under the Breton

     Woods Agreements Act 1945.

*4:  (1) International Bank for Reconstruction and Development: 1945:

          Order made as for IMF.

*14: (2) International Finance Corporation: 1955: order under IFC Act 1955.

*17: (3) International Development Association 1960: Order under IDA Act 1960.

List E

Organisations in respect of which the treaties contained provisions for non-liability of members and in respect of which no United Kingdom legislations was enacted.

      *(8)  East African Development Bank: 1967.

      *(9)  International Institute for Cotton: 1966.

      *(10) Caribbean Food Corporation: 1976.

      *(14) International Sea-Bed Authority: 1982.

NOURSE L.J. Amidst doubts commensurate with the difficulties by which every view of this extraordinary case is attended, I have formed the opinion, contrary to that shared by Kerr and Ralph Gibson L.JJ., that English law and international law together provide a sound basis on which the defendants ought to be held liable in these actions.

The consuming concern of the plaintiffs for the outcome of these appeals is evidenced by the breadth and learning of the arguments advanced to us over 20 days in advocacy of the highest quality, with an ear for whose contrasting styles a celebrated passage in the first book of Paradise Lost could well have been written: “Sonorous metal blowing martial sounds… the Dorian mood of flutes and soft recorders.” (11.540 and 550) In perfect phalanx, counsel for the plaintiffs have combined to arouse a thorough examination of every ground upon which the liability of members for the debts of the I.T.C. might possibly be rested. So high are the stakes, so complex the issues, that none of this has been wasted. But a decision of the issues requires a single choice to be made between several differing views of the effect of tin and loan contracts entered into by the I.T.C. in England. For someone who must make the decision there can be no long dwelling on arguments and sources which do not bear directly on his chosen view.

Article 4 of the Order of 1972

How must a correct view of the effect of these contracts be formed? For an English court that process must start, as in a sense it must end, [*206] with the Order of 1972. In my opinion there has hitherto been a tendency to attach too much importance to article 5 and too little to article 4. The effect of article 5, although it may be decisive, cannot be clearly perceived until the implications of article 4 have been fully understood. Article 4 states that the I.T.C. is an organisation of which the United Kingdom government and the governments of foreign sovereign powers are members; in other words, that it is an international organisation. Thus it is recognised, for the purposes of English law, that the I.T.C. is an organisation in international law. Such is the nature of the organisation which, by article 5 and for the purposes of English law, is given the legal capacities of a body corporate. It is not a municipal organisation. This means that we are directed, in the first instance, to a consideration of the nature of the I.T.C., and of the effect of its contracts, in international law. A consideration of these matters is, as I see it, mandatory. I believe this to be a feature of cardinal importance in the case.

The I.T.C. and its members in international law

The constitution of the I.T.C., so far as it is material to the claims made in these proceedings, is governed primarily by I.T.A.6. At this point its most important provision, article 16.1, is that the I.T.C. shall have legal personality, in particular the capacity to contract, to acquire and dispose of movable and immovable property and to institute legal proceedings. Its most important omission is to say nothing of significance about the liability of the members for the obligations of the I.T.C. However, it is obvious that the provisions of I.T.A.6 are no more an exhaustive statement of the rights and obligations of the I.T.C. and its members in international law than are, for example, the memorandum and articles of association of a company incorporated under the Companies Acts in English law. To take the simplest illustration, it is nowhere stated that the I.T.C., a legal person with capacity to contract shall, while it is a going concern, be liable on its contracts to the extent of the assets in its hands. But nobody would suggest that it is not a principle of international law, conformable with the laws of every civilised nation from time immemorial, that a debtor shall be liable to pay his debts so far as he has the wherewithal to do so. And so we must, where necessary, look to general principles of international law in order to supplement the provisions of I.T.A.6. The important and difficult question in which we have to engage is whether those principles impose on the members any liability for the obligations of the I.T.C. Such a liability could be either limited or unlimited; direct or indirect; primary and concurrent or secondary; and joint or joint and several.

Although it was established by the decision of the International Court of Justice in In re Reparation for Injuries Suffered in Service of United Nations [1949] I.C.J.R. 174 that an international organisation can be given separate personality in international law, it is not claimed by the defendants that there is any established rule of that jurisprudence which renders a contract entered into by the organisation alone incapable of carrying with it the liability of its members. They contend, correctly, that there is no established rule either way but, further, that in that state [*207] of affairs the English court can act only by applying its own established rule. Thus there is raised at the outset a fundamental question as to the function of the English court in regard to an uncertain question of international law.

English law and international law

For up to two and a half centuries it has been generally accepted amongst English judges and jurists that international law forms part of the law of this country, at all events if it can be shown that there is an established rule which, first, is derived from one or more of the recognised sources of international law and, secondly, has already been carried into English law by statute, judicial decision or ancient custom. It would seem that the second of these requirements, which is based on what is known as the doctrine of transformation, could not be satisfied without the prior satisfaction of the first, but the circumstances of the present case require that they be separately identified. Beyond this common ground there was formerly a significant difference of opinion. The doctrine of transformation had a rival in the doctrine of incorporation, which holds that the rules of international law from time to time in force are automatically incorporated into the common law and, subject always to statute, are supreme. That rivalry was resolved in favour of incorporation by the decision of this court which established the restrictive doctrine of state immunity in English law: Trendtex Trading Corporation v. Central Bank of Nigeria [1977] Q.B. 529; see in particular the judgment of Lord Denning M.R., at pp. 553B-554H, where many of the earlier cases are cited, see also Halsbury’s Laws of England, 4th ed., vol. 18 (1977), para. 1403, pp. 718-719.

The effect of the doctrine of incorporation on the present case is that an English court, in pursuance of the direction given to it by article 4 of the Order of 1972, must attribute to the I.T.C.’s contracts such effect as is currently assigned to them by international law, notwithstanding that there is no statute, judicial decision nor ancient custom to hand. But there remains the difficulty, already acknowledged, that there is no established rule of international law which bears on the matter. Does this mean that an English court has no alternative but to apply its own established rule?

The proposition that international law can only form part of English law if there is an established rule in point is supported by the views of several respected judges, their authority being by no means diminished by the fact that some of them were expressed in support of the doctrine of transformation: see Reg. v. Keyn (1876) 2 Ex.D. 63, 202-203, Cockburn C.J. and West Rand Central Gold Mining Co. Ltd. v. The King [1905] 2 K.B. 391, 406-408, Lord Alverstone C.J., Wills and Kennedy JJ. Perhaps the clearest statement was made by Lord Macmillan in Compania Naviera Vascongado v. S.S. Cristina [1938] A.C. 485, 497:

“Now, it is a recognised prerequisite of the adoption in our municipal law of a doctrine of public international law that it shall have attained the position of general acceptance by civilised nations as a rule of international conduct, evidenced by international treaties and conventions, authoritative text-books, practice and judicial [*208] decisions. It is manifestly of the highest importance that the courts of this country before they give the force of law within this realm to any doctrine of international law should be satisfied that it has the hallmarks of general assent and reciprocity.”

In none of those cases was the English court, as it is here, directed by an Order in Council to form a view of the nature of an international organisation and the effect of its contracts in international law. In such a case and in the absence of an established rule, it is argued that the court must do its best, on the material available to it, to arrive at the view of the matter which international law would be most likely to take. In support of this approach Mr. Burnton referred us to three judgments, of which the earliest and most valuable is that of Lord Langdale M.R. in Duke of Brunswick v. King of Hanover (1844) 6 Beav. 1. There it was decided that a foreign sovereign, resident in England and having taken an oath of allegiance to the Crown, enjoys immunity from suit in respect of his acts as a sovereign but not in respect of his acts as a subject. That case has recently achieved prominence on other grounds. The important point for present purposes is that Lord Langdale M.R. found that there was no usage or custom in international law, and little or no learning, on the immunity of a foreign sovereign outside his own dominions, in contrast to that of an ambassador; no doubt because it would have been rare in those days for a reigning sovereign to have a residence away from home. But he had to decide the question because the outcome of a demurrer depended on it. He said, at pp. 45-46:

“The question upon the demurrer is to be determined by that which may be thought to be the law of nations applicable to the case: there is no English law applicable to the present subject, unless it can be derived from the law of nations, which, when ascertained, is to be deemed part of the common law of England. The law of nations includes all regulations which have been adopted by the common consent of nations, in cases where such common consent is evidenced by usage or custom. In cases where no usage or custom can be found, we are compelled, amidst doubts and difficulties of every kind, to decide in particular cases, according to such light as may be afforded to us by natural reason, or the dictates of that which is thought to be the policy of the law. ‘Lege deficiente, recurritur ad consuetudinem, et deficiente consuetudine, recurritur ad rationem naturalem,’ and in the case now in question, it does not appear that there have been cases, or that events have occurred from which any usage or custom of nations can be collected.”

Having referred to what little direct learning there was on the subject, he proceeded to act on an analogy with the case of an ambassador.

I infer that Lord Langdale was sitting for the Lord Chancellor (Lord Lyndhurst). There was no intermediate appeal to the Lord Chancellor, as there would have been if he had been sitting in the Rolls. In any event, an appeal was heard by the House of Lords in 1848, in the presence of the Lord Chancellor (then Lord Cottenham) and Lords Lyndhurst, Brougham and Campbell, who unanimously affirmed the [*209] judgment below: (1848) 2 H.L. Cas. 1. Although there was no reference to the above quoted passage, their Lordships must, I think be taken to have endorsed it. On any view of the case the observations of Lord Langdale are of high authority.

The next judgment relied on by Mr. Burnton was that of the Privy Council in In re Piracy Jure Gentium [1934] A.C. 586, where an order in council directed the judicial committee to hear and consider the question whether actual robbery was an essential element of the crime of piracy jure gentium or whether a frustrated attempt to commit a piratical robbery was enough to constitute the offence. Viscount Sankey L.C., in delivering the report of the Board, said, at pp. 588-589:

“In considering such a question, the Board is permitted to consult and act upon a wider range of authority than that which it examines when the question for determination is one of municipal law only. The sources from which international law is derived include treaties between various states, state papers, municipal Acts of Parliament and the decisions of municipal courts and last, but not least, opinions of jurisconsults or text-book writers. It is a process of inductive reasoning. It must be remembered that in the strict sense international law still has no legislature, no executive and no judiciary, though in a certain sense there is now an international judiciary in The Hague Tribunal and attempts are being made by he League of Nations to draw up codes of international law. Speaking generally, in embarking upon international law, their Lordships are to a great extent in the realm of opinion, and in estimating the value of opinion it is permissible not only to seek a consensus of views, but to select what appear to be the better views upon the question.”

Finally, Mr. Burnton referred us to a passage from the judgment of the Privy Council delivered by Lord Atkin in Chung Chi Cheung v. The King [1939] A.C. 160, 167-168, but I do not find that that adds anything of significance to the present inquiry. To these citations may be added the following from the judgment of Lord Denning M.R. in Trendtex Trading Corporation v. Central Bank of Nigeria [1977] Q.B. 529, 552-553:

“It is, I think, for the courts of this country to define the rule as best they can, seeking guidance from the decisions of the courts of other countries, from the jurists who have studied the problem, from treaties and conventions and, above all, defining the rule in terms which are consonant with justice rather than adverse to it.”

An uncertain question of international law is one which cannot be settled by reference either to an opinion of the International Court of Justice or to some usage, custom or general principle of law recognised by all civilised nations. The authorities show that where it is necessary for an English court to decide such a question, and whatever the doubts and difficulties, it can and must do so; being guided by municipal legislation and judicial decisions, treaties and conventions and the opinions of international jurists; and, where no consensus is there found, [*210] by those opinions which are the most nearly consistent with reason and justice. Broadly stated, the uncertain question which confronts us in the present case is whether the members of the I.T.C. are liable for its debts. It is a question which must be answered either in the affirmative or in the negative. It is a question to which international law can no more refuse an answer than municipal law.

The international jurists

The convenient course is to go first to the opinions of the international jurists who have considered this question. Of the treatises to which we were referred there are four which have dealt with it directly. The earliest is Les Organismes Internationaux Spécialisés (1965) by Professor H.-T. Adam of the University of Paris. In 1969 Dr. Ibrahim F.I. Shihata, then a senior lecturer in international law at the Ain Shams University in Cairo and now a Vice-President and General Counsellor of the International Bank of Reconstruction and Development, read a paper in Bangkok, which was later published in Revue Egyptienne de Droit International, vol. 25, pp. 119-128, under the title: “The Legal Problems of International Public Ventures.” Next, there is International Institutional Law (1980) by Professor H. G. Schermers of the University of Leyden, ch. 11 of which is entitled: Legal Status. Finally, in 1984 Professor Ignaz Seidl-Hohenveldern of the University of Vienna delivered two Hersch Lauterpacht Memorial Lectures at Cambridge, which have since been made the basis of a publication (1987) under the title: Corporations in and under International Law.

All of these treatises assume that the attribution of legal personality to an international organisation does not necessarily free its members from liability for its obligations. Turning to them individually, I would say that Adam supplies a useful introduction to the question, but that his views, which were indeed relied on by both sides, are on the whole inconclusive: see in particular paragraph 110. On the one hand, he instances the control which the member states exercise over the organisation as pointing towards liability. On the other hand, he questions whether there can be liability independent of fault; and, while he is disposed to regard provisions limiting the members’ liability to contribute to capital as being equivocal, he reminds us that the obligations of states are to be interpreted restrictively, particularly as regards third parties.

An altogether clearer statement of opinion is found in Shihata’s “The Legal Problems of International Public Ventures,” at p. 125:

“A question usually raised in this respect is whether the members of an international company can be held liable to third parties for its acts. It has been argued that since the company has an independent personality, the states constituting it will not be answerable to its creditors unless some misconduct or negligence can be imparted to them in the exercise of their supervision over its activities. Influenced by the same logic some writers suggested that only the state exercising control over the company (l’état-tuteur) assumes an unlimited liability. Others, having found no rule of limited liability in international law, concluded that all member states are liable [*211] beyond the limits of the value of their shares. My point here is that we cannot conclude a rule of unlimited liability merely from the absence of a rule of limited liability in international law. All relevant provisions and circumstances must be studied to ascertain what was intended by the parties in this respect and the extent to which their intention was made known to third parties dealing with the enterprise. Present general rules of international law cannot, in my opinion, be quoted as basis of the unlimited liability of the parties to an international corporation for its acts or omissions, unless of course the corporation is considered, despite its independent personality, an organ of the state establishing it.”

The opinion of Schermers in International Institutional Law, section 1395, is no less clear and much more definite:

“Under national legal systems, companies can be created with restricted liability. An express provision thus enables natural persons to create, under specific conditions a new legal person in such a way that they are no longer personally liable for the acts of the new person. In international law no such provisions exist. It is therefore impossible to create international legal persons in such a way as to limit the responsibility of the individual members. Even though international organisations, as international persons, may be held liable under international law for the acts they perform, this cannot exclude the secondary liability of the member states themselves. When an international organisation is unable to meet its liabilities, the members are obliged to stand in, according to the amount by which each member is assessed for contributions to the organisation’s budget.”

Seidl-Hohenveldern in Corporations in and under International Lawmakes a distinction between international organisations, properly so-called, which are established by states jure imperii, and common interstate enterprises, which are established jure gestionis and are not subject to international law. As examples of the latter he gives a common travel agency or airline. This distinction and its consequences are not at all considered by the other jurists. There can be no doubt that, for the purposes of the distinction, the I.T.C. qualifies as an international organisation, properly so called. But its principal activity, that of buying and selling tin in large quantities, is one which, if viewed in isolation, ought to be regarded as jure gestionis. In any event, such a hybrid is not dealt with directly by Seidl-Hohenveldern, and there may be some doubt as to the view which he would hold of it.

The following passage, on which Mr. Pollock placed much reliance, is found in chapter 7 of Seidl-Hohenveldern’s Corporations in and under International Law, pp. 87-88:

“There seems to be no doubt that an international organisation is a ‘worse debtor’ than a state. Just as Samuel Johnson complained that ‘corporations have no soul to save and no bottom to kick,’ an organisation, by comparison with states, has limited assets for the satisfaction of claims, has no citizens against whom reprisals may be [*212] taken and cannot be sued as a party before the International Court.”

Chapter 7 deals with personality in international law and third states, and this passage may not therefore be as much in point as a first reading would suggest. Mr. Pollock also pointed to the fact that the two passages on which the plaintiffs principally rely are found in chapter 10, which deals with common interstate enterprises, there being no reflection of those views in chapter 9, which deals with international organisations in domestic law. The first of those passages is, at pp. 119-120:

“According to generally accepted principles of the conflict of laws the respective responsibilities of a corporate entity and of its members are determined by the national law of that entity. If the treaty establishing the enterprise does not contain any such rules, the member states will be jointly and severally responsible for its acts, as general international law does not contain any rules comparable to those which, in domestic law, limit the responsibility of the member of a corporation for the latter’s acts. Moreover, comparative law shows that in the domestic law of several states there exist corporate entities, whose members remain responsible for its acts.”

Later, after references to Shihata and to various occurrences in Germany the United States and elsewhere, we find, at p. 121:

“However, may the member states hide behind this veil at all in order to escape liability for debts incurred by their common interstate enterprise? The above precedents are not devoid of legal significance. The states appear to have acted on the assumption that they had more than a moral responsibility. Such responsibility as there is would be borne by the partner states jointly and severally. Just as a state cannot escape its responsibility under international law by entrusting to another legal person the fulfilment of its international obligations, the partner states of a common inter-state enterprise are jointly and severally responsible in international law for the acts of the enterprise.”

The Westland Helicopters award

Such are the opinions of the international jurists. In a similar category I would put Westland Helicopters Ltd. v. Arab Organisation for Industrialisation, 23 I.L.M. 1071, a decision of an international arbitration tribunal consisting of M. Eugene Boucher of Berne, M. Pierre Bellet of Paris, formerly the president of the Cour de Cassation, and M. Nils Mangard of Stockholm. We have been told that the history of the arbitration and the proceedings in the Swiss courts to which it is subject is lengthy, intricate and continuing. But we have been referred only to the award and must act accordingly. The dispute arose out of a treaty between four Arab states, by which they agreed to establish an organisation called the Arab Organisation for Industrialisation (“the A.O.I”), whose object was the development of an arms industry for their mutual benefit. In 1978 the A.O.I. entered into a contract for the [*213] purchase of helicopters from Westland. That contract contained an arbitration clause. Later, differences of political views between the four states caused the activities of the A.O.I. to come to an end. One of the consequences was that Westland raised a claim for damages for breach of contract. The initial question which had to be decided was whether the four states could be joined as parties to the arbitration, a question which in turn depended on whether they were bound by the obligations entered into by the A.O.I. The question was similar to that which arises in the present case. At pp. 1080-1081 the tribunal found that the member states, in drawing up the founding documents, had intended to define in an exhaustive and exclusive manner all legal aspects pertaining to the A.O.I., and above all that they wished to exclude the application of any national law. This led them to describe the character of the A.O.I. as “supranational,” although I remain uncertain whether any significance ought to be attached to their ommission to state expressly that it was governed by international law.

In a passage which must be quoted in full, the tribunal turned to consider the consequences of the possible attribution of personality to the A.O.I. as regards the liability of the member states, p. 1082:

“One may be tempted to reduce the question of whether the four states are bound by the acts of the A.O.I. to one of whether the A.O.I. has legal personality or not. A widespread theory, deriving moreover from Roman law (Si quid universitati debetur, singulis non debetur, nec quod debet universitas singuli debent’ * Dig. 3, 4; 7, 1), excludes cumulative liability of a legal person and of the individuals which constitute it, these latter being party to none of the legal relations of the legal person. This notion, which could be deemed ‘strict’, cannot however be applied in the present case. Nowhere is it accepted or given effect without limitation. Even in Switzerland, where more than probably anywhere else it serves as a reference, it is subject to important exceptions: A co-operative (‘société coopérative’) can be formed with the personal and unlimited liability of its members (article 868 COS) without its legal personality being challenged; the same is true for the limited partnership with share capital (société en commandite par actions) (article 764 ff COS). In addition the co-operative, the prototype of the legal person in the modern sense influenced by the doctrines of Germanic law, did not have at its outset an exclusion of the personal liability of its members who, on the contrary, were jointly liable for all its liabilities (cf. Otto Gierke, Geschichte des deutschen Kšrperschaftsbegriffs, vol. II of ‘Das deutsche Genossenschaftsrecht’, Berlin 1873, p. 384). It is revealing that the old Swiss Federal Code of Obligations dated 1881, article 688, starts from the principle of the joint and unlimited liability of the members; the exclusion of liability presupposes an express provision within the articles and publication in the Official Swiss Commercial Gazette. In France as in other countries, the general partnership (société en nom collectif)

* “Translator’s note:

‘If anything be owing to an entire body (such as a corporation), it is not owing to the individual members nor do the individuals owe that which is owing by the entire body.’Š [*214]

is deemed a legal person, even though its members are jointly liable for the obligations of the partnership. These observations show that the designation of an organisation as ‘legal person’ and the attribution of an independent existence do not provide any basis for a conclusion as to whether or not those who compose it are bound by obligations undertaken by it. One must therefore disregard any question relating to the personality of the A.O.I. The possible liability of the four states must be determined by directly examining the founding documents of the A.O.I. in relation to this problem.

The tribunal then proceeded to consider the liability of the member states in the light of the constitution of the A.O.I. They observed that the express attribution of legal personality did not in any respect allow one to deduce an exclusion of the liability of the member states, as to which the constitution was wholly silent. They thought the same of a provision which stated that the A.O.I. had a specified sum of capital, although they said that it could perhaps be inferred that the liability of the states was secondary, in that they could not be proceeded against so long as the A.O.I. performed its obligations. They continued, at p. 1083:

“In the absence of any rule of applicable law [‘règle de droit positif’], what is to be deduced from the silence of the founding documents of the A.O.I. as to the liability of the four states? In the absence of any provision expressly or impliedly excluding the liability of the four states, this liability subsists since, as a general rule, those who engage in transactions of an economic nature are deemed liable for the obligations which flow therefrom. In default by the four states of formal exclusion of their liability, third parties which have contracted with the A.O.I. could legitimately count on their liability.”

The tribunal said that that general rule flowed from general principles of law and from good faith. They then proceeded to support that view with further argument and references to the constitution of the A.O.I.

The final part of the tribunal’s reasoning which requires mention is their consideration of a number of special features which they regarded as pointing towards the liability of the member states in that case. In particular, they relied on the fact that the personality conferred upon the A.O.I. was expressly limited solely to operational needs, on their view that in reality the A.O.I. was one with the states; and on the fact that a committee consisting of ministers delegated by the four states had signed with the United Kingdom Government a guarantee of the obligations of the A.O.I. towards British companies. Their conclusion was that the four states were bound by the obligations entered into by the A.O.I., although it was unnecessary for them to go further and decide, for example, whether the liability was primary and concurrent or secondary, joint or joint and several.

The decision of the Westland tribunal is valuable in four main respects. First, it was a decision of a specific question of a similar kind. Secondly, it is natural to suppose that the tribunal’s approach to the question did not differ substantially from what would have been the approach of the International Court of Justice to the present question. [*215] assuming that there had been jurisdiction to decide it. Thirdly, the tribunal’s approach was to base themselves primarily on the particular constitution of the A.O.I. and not to lay down any general rules. Fourthly, while there was no reference, no doubt deliberately, to the opinions of international jurists, there was extensive reference to the municipal institutions of European countries, in order to support the tribunal’s view that the member states were bound by the obligations of the A.O.I.

The limited liability treaties

The final category of international material upon which reliance is placed consists of the 16 limited liability treaties, a full examination of which has been made by Ralph Gibson L.J. I gratefully adopt his analysis of them. Although the examination has been most valuable, I agree with him that they are not in the end of very great assistance. What they show is that, in a minority of cases, those states which have decided to set up international organisations have desired to make express provision for the exclusion or limitation of their liability towards, or for the obligations of, the organisation. There being no established practice of making provision in regard to the liability of member states, whether for or against, it cannot be assumed, in cases where no exclusion or limitation is found, that the liability exists. What can be said is that it may exist; and, further, that for those who intend to exclude or limit it there are precedents readily available for that purpose.

Application of international law

With the apparent exception of Schermers in International Institutional Law, it is inherent in the views of the jurists and the Westland tribunal that the founding states of an international organisation can, by the terms of its constitution, provide for the exclusion or limitation, alternatively no doubt for the inclusion, of their liability for its obligations; and, moreover, that such provision will be determinative of that question for the purposes of international law. Thus the intention of the founding states is paramount and, as Shihata puts it in “The Legal Problems of International Public Ventures,” all relevant provisions and circumstances must be studied in order to ascertain what it is. It cannot be supposed that there is any standard other than that of objectivity by which international law, any more that our own, can judge of such a matter. And we must heed the importance which Shihata, like the Westland tribunal, would attach to the extent to which the states’ intention was made known to third parties dealing with the I.T.C.

Throughout it must have been apparent to those states which were parties to successive I.T.A.s that the orderly regulation of world production and consumption and the maintenance of a stable price were objectives for whose attainment vast quantities of tin would very likely have to be bought and sold. It must have been apparent that there could well be periods when production persistently exceeded consumption, so that the price would have to be maintained by correspondingly increased purchases. It must have been apparent that if the cost of those purchases [*216] could not be met out of funds in hand, third parties who gave credit to the I.T.C. would have to look beyond those funds for satisfaction of their debts.

I.T.A.6

Turning to the provisions of I.T.A.6, I would refer first to articles 20 to 24, which make provision for the financing of the administrative and buffer stock accounts, in the former case by annual contributions from the members (article 20); and in the latter by contributions to the cost of a normal buffer stock of 30,000 tonnes of tin and by borrowings to finance the cost of an additional stock of 20,000 tonnes (article 21). The contributions to the cost of the normal buffer stock are to be apportioned amongst the members in accordance with their respective percentages of production and consumption (article 22.3) and there is a provision for refunds in the event of cash assets held in the account exceeding the cash equivalent of 10,000 tonnes (article 22.6). There is a further power to borrow for the purposes of the buffer stock (which I think must mean the additional buffer stock of 20,000 tonnes), subject to the approval of the council (article 24.1), and a power for the council, by a two thirds distributed majority, to make any other arrangements it sees fit in order to supplement its resources (article 24.2).

All these provisions appear to me to be concerned only with the internal regulation of the I.T.C.’s financial affairs between its members. Their broad effect is to provide that the members can only be called on to make contributions, over and above those required for the normal buffer stock, by a resolution or resolutions of the council. To that extent they limit the liability of the members to contribute to the capital of the I.T.C. No doubt they also imply that its assets are to be the primary source for meeting its obligations while it is a going concern. But if we are to pay due regard to the principle that the attribution of legal personality to the I.T.C. does not necessarily free the members from liability for its obligations, we must also allow that these provisions do not necessarily imply any exclusion or limitation of a direct secondary liability of the members towards third parties. The case is quite different from one where a contract with the corporate entity is incapable of engaging the liability of the members, because there a limitation of liability to the entity is necessarily a limitation as regards third parties. Moreover, articles 26 and 60, which together prescribe a winding up procedure on termination of the agreement (including the liquidation of the buffer stock), assume that there will then be a surplus of assets over liabilities, except, it is true, in regard to obligations towards staff: see article 60.2(b). I think that it would put altogether too great a burden on that single provision (which creates an obligation to the I.T.C. and relates only to the administrative account) to say that it impliedly relieves the members of any direct obligation to third parties to cover a deficit on the buffer stock account. There is no word of how a deficit on the latter account is to be met and certainly no suggestion that it is not to be met at all. Again the liability of the members would be secondary to that of the I.T.C., but there is nothing to exclude or limit it. [*217]

Having found nothing in the provisions of I.T.A.6 which is intended to exclude or limit a direct secondary liability of members for the obligations of the I.T.C., I turn to consider whether there is anything which shows positively that they were intended to be so liable. Here it must be observed that all important decisions in regard to the affairs of the I.T.C., not least in regard to the management of buffer stock operations (articles 28 to 31), are reserved to the council (i.e. to the members) or its subsidiary bodies. Such decisions are not left to the executive chairman or the buffer stock manager. The matters reserved include the determination of floor and ceiling prices, the operation of the buffer stock when the market price of tin is in the middle sector of the range between the floor and ceiling prices and, in general, the restriction or suspension of buffer stock operations. There is one provision which may be of special significance. When the market price of tin is equal to or less than the floor price, the manager, unless instructed by the council to operate otherwise and if he has funds at his disposal, is obliged to buy tin at the market price until it goes above the floor price or the funds at his disposal are exhausted: see article 28.3(e). It follows that anyone who sold tin to the I.T.C. under such conditions would be entitled to assume either that the manager had funds at his disposal or, if he did not, that the council had instructed him to buy tin without having funds at his disposal. Indeed, it is, I think, in general correct to say that anyone who gave credit to the I.T.C. on its buffer stock operations would be entitled to assume that the manager either had funds in hand to meet the debt or the authority of the members to incur it without them.

The other provisions of I.T.A.6 to which reference ought to be made are article 3.2 and 3.3, which provide that the seat of the I.T.C. shall be in London so long as the United Kingdom is a member and unless the council decides otherwise; and article 16.4, which provides that the status, privileges and immunities of the I.T.C. in the territory of the host government shall be governed by a headquarters agreement between that government and the I.T.C. That was a reference to the subsisting Headquarters Agreement which had been entered into between the United Kingdom Government and the I.T.C. on 9 February 1972.

The Headquarters Agreement

Article 2 of the Headquarters Agreement provides that it shall be interpreted in the light of the primary objective of enabling the I.T.C. at its headquarters in the United Kingdom fully and efficiently to discharge its responsibilities and fulfil its purposes and functions. Article 3 provides that the I.T.C. shall have legal personality; in particular the capacity to contract and acquire and dispose of movable and immovable property and to institute legal proceedings. This article, which is almost a verbatim reproduction of article 16.1 of I.T.A.6, obliged the United Kingdom Government to give the I.T.C. legal personality in English law. But its conjunction with article 2 suggests that the purpose of that gift was to enable the I.T.C. fully and efficiently to discharge its responsibilities and fulfil its purposes and functions in England. Article 8 provides that the I.T.C. shall have immunity from process in terms [*218] whose substance is faithfully reproduced in article 6 of the Order of 1972. It is unnecessary to refer to any of the other provisions of the Headquarters Agreement.

International law – conclusions

Having considered the material provisions of the two agreements and the matters which must have been apparent to all concerned, and guided by the opinions of the international jurists and the Westland tribunal, what must we conclude, objectively, was the intention of the states who were parties to I.T.A.6 in regard to the contracts of the I.T.C.? Were they intended to attract the liability of its members and, if so, to what extent and in what manner? A municipal court which has to decide such questions must studiously free itself from the preconceptions of its own jurisprudence. An English court must recognise that in international law the attribution of legal personality to an international organisation does not necessarily free its members from liability for its obligations. It must remind itself of the comparable institutions of other municipal systems, for example, the Scottish partnership and the société en nom collectif. By this route it may deduce that the attribution has been made for some other purpose, very probably to enable the organisation more readily to perform its functions both in international law and in the municipal law of the host country. Such a deduction is in my opinion well justified by the terms of article 16.1 of I.T.A.6 and articles 2 and 3 of the Headquarters Agreement.

While it may not be possible to say here, as was said by the Westland tribunal, that the I.T.C. is in reality one with the member states (a possibility considered also by Shihata), they nevertheless retain an extensive participation and control in its affairs. As Adam recognises, that must be a factor which points strongly towards their liability for its obligations. It does not seem to me that an equivalent case can be made on the other side for no liability without fault, because that would make third parties’ rights of recovery against the members precarious and dependent on circumstances outside their knowledge and control. Nor do I think that it can now be correct to say that the obligations of states are to be interpreted restrictively, where (1) the obligations arise out of an activity as mundane as that of buying and selling tin on the London Metal Exchange; (2) it must have been apparent to the members that in periods of world overproduction it might prove impossible to finance the necessary purchases wholly out of funds in the hands of the I.T.C.; (3) anyone who sold tin under such conditions would be entitled to assume that if the manager did not have funds at his disposal the members had instructed him to buy without them; and (4) the members did not, as they easily could have done, expressly exclude or limit their liability for liability for the obligations of the I.T.C.

Here I would enlist the general support of the Westland tribunal in favour of the liability of the members, and also of Schermers, albeit that I respectfully disagree with him that it is impossible for the members of an international organisation to exclude or limit their liability for its obligations. I cannot pause for a refutation of that view, except to say that every consideration of corporate law and of policy seems to be [*219] against it. It would also claim the support of the views expressed by Seidl-Hohenveldern in chapter 10 of Corporations in and under International Law, discounting the objection that they were apparently expressed in relation only to common inter-state enterprises. It may well be correct to say, as Mr. Pollock contended, that the I.T.C. were acting jure imperii because they were not buying and selling tin in order to make a profit. But the activity is surely one where those who deal with the I.T.C. ought to be in no worse a position than if it were carried on jure gestionis. What is it to them if someone, who buys and sells tin just like any trader, is not in truth a trader, only because he does not buy and sell in order to make a profit?

Having carefully considered all these matters, I have come to the conclusion that, judged objectively, the intention of the states who were parties to I.T.A.6 was that the members of the I.T.C. should be liable for its obligations. I have already given reasons for thinking that the liability is direct and secondary. Further, no limitation having been put on it, the liability is unlimited. Finally, it must, I think be joint and several and not merely joint. This view has the unqualified support of Seidl-Hohenveldern in Corporations in and under International Law. It seems that it would also have the support of Adam in Les Organismes Internationaux Spécialisés, once liability is established: see paragraph 111. Schermers states in International Institutional Law, at section 1395:

“When an international organisation is unable to meet its liabilities, the members are obliged to stand in, according to the amount by which each member is assessed for contributions to the organisation’s budget.”

I do not read this passage as being necessarily in favour of joint liability, as opposed to joint and several. No doubt it assumes that all the states will pay their due shares, so that the difference between the two bases of liability would become academic. In any event, the clear preponderance of juristic opinion is in favour of joint and several liability, no doubt because that is the basis universally applied to the trading entities of European systems, such as the Scottish partnership or the société en nom collectif; as indeed it is to an English partnership. I do not see this as a question about which there could be much debate. Like Schermers, international law would surely presume that states which were willing to join together in such an enterprise would intend that they should bear the burdens together no less than the benefits. What then is their interest in assuming towards third parties a basis of liability less stringent than that which their domestic laws impose on all joint traders? The possibility that one of their number might at first be made liable for the full amount is altogether irrelevant to an objective assessment of their intentions.

Then it is suggested that, even if it was intended that the members of the I.T.C. should be liable for its obligations, the liability was to exist only on the plane of international law, so that it does not extend to contracts of the I.T.C. which are governed by municipal law. With all due respect to those who hold this view, I can see no good ground for making that distinction, at any rate in the case of the I.T.C., whose [*220] principal activity was throughout intended to be the buying and selling of tin in vast quantities pursuant to contracts governed by municipal laws, more especially by that of the host country: see in particular articles 3.2, 3.3 and 16.4 of I.T.A.6 and articles 2 and 3 of the Headquarters Agreement. Either the members’ liability was intended to extend to all the obligations of the I.T.C. or to none.

Nowadays it is most unusual, if not unknown, for an English court which must decide a question of principle to be confronted with a freedom from authority not generally experienced since the times of Lord Hardwicke and Lord Mansfield. Like every freedom, it carries with it great responsibilities. We must not shirk the decision and, where it may govern a law which is the property of all civilised nations, we must be self-effacing as to our own. Above all, there being no clear and definite consensus amongst the sources which we may consult, we ought to welcome an opportunity of supplementing them with reason and justice.

Is it not both reasonable and just, and also proper, to impute to the members an intention that they should meet the bill for any amounts outstanding on the I.T.C.’s tin and loan contracts? We have heard much of the lofty motives which animated the founding states. When the gift of legal personality is explicable on grounds of expedience and practice, it is hardly respectful of such motives to hold that the members made it so as to escape liability for themselves. Why ever should they have wanted to do so? Are we to think that they put up this player, this poor player, to strut and fret its hour upon a municipal stage and then to be heard no more, while all the time they were washing their hands of the enormous costs of the production? The obligations of hospitality are very great. When the benefits, too, are great, it is right that they should be. But is it not an insult to the dignity of sovereign states to credit them with the intentions of the guest, who, omitting to say that only his friend will pay, departs from the hostelry without meeting the bill? I would think better of international law than that. I could not say that so many good and learned men had toiled in that stannary these centuries past for us to find that they had won only lead. It cannot have been for nothing that Grotius taught us: “The law obliges us to do what is proper, not simply what is just.”

For these reasons, I would hold that the I.T.C. has separate personality in international law, but that its members are nevertheless jointly and severally, directly and without limitation liable for debts on its tin and loan contracts in England, if and to the extent that they are not discharged by the I.T.C. itself.

Article 5 of the Order of 1972

Such being the nature of the I.T.C. and the effect of its contracts in international law, what, for the purposes of English law, are the nature and effect accorded to them respectively by article 5 of the Order of 1972? The longer we listened to the lengthy arguments on this question, the clearer it became that the answer is a simple one. To the recognition of the I.T.C. in international law which is effected by article 4 there are added, first, the qualities required to enable it to discharge its [*221] responsibilities and fulfil its purposes and functions in England; secondly, a confirmation of its separate personality. Although this language reflects that of articles 2 and 3 of the Headquarters Agreement, it is unnecessary to look beyond the terms of article 5 itself. For all the arguments which we heard to the contrary, it is in my opinion clear that a provision which gave the I.T.C the legal capacities of a body corporate would, as an inevitable consequence, give it separate personality in English law, even if it did not already have it in international law. To take the simplest and most pertinent example, you cannot have the capacity to enter into contracts of your own without enjoying a legal personality of your own – as Mr. Pollock brilliantly latinised it: “Debeo, ergo sum.”

So much for the positive effect of article 5. Even more important than what it does is what it does not do. Here the terms of article 2 of the Headquarters Agreement, to whose coming into force the operation of the Order of 1972 is expressly linked by article 1 of the latter instrument, assume a great importance. We see that the primary objective of the Headquarters Agreement is to enable the I.T.C. to discharge itsresponsibilities and fulfil its purposes and functions. The responsibilities, purposes and functions so referred to are those which are given to the I.T.C. by I.T.A.6 as supplemented by international law. It is natural to assume that the primary objective of the Order of 1972 was the same. Furthermore, even without reference to the Headquarters Agreement, the terms of article 5 suggest that it was deliberately expressed so as not to alter the nature of the I.T.C. in any way. It was clearly not intended that it should become a corporation in English law. It was intended that it should remain an international organisation with rights and obligations in international law. From that it must follow that the rights and obligations of its members are also to be governed by international law. For example, although certain provisions of the Companies Acts will overrride the articles of association of an English company and the rights of the members thereunder, they could not have that effect on the provisions of I.T.A.6. By similar reasoning, article 5 of the Order of 1972 cannot be taken to have any effect on the liability of the members of the I.T.C. for its obligations.

Both Mr. Pollock and Mr. Grabiner submitted that the rule of English law which renders a contract by a separate entity incapable of engaging the liability of its members depends not on the entity’s being a corporation proper, but on its having its own legal personality. Accordingly, they argued, article 5, by giving the I.T.C. a separate personality in English law, renders its contracts incapable of engaging the liability of its members, whatever may be the position in international law. I certainly accept that that argument would have prevailed if what had fallen for consideration was the effect of article 5 on the contracts of an English unincorporated association. But for the reasons which I have given article 5, when read with article 4, cannot have that overriding effect in the case of the I.T.C. On the contrary, the combined effect of the two articles is to adopt the liability of the members for the purposes of English law. Although this is a species of liability which was for a long time extinct, it was observed to flourish here for a short period during the last century: see section 25 of the Joint Stock Companies Act [*222] 1844 (7 & 8 Vict. c. 110) and In re Sea Fire and Life Assurance Co., Greenwood’s Case (1854) 3 De G.M. & G. 459.

Submissions A, B and C

From the views which I have expressed it will be apparant that I accept the plaintiffs’ submission B, the liability of the members being secondary to that of the I.T.C. and not concurrent. This necessarily carries with it a rejection of submission A, which is incompatible with my view of the separate personality of the I.T.C. in international and English law. Submission C can be disposed of on the simple ground that, however it is put, it runs foul of the principle of Salomon v. A. Salomon & Co. Ltd. [1897] A.C. 22. In rejecting submissions A and C, I am broadly content to adopt the reasoning of Kerr and Ralph Gibson L.JJ. and do not wish to add anything further of my own.

Having accepted submission B, I turn finally to consider the further grounds on which it is said that the plaintiffs’ claims must fail.

Justiciability

The defendants argue that the plaintiffs cannot make submission B effective because, being founded on the provisions of I.T.A.6 as supplemented by international law, it forces them to rely on an unincorporated treaty. Here I am in full agreement with the views of Kerr L.J. On my view of the matter, the short answer to the objection is that the combined effect of the International Organisations Act 1968 and articles 4 and 5 of the Order of 1972 is either to make the necessary incorporation or, perhaps, to dispense with the need for it.

Immunity

I agree with Kerr L.J. that the effect of section 3(1)(b) of the State Immunity Act 1978 is to deny to the member states immunity as respects proceedings based on submission B. It is perfectly correct to say that the I.T.C.’s tin and loan contracts were not “entered into by” the states, but on no principle of statutory construction can that be held to be a requirement of section 3(1)(b). That paragraph includes any obligation of a state which by virtue of any contract falls to be performed wholly or partly in the United Kingdom, irrespective of whether the state is a party to the contract or not. It was said that the words “entered into by the state” ought to be imported into section 3(1)(b) from section 3(1)(a), on the ground that Parliament cannot have contemplated an obligation of a state arising under a contract to which it was not a party. The answer to that is that not only do the words of section 3(1)(b), in their plain and ordinary meaning, contemplate such a possibility; we now know that it is a reality. Accordingly, there is no ground on which the court can decline to apply the plain and ordinary meaning of the words.

With regard to the two qualifications mentioned by Kerr L.J., I will say at once that the arguments of the defendants in support of the second of them appear to me to be wholly misconceived. I cannot believe that a plaintiff who has obtained an award, or an award and a [*223] judgment in terms of the award, against the I.T.C. is thereafter disentitled from proceeding against the members, any more than a creditor who obtains judgment against a principal debtor is thereafter disentitled from proceeding against the guarantor.

The first of the two qualifications, which relates only to the claims made by the five banks other than Kleinwort Benson, is more formidable. It may well be correct to say, as Kerr L.J. has held, that it is a prerequisite to the liability of the members under submission B that the I.T.C. should itself be liable and, further, that the immunity of the I.T.C. as against a plaintiff which does not have an arbitration award prevents it from being liable for this purpose. However, this is a point which was not fully dealt with by counsel and I believe that there may be an argument to the contrary. Since the views of the majority of the court make it unnecessary for this question to be decided, I prefer to express no opinion on it.

As for the E.E.C.’s independent claim to sovereign immunity, I am in complete agreement with the views which have been expressed by Kerr L.J. and there is nothing which I wish to add.

Conclusion

I would have allowed the appeals of the brokers and Kleinwort Benson, holding that the members of the I.T.C. are or may be jointly and severally, directly and without limitation liable to them for debts on its tin and loan contracts in England, if and to the extent that they are not discharged by the I.T.C. itself. I would have adjourned the appeals of the other five banks for further argument on the single point just mentioned.

RALPH GIBSON L.J. For the reasons which follow I have reached the conclusion that the appeals in the direct actions should be dismissed. Having regard to the other decisions of this court in the winding up and the receivership appeals of Maclaine Watson, there can be, if our decisions are not reversed on any further appeal, no relief against the member states by judicial process under our law for the plaintiffs. Their claims have been left unpaid by the I.T.C. which is an international organisation, created by sovereign states, controlled by them, caused or permitted by them to incur large obligations to companies in this country which dealt with their organisation in good faith, and then denied by those sovereign states the funds to honour those obligations. If my opinion of the rules and effect of our law and of international law is correct, the member states are not directly liable in our law to the plaintiffs, and the member states cannot be ordered by our courts to pay funds directly to the I.T.C. to satisfy the claims; but the member states are, in probability and subject to any considerations not suggested on the material before us, liable under international law to provide sufficient funds to the I.T.C. Ordinary concepts of justice, in my view, should plainly so require. The member states pursued their purposes of trying, by the trading operations of their organisation, to control the price of tin as they wished to control it. The member states had such benefit as was produced by implementation of their purposes and policy. They ought, [*224] so far as I can see, to pay the proper costs thereof and should not leave that cost to be borne by the banks and metal brokers to whom their organisation turned for assistance in carrying out those purposes and that policy.

This appeal, however, is concerned with a case in which two systems of law are involved in only one of which our courts have full jurisdiction. Our jurisdiction is limited to the law of England and Wales and that law limits the extent to which our courts can take notice of and apply rights arising under international law. If, as is my view, any obligations of the member states in respect of the debts of the I.T.C. arise only under international law, the claims in respect of those obligations cannot be decided in our courts and can only be pursued under international law by the Government of the United Kingdom.

Submission A: the I.T.C. as a partnership or unincorporated association of states

So far as concerned their first and main submission, Mr. Littman for Maclaine Watson and Mr. Kentridge for Rayners relied solely upon the true construction of the Order of 1972 in its statutory context to show that the I.T.C. had no legal personality separate from its members. Reference was made by them to international law and I.T.A.6 and the Headquarters Agreement only to rebut submissions, made for the Department of Trade and Industry and the member states, to the effect that the United Kingdom would be put into breach of treaty obligation if the court should hold that the I.T.C. lacked legal personality entirely, or lacked such legal personality as would be effective to exclude in the members any liability arising only from the fact of membership for the debts of the I.T.C. Mr. Sumption for the brokers and Mr. Burnton for the banks adopted that first submission. Mr. Pollock for the defendant states and Mr. Grabiner for the department joined in asserting that the answers to all questions as to the existence and nature of the legal personality of the I.T.C. are to be found in construing the Order of 1972 as required by our law.

The main contention of Mr. Littman and Mr. Kentridge with reference to the alternative submission B was also based upon construction of the Order of 1972 and sought no support from international law or from the terms of I.T.A.6 or the Headquarters Agreement. In that form their submissions were again adopted by Mr. Sumption and Mr. Burnton. As a further alternative, Mr. Burnton submitted that, assuming the I.T.C. to have legal personality for the purposes of proceedings under our law, direct secondary liability of the members is shown to arise upon construction of I.T.A.6 in accordance with international law. This final alternative was adopted as such by Mr. Littman and Mr. Kentridge and, I think, by Mr. Sumption on behalf of their clients.

The Act of 1968 and the Order of 1972

I will start examination of these issues with the United Kingdom legislation. The International Organisations Act 1968, under which the [*225] International Tin Council (Immunities and Privileges) Order 1972 was made, and the preceding Acts of 1944 and 1950 contained no express reference to any power to confer legal personality or status upon any international organisation to which the legislation is applied; nor is there express reference to the making thereby of any change in the nature of any personality which such organisation might already possess in international law. The only words which are said to confer personality upon the international organisation are the phrase “shall have the legal capacities of a body corporate.” In those words there has been no change since they were first used in 1944.

I accept that the court should approach the construction of the legislation and the Order of 1972 on the basis that the conferring of legal personality, which will have, or may have, an effect upon the liability of members for debts of the organisation, should only be derived by implication from the legislation and the Order if that implication is clearly a necessary consequence of the true construction of it. It is said for the plaintiffs that it is possible to give meaning and effect to the words of the Order of 1972 without implying any grant of legal personality to the I.T.C. I think that it might be possible; but to make the provisions of the Order of 1972 fit with the concept that the I.T.C. remains only a name for the members would require, in my judgment the imposition of a meaning which, from the language used both in the statute and in the Order, was not intended by Parliament. Any doubt as to the meaning intended by Parliament would be set at rest, in my view and for reasons stated below, by the legislative history of the use by Parliament of the formula contained in the Order of 1972.

It has been, I think, common ground that the Act of 1968, and its predecessors of 1950 and 1944 (and the Act of 1946 to which further reference will be made later) were not directed at the liability of members of international organisations, whether such liability be to the organisation itself to supply funds or directly to creditors of the organisation, in the sense that the absence or the existence of any such liability was a “mischief” at which the legislation was directed, within the meaning of the word “mischief” as used in Heydon’s Case (1584) 3 Co. Rep. 7a and subsequent authorities: see Halsbury’s Laws of England, 4th ed., vol. 44 (1983), para. 858, p. 523 and para. 899, pp. 551-552. Parliament, in short, had no purpose to remove, or to preserve, or to impose such liability from or upon members of such organisations. For my part, I think it probable that there was no such purpose because it was not envisaged that any international organisation would be left, whether by common agreement of the members, or because of disagreement among them, to default upon its obligations to creditors.

It may, therefore, be that if legal personality has been conferred upon the I.T.C. by the Order of 1972, and if the existence of that personality protects the members from liability to which they would otherwise be subject, that protection is a consequence which Parliament had no specific purpose to achieve. If, however, the intention of Parliament was, as I think it was, to confer upon the I.T.C. every capacity to act as an entity separate from its members, and to treat it as [*226] such in the law of this country, then the intention was that the contracts of the I.T.C. would be made by that entity and not by the members and that arbitration proceedings in respect of any claim under such a contract would be directed against the I.T.C. and not its members. Parliament had no specific purpose to impose upon the members any liability in respect of those contracts which would not otherwise arise according to the law of this country. Parliament was, I think, assuming that member states would supply funds to the organisations, which they created and controlled, sufficient to meet debts incurred unless such an obligation was disclaimed or excluded.

The main submission for the plaintiffs was that the court cannot imply any grant of legal personality to the I.T.C. from the legislation. No necessity for making such an implication is, it was submitted, shown. The I.T.C., despite the existence of its legal personality at the level of international law, remains a form of partnership under English law. The fact that the Order of 1972 appears to treat the I.T.C. as an existing entity, upon which capacities and immunities can be conferred, matters not. Effect can, it is said, be given to those provisions by treating the I.T.C. as an association of its members – the United Kingdom, the foreign states and the E.E.C. – to which members are given capacities to act in the name of the association and, in respect of actions done in that name, the specified immunities. It was acknowledged that a consequence of this construction was that in 1972, when the wide principle of sovereign immunity was still received in this country, each foreign state member thereby suffered a restriction in its sovereign immunity in this country, and the United Kingdom acquired a qualified immunity in its own courts. It is said that there is no reason to regard those consequences as outside the possible intention of Parliament.

I have found it impossible to accept that submission for a number of reasons. First, the terms of the Act of 1968 indicate that it is upon the designated organisation and not upon the members that capacities and immunities are to be conferred. Thus the power is to specify an organisation and to confer (section 1(2)(a)) on the organisationthe legal capacities of a body corporate; and the power is to provide (section 1(2)(b)) “that the organisation shall… have… privileges and immunities.” It has been objected that this process of reasoning suffers from circularity. It assumes that the reference to “the organisation” means something separate from the members of which it is composed. I am confident that such an assumption was made by the draftsman and by Parliament. If I am right on the matter of the grant of immunities, with which I next deal, then it seems to me that the possibility of erroneous circularity is removed.

The powers under the Act can be applied to “any organisation” of which the United Kingdom and one or more foreign sovereign powers are members. Members may thus include bodies which are not sovereign powers, such as the E.E.C. or another international organisation. Foreign state members would be individually entitled to sovereign immunity. Non-state members would not be so entitled unless immunity were separately provided by some other legislation or rule of law. There is no express power to confer any privilege or immunity upon members [*227] of the organisation as contrasted with the organisation itself, and its representatives, officers, etc. Parliament did not intend, in my judgment, to confer, without the use of express words in the statute or in the order to be laid before Parliament, any form of immunity upon the members of the designated organisation, or to affect the immunity already possessed by member foreign states.

It is true that there was power under the Acts of 1944 and 1950, as there is under the Act of 1968, to confer the capacities of a body corporate without the grant of any immunities. The first Order in Council made in respect of the I.T.C., the International Organisations (Immunities and Privileges of the International Tin Council) Order 1956 (S.I. 1956 No. 1214) provided for capacities and exemption from taxes etc., but no immunity from suit or legal process. The point, however, is not that the presence of a provision for immunity in the Order, article 6 in the Order of 1972, controls or explains the meaning of the grant of legal capacity in article 5, but that the terms of the statute indicate that it is upon the organisation itself and not the members that the immunities may be granted, and there can have been no different intention with reference to capacities.

Next, if I am right that the capacities and immunities are conferred by the Order of 1972 upon the I.T.C. as distinct from the members what effect does that have upon the status or legal personality of the I.T.C.? It was not, as has been stated already, the primary case for the plaintiffs, and it was at no point part of the case for the defendants, that the I.T.C. should be treated as having legal personality under the law by reason of its legal personality in international law. Such a legal personality, derived from I.T.A.6 and international law, was the basis of the final alternative submission advanced by Mr. Burnton for the banks as a variant upon submission B. I defer until later consideration of legal personality so derived.

Reliance was placed by the plaintiffs upon the absence of express words in the Acts of 1944 to 1968 giving power to create legal personality in any designated organisation. It was said that the absence of an express power must be taken as showing that Parliament intended that there should be no power to create legal personality. There was cited the passage in Bonsor v. Musicians’ Union [1956] A.C. 104, 144, from the speech of Lord MacDermott:

“But perhaps the most weighty consideration of all lies in the fact that Parliament has made no effort to incorporate the registered trade union. In the latter half of the last century incorporation was the recognised and usual way of conferring upon an association of persons the status of a distinct legal entity, and it is clear that the draftsman of the Act of 1871 had the Companies Act of 1862 before him. Yet there is not a word about the members becoming, on registration, a body corporate, and the only reference to a seal is in relation to the work of the registry. Parliament is not, of course, restricted in its choice of possible methods of producing a given result. But when, as here, it studiously avoids a familiar and approporiate method without purporting to adopt another in its stead, its intention to reach that result may well be open to doubt. [*228] For these reasons I am of the opinion that a registered trade union is not a juridical person.”

The terms of the Trade Union Act 1871 (34 & 35 Vict. c. 31) were examined in argument and the capacities thereby conferred upon a registered trade union were contrasted with the fullness of the gift of “the legal capacities of a body corporate” to a designated organisation under the Acts of 1944 to 1968; but it was said that, since the only mischief at which the Act of 1944 was aimed was to deal with the procedural handicaps in owning property, in bringing or defending proceedings, and in carrying on business, which an unincorporated association would face, there was no warrant to attribute to the grant of capacities any effect upon the status of the recipients.

I do not find it necessary to examine the speeches in Bonsor v. Musicians’ Union or the reasons given by their Lordships, who were in the majority on that point, for concluding that a registered trade union under the Act of 1871 was not a juridical person separate from its members although it had the capacity to be sued by a member upon a contract made with the member. I accept the submission made for the defendants that the approach of their Lordships was to consider the nature and extent of the capacities conferred upon the trade union in the statutory context of the Act of 1871 in order to determine whether separate legal personality had been conferred. I would apply the same approach to the statutory provisions relevant to this case. There was, as I have said, no purpose in the legislation with reference to the liability of the members, whether to remove, or to preserve, or to impose it. There was, however, certainly a purpose to confer such capacities as would enable the designated organisation fully and effectively to perform its functions within the jurisdiction and in our law. It seems clear to me that the purpose included that of enabling the international organisation to operate at the level of municipal law without requiring or causing the participation of the members. I find it as impossible to attribute to the members of such an organisation an intention to submit themselves, and their actions as members of such an organisation, to our municipal law in respect of the trading and commercial activities of the organisation as I do to attribute to the United Kingdom and Parliament an intention so to subject them by reason only of the international treaties which provided the occasion for the making of the Orders such as the Order of 1972. When the provisions were first enacted in 1944 the members, if sovereign states, had general immunity even in contracts of a commercial nature. I regard it as clear that Parliament intended that a designated organisation should have the capacities of a body corporate under the law and that in respect of the exercise of those capacities the organisation should have only the immunities given by the Order in Council from which it derived the capacities. The organisation, in short, and not “the organisation and the members,” or the “organisation with the members,” was intended to be the user of the capacities given.

Finally, on this point, in agreement with Millett J., I accept the contention made for the defendants that, in the context of international organisations of which the members include the United Kingdom and [*229] other sovereign states, it is right to construe the capacities of a body corporate as including the capacity, which a body corporate has, to contract with third parties, or with its own members, for its own account and without engaging the primary liability of the members upon the contract. I do not doubt that Parliament might, in a different context, confer upon an entity or association the capacity of a body corporate to contract without the intention to create a separate legal personality in the association on behalf of which a separate contract and liability might arise. In the statutory context of the Act of 1968, however, it appears to me to be clear that Parliament should be taken as having intended that a contract made by the I.T.C. was made by the I.T.C. as a separate entity and that sufficient legal personality for that to be the position in law was conferred on the I.T.C. by the Order of 1972.

The legislative history of the formula

As to the legislative history of the formula used in the Order of 1972, it was contended for the plaintiffs that the provisions in the Act of 1968, which gave power to confer the legal capacities of a body corporate upon an international organisation, should be regarded as having the same and no more force and effect as the provisions in similar terms which were in the Acts of 1950 and 1944. The effect of the use of the powers should be the same when made under the Act of 1968 as when first exercised under the Act of 1944.

As Kerr L.J. has made clear, it cannot be doubted that in 1972 the Government and Parliament of the United Kingdom supposed that enactment of the Order of 1972 would constitute a sufficient discharge of the treay obligations assumed in the Headquarters Agreement that the I.T.C. “shall have legal personality” for the purposes of legal proceedings in this jurisdiction. But it was submitted for the plaintiffs that the defendants could derive no assistance from the principle (cited by Staughton J. from Garland v. British Rail Engineering Ltd. [1983] 2 A.C. 751, 771, per Lord Diplock):

“that the words of a statute passed after the Treaty has been signed and dealing with the subject matter of the international obligation of the United Kingdom, are to be construed, if they were reasonably capable of bearing such a meaning, as intended to carry out the obligation, and not to be inconsistent with it.”

The Order of 1972 and the Acts of 1944 to 1968 were not passed to deal with any particular treaty or international obligation. It is clear, therefore, that there was no specific international obligation of the United Kingdom with reference to the I.T.C. which can be used for application to the Order of 1972 of the principle stated by Lord Diplock in Garland’s case, if the principle is limited by the words in which for that case he expressed it. Staughton J. acknowledged the force of these submissions. He, nevertheless, took the view that he ought to construe the Order of 1972 so as to conform with the Headquarters Agreement if he could. But, since in his view international law provided no clear rule as to the effect of legal personality in international law, the principle was of no direct assistance. [*230]

It was submitted by Mr. Grabiner and Mr. Pollock that it was, nevertheless, permissible to look to the legislative history of the use of the words now contained in the Act of 1968 to see whether any reliable indication can be derived as to the meaning intended by Parliament and, in particular, by reference to the discharge of relevant international obligations of this country; and that such indication is to be found from examination of the use of the legislative technique contained in the Act of 1968 and from its application on a large number of separate occasions.

There were put before the court schedules which listed some 64 international organisations and the treaties by which they were established, starting with the agreement relating to U.N.R.R.A. of November 1943 and ending, so far as concerned date, with an agreement relating to rubber of 1987. By Orders in Council made under the Act of 1944, the Act of 1950 and the Act of 1968, the United Kingdom Government has obtained the approval of Parliament to the conferring upon some 48 of the relevant organisations of “the legal capacities of a body corporate:” see list B of the international organisations and of the relevant treaties in the annexe to Kerr L.J.’s judgment.

By reference to those schedules Mr. Grabiner submitted that there was demonstrated a consistent legislative practice by which an international obligation to accord to different international organisations legal personality in this jurisdiction was sought to be fulfilled by use of the formula contained in the Act of 1968 and its predecessors; and that to hold that the formula has no effect to confer legal personality in our law would be to place the United Kingdom in apparent breach of numerous international obligations. The submission is, I think, clearly correct as a statement of fact. So far as concerns the 46 instances of use of the powers under the Acts of 1944 to 1968, they are in no different position from the Order of 1972 in relation to I.T.A.4 of 1972, that is to say the Orders constituted use of a formula enacted before assumption of the particular international obligation. The legislative practice demonstrated by the 46 instances listed in the schedule is not, however, in my judgment, on that ground to be dismissed as irrelevant. Kerr L.J. has referred to the dicta of Diplock L.J. in Salomon v. Commissioners of Customs and Excise [1967] 2 Q.B. 116, 132, and of Lord Diplock in Garland v. British Rail Engineering Ltd. [1983] 2 A.C. 751, 771; and to those of Scarman L.J. in Pan-American World Airways Inc. v. Department of Trade [1976] 1 Lloyd’s Rep. 257, 261, and of Lord Bridge of Harwich in Shearson Lehman Brothers Inc. v. Maclaine Watson & Co. Ltd. (No. 2) [1988] 1 W.L.R. 16, 24D.

The principle, as it seems to me, requires that domestic legislation should be construed so as to be in conformity with an international obligation of this country if it is clear that the legislation was intended by Parliament to be in conformity with that obligation and if such a construction is one which is and was properly applicable to the terms of the legislation when first enacted. International obligations cannot alter the clear meaning of statutes. They may, however, be permitted to make clear which of more than one reasonable meaning was intended by Parliament. On a large number of occasions both before and after enactment of the Order of 1972 the formula was applied by Parliament [*231] to international organisations with reference to which this country had assumed an international obligation to accord them in our law legal personality. It is a reasonable and proper construction of the Acts of 1944 to 1968 that use of the relevant power therein contained should have that effect. Use of the power in the cases where there was no obligation to accord legal personality does not prevent that conclusion. In each case, by the use of the power so construed, there was proper performance of the obligation assumed by the United Kingdom Parliament intended the Orders in Council to achieve a result in conformity with that obligation. The meaning of the international obligation remains to be considered. I would construe the Order of 1972 so that its meaning conforms to the international obligation of the United Kingdom under the Headquarters Agreement.

This, however, does not exhaust the legislative history which requires to be examined. Mr. Grabiner drew attention to the Diplomatic Privileges (Extension) Act 1946. Kerr L.J. has described the occasion of its enactment. Mr. Grabiner submitted that that was not the case of the mere application of a previously established formula to a new international obligation but the considered re-use of the established formula in an amended Act which was passed specifically to deal with the international obligations assumed by the United Kingdom in the Convention of 1946. That submission, in my view, is right. If the court should hold that the formula appearing in the Act of 1944, and left unamended in the Act of 1946, does not secure to the United Nations such legal personality as, on the true construction of the Convention of 1946 was thereby promised, the United Kingdom would be in breach of that obligation. The court should, if it reasonably can, attach to the formula such a meaning as will result in the United Kingdom not being in breach of that international obligation.

There appear to be two other instances of substantially similar effect, and it is sufficient to identify them. The first is Eurocontrol, with reference to which there was the Eurocontrol Convention of 1960, and effect was given to the obligation by section 2 of the Civil Aviation (Eurocontrol) Act 1962, by a provision now contained in paragraph 1 of Schedule 4 to the Civil Aviation Act 1982. The second instance is the Commonwealth Secretariat. The agreement was made in 1965 and effect was given to the obligation by the Commonwealth Secretariat Act 1966.

To construe the Order of 1972 so that its meaning conforms to the international obligation of the United Kingdom under the Headquarters Agreement requires that that meaning be demonstrated. What was the nature of the international obligation which the United Kingdom assumed with reference to the I.T.C. that the I.T.C. should have “legal personality?” The promise is made in an international agreement and effect is to be given to it in municipal law. Staughton J. was unable to reach any firm conclusion on the effect of legal personality in international law. He considered the material before him, including the arbitration award in Westland Helicopters Ltd. v. Arab Organisation for Industrialisation, 23 I.L.M. 107, and acknowledged that there was material on which one could conclude that, both in the domestic law of some countries and in public international law, the fact that an association is a [*232] legal person is not inconsistent with its members being liable to creditors for its obligations. I will consider the question of the effect of legal personality of an international organisation upon the liability of its members in international law later in this judgment with reference to Mr. Burnton’s alternative submission. At this stage it is sufficient to say that international law appears to me clearly to recognise that legal personality in an international organisation means in international law that the organisation is an entity separate from its members. The question whether the possession of that separate personality has any, and if so what, effect upon the liability of its members under international law either to put the organisation in funds or directly to creditors of the organisation is another question.

Passages which support that proposition as to the effect of legal personality in international law can be found in the excerpts cited to us from the works of learned authors. Professor Henry Schermers, of Leyden, in International Institutional Law (1980), has written:

“1386. The constitutions of certain international organisations provide expressly that these organisations have legal personality in international law. Such provisions oblige the members to accept the organisation as a separate international person, competent to perform acts which under traditional international law could only be performed by states. They clarify the status of the organisation for non-members.”

Later, under the heading “Responsibility under Private Law,” in a passage much discussed in this case, he wrote:

“1395. Under national legal systems, companies can be created with restricted liability. An express provision thus enables natural persons to create, under specific conditions, a new legal person in such a way that they are no longer personally liable for the acts of the new person. In international law no such provisions exist. It is therefore impossible to create international legal persons in such a way as to limit the responsibility of the individual members. Even though international organisations, as international persons, may be held liable under international law for the acts they perform, this cannot exclude the secondary liability of the member states themselves. When an international organisation is unable to meet its liabilities, the members are obliged to stand in, according to the amount by which each member is assessed for contributions to the organisation’s budget.”

As I understand the reference to “secondary liability,” the liability of members is said to be secondary because the primary liability is that of the organisation itself in right of its separate personality.

Next, an opinion to similar effect is expressed by Professor H.-T. Adam of the University of Paris in his book Les Organismes Internationaux Spécialisés (1965). In paragraph 110, according to the translation supplied to this court, he contrasts the position of the member states of an international organisation with the position of shareholders of a company in municipal law: [*233]

“However, a distinction may be drawn between member states and shareholders, owing to particular features of the inter-state situation. The rights and obligations of shareholders are determined, in internal law, on the rules of company law which produce effects erga omnes. There is no equivalent in international law, even according to the most progressive doctrinal writing on the subject. If the international personality of the establishment may, ultimately, be raised against non-member states, it is more difficult to raise the non-liability of member states if only because the control which they exercise over the establishment may give rise to liability on the application of general principles of law. The extent and scope of such liability obviously remains ill-defined in the absence of international legislation on the subject. It can only be said that the personality of the establishment makes the liability of member states a subsidiary matter (after consideration of that of the establishment). Does it make it also conditional (on demonstration of fault)? Is this liability independent of fault? The answer to these questions is all the more difficult to formulate because, in international law, there are no rules limiting the liability of members for corporate obligations; in public international law, there are no rules of law relating to limited liability companies.

Again, as I understand this passage, the reason why the liability of the member governments is “subsidiary” is because the primary liability is that of the organisation or establishment itself.

Lastly, I would refer to the work of Professor Ignaz Seidl-Hohenveldern of the University of Vienna, Corporations in and under International Law (1987). A brief citation is sufficient for this purpose, from p. 73:

“International organisations and common inter-state enterprises, however, have two features in common: they are formed by several states for the pursuit of a common purpose and these states have endowed them with a separate personality, applying a general principle of civil law to relations established under international law.”

It would, as I think, be astonishing if international law were found to be to any different effect. The repeated use of the phrase “legal personality,” or variants of it, in the multi-lateral treaties listed in the schedule could not have been intended by the states, who were parties to the treaties, to have no effect in international law so that the organisation, upon which they expressed the intention of conferring legal personality, continued as an association of, and not an entity separate from, the members. In In re Reparation for Injuries Suffered in Service of United Nations [1949] I.C.J.R. 174, the International Court of Justice had to consider whether the United Nations, under its charter, had international personality so as to be able to bring an international claim. As already mentioned above, the charter did not express an intention by the founding states that the United Nations should have international legal personality. The court concluded, at pp. 179-180: [*234]

“the organisation was intended to exercise and enjoy… functions and rights which can only be explained on the basis of the possession of a large measure of international personality and the capacity to operate upon an international plane…. It must be acknowledged that its members, by entrusting certain functions to it, with the attendant duties and responsibilities, have clothed it with the competence required to enable those functions to be effectively discharged. Accordingly the court has come to the conclusion that the organisation is an international person. That is not the same thing as saying that it is a state, which it certainly is not, or that its legal personality and rights and duties are the same as those of a state…. Whereas a state possesses the totality of international rights and duties recognised by international law, the rights and duties of an entity such as the organisation must depend upon its purposes and functions as specified or implied in its constituent documents and developed in practice.

It appears to me to be clear that international law would regard the possession of legal personality under international law by an international organisation, expressly conferred by its constituent documents, as causing the organisation to have existence separate from the members who formed it and capable of acting in law independently of its members. The rights and duties of the organisation, and the consequences in international law of its actions for the liability of its members by reason of their membership, would have to be determined by consideration of the constituent documents of the organisation in the light of any relevant rule of international law.

The international obligation assumed by the United Kingdom to the I.T.C. in the Headquarters Agreement, that the I.T.C. should have legal personality under our law, was therefore, in my judgment, an obligation to afford such legal personality as would cause the I.T.C. to be an entity distinct from its members and capable of acting and contracting on its own behalf and without, at the same time and automatically, engaging the primary liability of the members under its contracts. In short, the organisation would not be a form of partnership as known to English law. Further the obligation assumed by the United Kingdom under the United Nations Convention of February 1946, to the effect that the United Nations should have “juridical personality,” was to the same effect. That obligation was assumed before the date of any of the authorities cited to us, but I would hold that the effect of legal personality in international law must be taken to have been the same in 1946, and when the Act of 1944 was passed, as it is shown to have been before and after 1972.

I would add that the international obligation assumed by the United Kingdom was, in my judgment, limited to the provision for the I.T.C. of separate legal personality and did not extend to the securing in English law of the enforceability of any other attributes of the international legal personality of the I.T.C. which under international law might be derived from the terms of its then constituent document, I.T.A.4. That limit upon the obligation assumed by the United Kingdom under I.T.A.4 and [*235] the Headquarters Agreement is apparent from the terms of the Headquarters Agreement of which article 3 says only that the council shall have legal personality. There cannot be derived from that provision any obligation to enact in this country any particular attributes of that personality whether concerned with liability or non-liability of the members.

In the result, the first and main submission for the plaintiffs must, in my judgment, fail. The I.T.C. has at all times had legal personality separate from its members and of such a nature that, when it contracts in its own name, it contracts for itself and it does not thereby engage its members by reason only of their membership in any direct and primary liability upon its contracts.

Submission B: secondary and contingent liability

The consequence of the conclusion that the contracts of the I.T.C. were made for itself and not for the members is, according to our law, that, in the absence of agency, the I.T.C. alone is liable upon the contracts unless some rule of our law, or some special attribute of the I.T.C. which our law recognises and is able to enforce, imposes liability upon the members.

The submissions of Mr. Littman and Mr. Kentridge may, I think, be summarised thus.

(i) In English law the nature of the association within the I.T.C. according to I.T.A.6 is such that, in the absence of separate legal personality by the I.T.C., the members would be liable upon the contracts of the I.T.C.

(ii) The interposition of a legal entity, created by operation of law, which permits the contracts of the I.T.C. made under the direction of the members, to be the contracts of the separate entity only, is a privilege created by the law in municipal legal systems for the protection of members but it is applied in the case of some only and not all separate legal entities. The English model of the corporation aggregate and limited company is not the only model known to the legal systems of the members of the I.T.C. or of the United Kingdom. There is no reason, it was said, to attribute to the separate personality of the I.T.C., obtained in English law by means of the Order of 1972, any such consequence in our law. All that it is necessary to attribute to the legal personality so created is sufficient separateness for the primary liability to be separate.

(iii) The court should therefore attribute to the I.T.C. the personality and attributes of a partnership in Scottish law, which are similar to those given by French law to the société en nom collectif.

(iv) The consequence should be that the members of the I.T.C. are subject to secondary and contingent liability. The liability is secondary or contingent because it arises, or becomes enforceable, on failure by the I.T.C. to pay. It was accepted, as I understand it, by Mr. Littman and Mr. Kentridge and Mr. Sumption that this secondary liability of the members could not arise unless it was established by complying with the requirement, which provides the exception to the immunity of the I.T.C., that an arbitration award be obtained. Mr. Burnton, some of [*236] whose clients do not have arbitration terms in their contracts of loan, despite the obligation upon the I.T.C. under article 23 of the Headquarters Agreement that such contracts “shall include an arbitration clause,” made no such concession.

I cannot accept this submission. It was supported by arguments of very great skill and learning. If I am right in my reasons for rejecting it, it is not necessary to examine some parts of the argument, and, while expressing my great gratitude and admiration for the submissions of counsel for the plaintiffs, I shall not do so. In particular, I shall not examine the submission that the members of the I.T.C. would be liable on the contracts by reason of their membership in the absence of separate legal personality and, for the purposes of the submission, I will assume that they would be.

A system of municipal law may develop different rules for the control of the two main forms of association by which trade and other forms of economic activity are conducted, namely the partnership, which is primarily an association of individuals who jointly conduct their activity, and the corporation or limited company, primarily treated by law as a separate entity which itself conducts the activity under the control of directors and, more remotely, of the members. It is well known that in some systems of law an association which is fundamentally like a partnership may be given full legal personality, or some degree of personality; and the corporation or limited company may be subjected to rules which impose liability of a secondary nature, either generally or in particular circumstances, upon the members. Such rules are developed, as is obvious, according to the perceived requirements of the particular society.

We are, however, in this case not concerned with abstract jurisprudential concepts save as those concepts assist towards clarity of thought. Our task is to apply the rules of law of England and Wales including the Order of 1972 which has effect throughout the United Kingdom.

The plaintiffs assert that they have advanced claims in law which are arguable and which should be allowed to proceed to trial. So far as the claims depend upon secondary liability by reason only of membership it seems to me that the plaintiffs are stopped by the basic rule of English law to which I have referred, namely, that when a contract is made by A with B then, in the absence of agency, A cannot claim on the contract against C unless he can point to a special rule of law which imposes the liability. Upon the submission now under consideration, the attributes of the separate personality of the I.T.C. are to be derived solely from the Order of 1972 and the general principles of our law, including the power of the common law to develop those principles to meet and to deal with new situations and problems. For my part, I have no doubt that all that can be derived from those sources is the fact that separate legal personality has been conferred upon the I.T.C. If Parliament had intended that, notwithstanding that separate legal personality, the members should be secondarily and contingently liable directly to creditors for the debts of the I.T.C., there would have been an express provision to that effect. There was not any such provision. As I have [*237] said, the legislation was not apparently directed to the avoiding or to the preservation or to the imposition of liability on the part of members. If it had been so directed a different form of legislation would have been necessary.

Further, it seems to me that the invitation to the court in this submission is not to develop any existing principle of our law but to devise a basis of liability in circumstances where, on the information before the court, something seems to have gone very wrong in the conduct and management of the I.T.C. So to do would be, in my view, contrary to the principle of our law by which our courts do not adjudicate upon the transactions of foreign sovereign states: see Buttes Gas and Oil Co v. Hammer (No. 3) [1982] A.C. 888, 931G-932A, perLord Wilberforce. The circumstances of this case are very different from those considered in the Buttes Gas case. The transactions of the members of the I.T.C. within their organisation were carried out in the control and direction of the affairs of an organisation having its principal place of business within this country and the transactions themselves were, no doubt, conducted by the delegates of the members within the jurisdiction. Those transactions, in so far as they were, for example, directed to the conduct of the buffer stock and to the approval of borrowing, had effect upon the trading and commercial activities of the I.T.C. within the jurisdiction. Those facts, by themselves, do not, in my judgment, disapply or make irrelevant the principle laid down in the Buttes Gas case. The transactions of the members within the I.T.C. remain transactions of and between foreign sovereign states with the E.E.C. and the United Kingdom. It is not necessary to consider at this point the precise limits of that principle but I think it is clear that it has no application if, from the circumstances of the case, the states are shown to have intended to submit, or must be taken to have submitted, the transactions in question to adjudication at the level of municipal law by our courts. An obvious example would be the making by one or more states of a commercial contract with a company in this country: in such circumstances, in the absence of terms effectively indicating a contrary intention, the transaction would be subjected to our law, despite the role of the states in joining together so to contract, and there would be no immunity under the State Immunity Act 1978. If states, however, who are members of an international organisation endowed with legal personality under both international law and the law of this country, by the use of their powers as members of the organisation cause it to trade at the level of municipal law in this jurisdiction, then, as it seems to me, those states could only be treated as having submitted their actions as members of the organisation, and any liabilities arising out of those actions, to the jurisdiction of our courts if the organisation is shown to be of such a nature that the trading by the organisation is also trading by the members, or if statute requires that the court adjudicate upon the matters irrespective of submission; or if there is some other indication of such submission. If it had been demonstrated that the I.T.C. had, under our law, no separate legal personality, such would have been the position so far as concerned direct liability to creditors of the I.T.C. But the I.T.C. has always had, in my view, separate legal personality. There [*238] is no existing rule of English law which states that trading by an international organisation, which has separate legal personality under our law, shall be treated as trading at the level of municipal law by its members. The Order of 1972 does not so require. The court is asked, in effect, to devise such a rule. So to do would not only be to devise a rule of law but also to attribute to the member states an intention, or conduct from which such an intention should be found, to subject their transactions as members of the I.T.C., and the consequences of them in our law, to the jurisdiction of our courts, when such an intention is not manifested by any actions or statements of the members. On the contrary, the actions of the members in conducting their international purposes through the means of the I.T.C., upon which they conferred international legal personality, and for which they sought and obtained legal personality under our law for the purposes of its trading activity, show, in my judgment, that the intention of the members was to prevent their actions as members within the organisation from being subjected to the jurisdiction of our courts.

Mr. Burnton’s alternative: I.T.A.6 and international law

I will first state this submission in summary form as I understand it.

(i) The liability of members for the debts of a collective or corporate entity is determined always by the rules of law applicable to the entity: the activities or constitution which created the entity determine what sort of entity it is under the relevant system of law.

(ii) The legal personality, which the I.T.C. is shown to have by reason of the Order of 1972, is not thereby defined as to its attributes including any liability of its members. It is therefore necessary, in order to determine what are the consequences in English law of acts by and on behalf of the I.T.C. within this jurisdiction, to consider and interpret I.T.A.6 in the context of international law.

(iii) The necessity or the propriety of that course are to be derived by the application and development of the established rules of conflict of laws in English law, namely, that the liability of members for the debts of a foreign corporation is to be determined by the law of the place of incorporation: Dicey & Morris, The Conflict of Laws, 11th ed. (1987), vol. 2, p. 1136 and cases there cited. The law of the creation of the I.T.C. is public international law. The constituent instrument is I.T.A.6.

(iv) No rule of English law prohibits, for this purpose, the examination and construction of I.T.A.6 although it is an international treaty not directly incorporated into domestic law.

(v) The terms of I.T.A.6 considered in the light of public international law, and having regard to the practice of states as demonstrated by various bilateral treaties, show that the members of I.T.A.6 are directly liable to the creditors of the I.T.C.

(vi) That liability should be held to be concurrent with the liability of the I.T.C.; alternatively, it should be held to be secondary and contingent.

If liability were held to be capable of being established by this route, questions of immunity would arise with reference to the foreign member [*239] states and the E.E.C. Those questions, and the plaintiffs’ submissions with reference to them, will be considered later.

This argument was made before Staughton J. and was rejected by him. He considered that it was not open to the plaintiffs to rely upon I.T.A.6 for this purpose. It must, I think, be acknowledged that if Mr. Burnton’s argument correctly represented existing law there would be much to commend it. If the liability of members of an international organisation, designated and endowed with legal personality in this country under the Act of 1968 by Order in Council, were to be determined by the terms of the constituent document, in this case I.T.A.6, so that a statement as to non-liability or as to the nature and extent of any liability, would be effective, there would be a strong incentive upon those who draft and approve such documents to insert clear statements to the effect intended. If that had been done in this case either there would have been no such difficulties as the plaintiffs face, or at least no difficulties of the scale which have arisen here; and those who were left with unsatisfied claims would have no clear basis of grievance against the members.

The submission also appears to fit with the structure and language of the Order of 1972 made under the Act of 1968. As stated above, there are no express words of grant of legal personality. The Act speaks of specifying an organisation and of conferring legal capacities and immunities upon it as if it is the existing organisation which is to receive them. The Order in article 4 recites that the I.T.C. “is an organisation of which Her Majesty’s Government in the United Kingdom and governments of foreign sovereign powers are members.” There are no express words to effect any change in the status or attributes of the I.T.C. save as must be derived from the grant of the legal capacities of a body corporate.

The starting point for consideration of this submission must be the rule relating to the use of unincorporated treaties in claims based on private law. The rule is long established and the Acts of 1944 to 1968 must be considered in the light of the existence of that rule of the common law and of the constitution. For this purpose it is sufficient to cite Attorney-General for Canada v. Attorney-General for Ontario [1937] A.C. 326, 347, per Lord Atkin, giving the opinion of the Privy Council:

“Within the British Empire there is a well established rule that the making of a treaty is an executive act, while the performance of its obligations, if they entail alteration of the existing domestic law, requires legislative action.”

and a passage from Halsbury’s Laws of England, 4th ed., vol. 18 (1977), para. 1405, p. 719:

“Since in the United Kingdom the power to make and to ratify treaties belongs to the Crown, any treaty which requires a change in English law in order to make that law conform with the provisions of the treaty, and thus ensure that those provisions are cognisable and enforceable in the English courts, requires that the necessary legislation be enacted.” [*240]

It is clear that the rule does not prohibit reference to unincorporated treaties in all circumstances and for any purposes. Staughton J., after reference to a number of authorities, held that the rule was derived from the principle that a treaty which has not been enacted into English law is not part of English law for the purposes of creating private rights, and that, therefore, the claimants could not rely upon the provisions of I.T.A.6 either to make good a case of agency or to found the imposition of a primary or secondary liability of the members of the I.T.C. That statement appears to me to be fully supported by the authorities. It leaves for further consideration what is meant in this context by “relying upon the provisions” of a treaty.

Where an international organisation, given legal capacity and personality under our law by Order in Council, carries on trade in this jurisdiction, the law of this country applies to its trading activities. If it is alleged that a contract was made by the organisation and a question is raised as to the authority of the person to bind the organisation then, as it seems to me, the rule would not exclude reference to I.T.A.6 for the purpose of establishing whether or not the person had or had not such authority. The question of agency is one both of law and of fact but, for such a purpose, there would be no attempt to base the cause of action upon a provision of the unenacted treaty but to apply the existing rules of our law to a justiciable transaction.

The purpose for which Mr. Burnton asks the court to interpret and to apply the provisions of I.T.A.6, however, seems to me to be one which falls clearly within the established rule. His clients claim upon a contract of loan made by the I.T.C. No general rule of English law imposes liability in respect of those contracts upon the Crown in right of the United Kingdom or upon other members of the I.T.C. The submission is that the terms of I.T.A.6, construed in the light of public international law, provide a basis of liability. In my judgment, that is a claim that the applicable rules of private law have been changed by the effect of an unenacted treaty.

That conclusion does not provide a complete answer to Mr. Burnton’s submission. The rule relating to reliance upon unenacted treaties is a rule of common law and it must, in any particular instance, give way to the express or necessary effect of legislation. For example, the Order of 1972 directs reference to I.T.A.6 for certain purposes. The “official activities” of the I.T.C., to which reference is made in articles 8, 10, 12 and 13, are provided by article 2 to “include its administrative activities and those undertaken pursuant to the I.T.A.4 or any succeeding agreement.” It seems to me that, if any question had arisen as to whether activities were “official activities,” reference to the relevant agreement would clearly have been authorised by necessary implication even if the express provision in article 2 had not been included.

The next question, therefore, is whether, upon the proper construction of the Order of 1972, reference to I.T.A.6 for the purposes of demonstrating a basis of liability of the members is authorised. Having regard to the constitutional importance of the rule, namely, that the law relating to private rights cannot be changed without legislation, it seems to me that, where there are no express words to that effect in the Order [*241] laid before Parliament, or in the statute in which the powers are contained, there must be shown a clear necessity to make the implication to that effect before such an intention could be attributed to Parliament. No such clear necessity is, in my judgment, demonstrated for the reasons which follow. First, the effect of the Order of 1972, if I am right so far, is that it conferred a separate legal personality on the I.T.C. There is no basis, as I have explained above, for attaching any further attributes to that legal personality, whether derived from I.T.A.6 or public international law, as a process of construction by reference to the meaning of any international obligation assumed by the United Kingdom. The claims before the court are claims against the I.T.C. and against the members. It is not necessary for providing answers in law to those claims to look to I.T.A.6 or to infer that Parliament must have authorised such reference. The answers are that the I.T.C. is liable and that the members, by reason only of membership, are not. The fact that these answers are regarded by the claimants as unjust (and, on the information before the court, so regarded with some apparent justification if failure in this jurisdiction must mean no compensation from any source), does not provide any ground for holding that the Order of 1972 must be read as authorising reference to I.T.A.6 as a basis for asserting the liability of the members. There is nothing unjust about the rules of law which the court is applying. The injustice, from which the plaintiffs suffer, arises from the unexpected failure by the members to supply funds to the I.T.C. and this court has no jurisdiction to determine whether that failure is justifiable or not.

Secondly, to hold that the Order of 1972 authorises reference to I.T.A.6 as a basis for the liability of the members to creditors of the I.T.C. would be to attribute to Parliament an intention to subject the transactions of the member states as members of the I.T.C. to the judgment of the courts of this jurisdiction. Parliament may, of course, by legislation so provide, but it is not to be expected that Parliament would do so without the consent of the states concerned. Foreign sovereign states may of their own motion subject their transactions to the jurisdiction of the courts of this country. The Acts of 1944 to 1968 contemplate application of the powers therein contained to international organisations of which the United Kingdom and foreign sovereign powers are members. Such membership requires an international agreement to which the members are parties or to which they accede. The Order of 1972 was made, as in article 1 it expressly acknowledges, pursuant to the Headquarters Agreement which itself was made pursuant to I.T.A.4. Nothing in those treaties, as I have already said, supports the contention that the member states agreed or intended to subject their transactions as members of the I.T.C., and any liability under the terms of the international agreement which might result therefrom under international law, to the judgment of the courts of this country. I think it is impossible to derive by implication from the Order of 1972 that Parliament intended that their transactions should be so subjected. I therefore agree with Staughton J. that Mr. Burnton’s submission cannot succeed upon the ground that the claim so advanced is based upon provisions is an unenacted treaty. [*242]

If I am right in holding that it is not open to the plaintiffs to rely upon I.T.A.6 it is not necessary to decide the questions raised by Mr. Burnton with reference to international law. His submission, however, fails in my view on this ground also. The contention is that the terms of I.T.A.6, considered in the light of public international law, and having regard to the practice of states, show that the members of the I.T.C. are liable to the creditors. In my judgment, they do not.

The relevant terms of I.T.A.6 have been set out by Kerr L.J. In summary, the effect of those terms, for the purposes of this submission, is that they contain no express provision under which the members are to be directly liable to creditors and no express provision excluding liability. Obligations upon the members to supply funds to the I.T.C. are provided but, so far as concerns express provision, only as to normal buffer stock and administrative account debts, including obligations to staff. There is, conspicuously, because expressly excepted from the express provision, no provision for liabilities relating to the buffer stock account, into which category fall the claims of all the plaintiffs.

Mr. Burnton’s submission, however, relies not upon enforcing a specific provision for liability in I.T.A.6, but upon the absence of any provision against such liability. For that submission support is required from public international law. It is said that there is a rule of public international law which, supported by evidence of the practice of states, is sufficiently clear for application by this court, to the effect that in the absence of a provision excluding the liability of members of an international organisation, the members are directly liable to creditors. In the first place, the rule is said to be discernible from the writings of learned authors. Reference has already been made to some of the passages cited to the court. For the reasons which follow I am not persuaded that this rule of international law has been made out.

From examination of the writings, no clearly recognised rule of international law is, in my judgment, discernible as to the effect of the existence of legal personality where there is no statement of non-liability on the part of the members of an international organisation. As set out above it appears that international law recognises that, where legal personality exists, the primary liability of members is excluded without reference to the existence of any express statement of non-liability. There is no general agreement that the effect of the absence of a non-liability clause is to impose direct secondary liability upon the members to creditors. On the contrary, Professor Schermers, writing in 1980, International Institutional Law, expressed the view that where an international organisation is unable to meet its liabilities the members are “obliged to stand in, according to the amount by which each member is assessed for contributions to the organisation’s budget:” see the passage cited above. That is a reference, I think, to liability of the members to the organisation and not to direct secondary liability, joint and several for the full amount of the claim, to creditors.

That is, in my view, a likely consequence of the development of basic principles of law as generally received in the legal systems of states. For the reasons already given, international law recognises the power of states to create an international organisation with legal [*243] personality separate from its members. If that is done, principle should require that, so far as concerns those states who must recognise the validity of the legal personality so created, including those who are party to the constituent agreement, liability upon the contracts of the organisation be limited, in the absence of agency, to the parties to the contract unless some positive rule or provision should impose liability. A provision to that effect might be found in the terms, express or implied, of the constituent document of the organisation. Such liability, therefore, is not, in my judgment, to be founded simply upon the absence of a provision excluding it.

Different principles should apply to the concept of an obligation of members to indemnify the organisation. If members of an international organisation can and do cause it to trade on credit, principle should impose a liability to indemnify the organisation in respect of the debts which it has been caused to incur unless the nature of the organisation, under its relevant law, provides otherwise. In the absence of an effective rule or provision in the constituent document excluding that obligation to indemnify, international law should, in accordance with general principle, retain the liability of members in respect of it. It is to that sort of liability, I think, to which Professor Adam was referring in the passage from Les Organismes Internationaux Spécialisés cited above.

Further, it is clear from the decision of the International Court of Justice, in In re Reparation for Injuries Suffered in Service of United Nations [1949] I.C.J.R. 179 of which a passage has been cited above, ante pp. 1140H – 1141B, that the rights and duties of an international organisation with legal personality must depend upon its purposes and functions as specified or implied in its constituent documents and developed in practice. I can see no reason to look less widely in order to discover the attributes of such an organisation as concerns the liability of its members arising from that membership. It has not been suggested that the practice of this organisation is relevant. There remains the constituent document. I cannot accept that public international law requires or permits the liability of members of an international organisation such as the I.T.C. to be established simply by reference to whether there is or is not an express exclusion of liability. I would expect, and if necessary would hold, that the rule of international law for this purpose must be that the constituent document be construed fairly in its factual context and that the members should be held to be bound to such liabilities, whether to creditors, or by way of indemnity to the organisation, which can be shown to have arisen in law on the facts and not to be excluded expressly or by necessary implication under the terms of the constituent document.

It is necessary to refer at this point to Westland Helicopters Ltd. v. Arab Organisation for Industrialisation, 23 I.L.M. 1071, upon which the plaintiffs relied. It is a case of great interest and importance but, in my judgment, it does not provide a basis for this court to hold that there exists a rule of international law to the effect claimed by Mr. Burnton. That case was concerned with an international organisation called Arab Organisation for Industrialisation (“A.O.I.”) which had been formed by four states and which had legal personality in international law. The [*244] A.O.I. in 1978 made contracts with Westland Helicopters Ltd., the claimants, which provided for a large commercial enterprise. In 1979 three of the states purported to terminate the existence of the A.O.I. Westland claimed arbitration against the A.O.I. and the four states in pursuit of a claim for damages for breach of the contracts with A.O.I. and asserted that the states were liable with the A.O.I. An award was made in the court of arbitration of the International Chamber of Commerce by a tribunal of eminent lawyers consisting of Eugene Bucher Esq. of Berne, Pierre Bellet Esq. of Paris and Nils Mangard Esq. of Stockholm, to the effect that the arbitration clause in the agreement between Westland and A.O.I. was binding upon the four states, although they were not parties to it, and that the states were liable for breach of contract notwithstanding the fact that A.O.I. had separate legal personality. The reasons for their holding included the following.

(i) The question whether the four states were liable for the acts of A.O.I. was not answered by the fact that it had legal personality. The principle that the existence of legal personality excludes cumulative liability of the legal entity and of the members which constituted it, is nowhere accepted or given effect without limitation, as exemplified by, among other examples, the société en nom collectif of French law. Therefore the possible liability of the four states must be determined upon examination of the founding documents disregarding any question relating to the personality of the A.O.I.

(ii) In the absence of any provision expressly or impliedly excluding the liability of the four states this liability subsists since, as a general rule, those who engaged in transactions of an economic nature are deemed liable for the obligations which flow therefrom.

(iii) That rule flowed from general principles of law and from good faith. The A.O.I. was much closer to a partnership and certain provisions in the basic statute of the A.O.I. led the tribunal to think that the four states, in forming the A.O.I., did not intend wholly to disappear behind it but rather to participate in the A.O.I. as “members with responsibility.”

(iv) In reality, in the circumstances of the case, the “A.O.I. is one with the states.”

(v) Apart from the legal ground the tribunal was motivated by considerations of equity. In common with the principles of international law, equity allows the corporate veil to be lifted in order to protect third parties against an abuse.

The tribunal did not, I think, find it necessary to decide the precise nature of the liability of the states which was held to subsist. The tribunal was not applying the law of any one state, which was excluded by the contract, but, as I understand it, general principles of law and international law. The tribunal approached the case on the basis that the question of the liability of members of an international organisation for the debts incurred by it is one to be decided by reference to the terms of the founding documents, including any provisions expressly or impliedly excluding the liability of the members. Upon the terms of those documents the tribunal held that liability was neither expressly nor impliedly excluded and they relied in part upon the fact that the members did not intend wholly to disappear but to participate as [*245] members with responsibility. The decision is authority, as I understand it, that members of an international organisation, which has legal personality, must if they are to escape secondary liability for the debts of the organisation, at least in the circumstances of that case, be able to point to provisions of the constituent document which expressly or impliedly exclude that liability. For the reasons which I have given, I would not be willing to apply that decision because I regard it as contrary to principle, with reference to secondary liability upon contracts made by the organisation as a separate entity, to impose direct joint and several liability upon the members merely because such liability has not been excluded. Where the contract has been made by the organisation as a separate legal personality, then, in my view, international law would not impose such liability upon the members, simply by reason of their membership, unless upon a proper construction of the constituent document, by reference to terms express or implied, that direct secondary liability has been assumed by the members.

I would therefore hold that any form of direct liability to members is excluded by reason of the existence of the separate legal personality of the I.T.C., and because of the absence of any express or implied term or rule of law imposing such liability. There remains the question of the obligation to indemnify the I.T.C. That is of no relevance to Mr. Burnton’s submission which is concerned with direct liability, but I will deal with it because it is necessary to explain my view of the rule of international law. As to liability of members to the I.T.C., there appears to me to be at the very least an arguable case under what I would hold to be the relevant rule of international law and the proper construction of I.T.A.6. It may be thought, of course, that there is little reason to suppose that the existence of such a liability would benefit claimants against such an organisation at international law level. The I.T.C. is controlled by its members and they may refuse to agree to cause the I.T.C. to make the claims. We have not been asked to consider these matters because they are not relevant but it would appear that, if an individual member state considered that its citizens, or their companies, had suffered damage by reason of a breach of the international obligations to put the I.T.C. in funds to meet its debts, that member state could advance an international claim to recover compensation on their behalf. A claim at international law level need not, as it seems to me, necessarily fail in respect of claims by banks which had no arbitration clause in their contracts of loan and who could not therefore get within the exception from the I.T.C.’s immunity which it enjoys under our law by reason of the Order of 1972. An obligation under international law to provide funds to meet the obligations incurred by international organisations need not be limited by reference to requirements of municipal law immunity, in particular in any case where the failure to insert an arbitration clause in the contract of loan constituted a breach of the express obligation at international law, assumed by the I.T.C. in article 23 of the Headquarters Agreement, that any “formal instrument” of contract should include an arbitration clause. The existence, however, of an arguable claim at international law to the effect that the members are liable to indemnify the I.T.C. cannot be of [*246] assistance to the plaintiffs in these proceedings and they did not suggest that it could.

As to the practice of states, as shown by the treaties upon which Mr. Burnton relies, the material does not in my view provide evidence from which any different conclusion as to the rule of public international law could be reached. Mr. Burnton submitted that the practice of inserting in the constituent treaties of trading organisations express provision excluding the liability of the member states suggested that, under international law, in the absence of such a provision, the members are liable for the debts of the organisation. International custom, as evidence of a general practice recognised by law, is a recognised source of international law: see Halsbury’s Laws of England, vol. 18, p. 717, para. 1402, citing the statute of the International Court of Justice. In the note thereto it is said that customary international law is to be distinguished from usage, in that it arises from state practice coupled with a conviction on the part of the state in question that the rule is required by or is in conformity with international law.

The point of the submission is that, in a number of instances, states are shown to have set up organisations, in which they are to be members by constituent treaties which provide not only that the organisation shall have legal personality but also for exclusion of liability of the members. The clauses appear in two general forms: first, in the provisions dealing with the subscription of capital, “liability on shares shall be limited to the unpaid portion of the issue price of the shares;” and, secondly, and also in the provisions dealing with membership and capital: “no member shall be liable by reason of its membership for obligations of the organisation.” In some instances both forms of clause appear together. In others there is a special provision about responsibility for borrowings.

The 16 instances of the use of such clauses were listed in a schedule put before the court by Mr. Burnton. They are marked by asterisks in the list which appear in the annexe to the judgment of Kerr L.J.; and they are mentioned below by reference to the numbers by which they are listed in Mr. Burnton’s schedule. Those numbers have been added also to the lists in the annexe.

We have been supplied with the relevant treaties. Limitation of “liability on shares” was provided for in the following cases:

(1) International Bank for Reconstruction and Development 1945 and (4) African Development Bank 1963.

Exclusion of “liability by reason of membership” was provided for in (2) International Finance Corporation 1955; (3) International Development Association 1960; (5) African Development Fund 1972; (9) International Institute for Cotton 1966; and (13) Common Fund for Commodities 1981.

Both forms of clause were together provided in (6) Asian Development Bank 1966; (7) Caribbean Development Bank 1969; (8) East African Development Bank 1967; and (10) Caribbean Food Corporation 1976.

In addition a particular provision, providing that there should be no liability in members in respect of borrowing by the organisation, appeared in (11) International Sugar Organisation, 1968 (provision [*247] inserted in agreement of 1977 when powers of borrowing were included and dropped in 1984 when the borrowing power was deleted); (12) International Cocoa Organisation 1972 (provision for no responsibility for repayment of buffer stock loans inserted in 1980 and omitted in 1986 when power to borrow excluded). Provisions providing for no liability with reference to borrowing appear in (14) International Seabed Authority 1982 and (16) International Atomic Energy Agency 1956.

The inclusion of these clauses in a number of international organisations which, from their nature and purposes, were likely to engage in financial transactions with other states or international organisations and with private institutions at the level of municipal law, is impressive. Such terms are consistent with the acceptance by the states concerned that liability of members would arise if no such terms were included; but they are also, as I think, consistent with a state of uncertainty as to the rules of public international law and with a desire to declare what the states regarded as the consequences in international law of the existence of separate legal personality and of stated limits upon members’ contributions to the organisation. There was, no doubt, further an intention to warn those dealing with the organisation. I am unable to accept that the practice shown in these treaties can fairly be regarded as recognition by the states concerned of a rule of international law that absence of a non-liability clause results in direct liability, whether primary or secondary, to creditors of the organisation in contrast to the obligation to provide funds to the organisation to meet its liabilities. Nothing is shown of any practice of states as to the acknowledgement or acceptance of direct liability by any states by reason of the absence of an exclusion clause. The only decision shown to us is the arbitral award in Westland Helicopters Ltd. v. Arab Organisation for Industrialisation, 23 I.L.M. 1071 to which I have referred and which, while it affords support to Mr. Burnton, does not persuade me of the existence of the rule of international law in the form for which he contends.

There is another aspect of the “non-liability clause” treaties which must be mentioned. Before Staughton J., the reference to the use of non-liability clause treaties by Mr. Burnton was more limited. He referred, I think, only to three. On behalf of the defendants it was not contended before Staughton J. that the existence of the non-liability clauses in those treaties, and any legislative response by the United Kingdom with reference to them, were of any assistance in resolving the questions before the court. Staughton J., after reference to the treaty relating to the International Finance Corporation, and to Mr. Burnton’s submission that international draftsmen “knew how to provide for the exclusion of members’ liability if they wished to do so,” expressed the view that there was a much more powerful point to be made, not in favour of the plaintiffs, in connection with the I.F.C. treaty. If the effect of the use of the words “the legal capacity of a body corporate” was, contrary to the view expressed by Staughton J., not to imply that members were not liable for the debts of an organisation to which that formula is applied by Order in Council, then the United Kingdom would be plainly in breach of international obligation in the case of the I.F.C. [*248] It seemed to Staughton J. that the view of Parliament, when enacting the Act of 1968 (or the Acts of 1944 and 1950) was that in international law legal personality necessarily meant that the members of an organisation were not liable for its obligations.

This point depended upon the proposition that the United Kingdom had, in the case of the I.F.C., assumed an international obligation to provide that the I.F.C. in the law of this country should not only “possess full juridical personality” as provided by article 6(2) of the treaty but also that “no member shall be liable by reason of its membership for obligations of the corporation” as set out in article 2(4). If application of the formula by the Order in Council made under the International Finance Corporation Act 1955 did not provide for exclusion of liability the United Kingdom would be in breach of that obligation. Mr. Burnton has pointed out that the United Kingdom had not in fact assumed any international obligation to the effect supposed. The provision in article 2(4) as to “no liability by reason of membership” was contained in the article headed “Membership and Capital.” The provision as to possession of “full juridical personality” was contained in article 6 which was headed “Status, Immunities and Privileges.” By section 1 of article 6 it was provided:

“Purposes of articles: to enable the corporation to fulfil the functions with which it is entrusted the status, immunities and privileges set forth in this article shall be accorded to the corporation in the territories of each member;…”

and then by section 10 of article 6:

“Each member shall take such action as is necessary in its own territories for the purpose of making effective in terms of its own law the principles set forth in this article…”

Mr. Burnton is right, in my judgment, in his submission that there was no obligation upon the United Kingdom to make effective in terms of its law the principle or provision as to non-liability which was contained not in article 6 but in article 2. Mr. Pollock and Mr. Grabiner did not contend that any assistance could be derived in support of their submissions from the point made by the judge with reference to any international obligation to provide exemption from liability.

Examination of the other treaties in which non-liability clauses were included shows, if I have read them all correctly, that in no case was there an express term requiring members to make the non-liability clause effective in their own territories save in the case of the Caribbean Food Corporation 1976 (item 10 in the schedule submitted on behalf of the banks). It appears that the United Kingdom was not a member of that corporation and there has been no relevant legislation by Order in Council or by Act of Parliament.

The first conclusion I draw from these aspects of the treaties which contain non-liability clauses is that they do not provide such degree of support for the defendants’ submissions as the judge was disposed to attribute to at least some of them.

Next, the absence of express requirement that the non-liability clauses be made effective in the municipal law of members of the [*249] organisations provides, I think, no indication, one way or the other, as to the recognition by states of the existence of any relevant rule of international law. It seems probable that the member states regarded the liability of members as something which could arise only at the level of international law and was therefore not affected by municipal law.

Submission C: Agency

The issue of agency was the last ground upon which it was sought to raise against the members an arguable case of direct liability upon the contracts made between the plaintiffs and the I.T.C. The argument was developed mainly by Mr. Sumption. His first proposition was that the business of buying and selling tin carried on by the I.T.C. was not its own business but was that of the members and was carried on by the I.T.C. as their agent. He sought to make good that proposition by a series of sub-propositions, which he contended were apparent from the terms of I.T.A.6, as follows: (i) the enterprise was run for the benefit of the members rather than the I.T.C. itself; (ii) the individuals who ran the business of the I.T.C. were appointed by the members; (iii) the members were the “head and brain” of the venture of the I.T.C.; (iv) the members governed that venture, deciding what the I.T.C. should do and what resources should be committed to it; (v) the benefits of the venture of the I.T.C. were achieved by the skill and direction of the members; and (vi) the members were in “constant and effectual control.”

Those sub-propositions are statements in positive terms of the six questions derived by Atkinson J. from certain earlier cases and listed by him in Smith, Stone and Knight Ltd. v. Birmingham Corporation [1939] 4 All E.R. 116. The questions were stated as relevant guidelines for deciding whether, in a particular case, it was permissible in law to regard as loss suffered by a parent company, for the calculation of compensation for disturbance on compulsory acquisition, the consequences of the acquisition of the premises at which the business of a subsidiary company was carried on. Kerr L.J. has referred to the facts of the case. For reasons which I shall explain later in this judgment, the relationship between the I.T.C. and its members revealed by the terms of I.T.A.6 are essentially different from the relationship between that parent and subsidiary company. I agree with Kerr L.J. that it is clear from I.T.A.6 that the I.T.C. was not intended to be the agent of the members in making the tin contracts or contracts of loan, and that there is no ground upon which it would be open to the court to hold that the I.T.C. must be treated as agent.

I agree also, however, with Kerr L.J. that the issue of non-justiciability, which was one of the grounds upon which Staughton J. held against the plaintiffs on the issue of agency, should be considered first. There are, in my view, two relevant aspects of the principle of non-justiciability. The first, which has been considered before in this judgment, is whether the relationship between the foreign sovereign state members and the I.T.C., and the relevant transactions between them, have been subjected to the law of this country and to the jurisdiction of our courts. If they have not been so subjected by the will of the states concerned, or if the court is not required or authorised by [*250] any rule of law or by statute or other circumstances so to treat the relevant transactions, then the court must abstain from adjudication upon them: see Buttes Gas and Oil Co. v. Hammer (No. 3) [1982] A.C. 888, 931G, per Lord Wilberforce. There is, in my view, no doubt that in order to decide that question the court can properly, and indeed must, consider and construe the terms of I.T.A.6 although it is an unenacted treaty. To take the example considered by Kerr L.J., if I.T.A.6 had expressly provided that the I.T.C. should carry on its trading activities in this country as agent for all or some of the members, and if the trading were conducted pursuant to the terms of I.T.A.6, then as it seems to me the members who had so caused or permitted the I.T.C. to act as their agent would necessarily be treated as having subjected those transactions on their part to our law. The position would not be different in any relevant sense from the making by one or more states of a commercial contract with a company in this country and by reference to our law. The position would, on this point, be the same as would have occurred if the plaintiffs had made good their main submission A and had shown that the members were themselves as “partners” conducting the trading activities of the I.T.C. in the name of the I.T.C.

If the answer to this first question were that, on the true construction of I.T.A.6, the members were principals for whom the trading contracts in this country of the I.T.C. were made by the I.T.C. as their agent, so that the members, or those of them shown to have acted as principals, were entering into contracts governed by our law, then the second relevant aspect of the principles of non-justiciability would require to be considered, namely, that the provisions of an unenacted treaty cannot be relied upon by a claimant as effecting some change in the law of this country or as providing a cause of action not otherwise afforded by our law.

If the plaintiffs had been able to satisfy the first requirement, namely of demonstrating that by the terms of I.T.A.6 the members had constituted the I.T.C. as their agent to make the contracts upon which the plaintiffs claim, and had thereby entered into contracts with the plaintiffs governed by our law, then it seems to me that the plaintiffs would not have been prevented from proving their claims against the members by reason of the principle of non-justiciability of unenacted treaties. Upon that hypothesis the plaintiffs would be relying upon existing rules of our private law and would not be relying upon any provision of I.T.A.6 as affording to them a cause of action not arising under our law, or as changing the law of this country in any way. Their cause of action would arise from the contract and not from any provision of I.T.A.6. But the plaintiffs have, as I have said, wholly failed to satisfy those first requirements.

Returning to the first proposition advanced by Mr. Sumption, the terms of I.T.A.6 show, in my judgment, that there was no intention on the part of the members to authorise the I.T.C. to act as agent in making the tin contracts or the loan contracts, and no intention on the part of the I.T.C. to act as such. The relationship of agency, apart from the concept of agency of necessity which is irrelevant, is based upon the consent of both parties. The doctrine of apparent authority or agency by [*251] estoppel may impose liability upon a party as if there had been such consent, but no reliance is placed upon that doctrine in these cases. The consent of the parties may be implied from their conduct or from their positions with regard to each other: see Chitty on Contracts, 25th ed. (1983), vol. 2, para. 2202, p. 4. In Garnac Grain Co. Inc. v. H.M.F. Faure & Fairclough Ltd. (Note) [1968] A.C. 1130, 1137, in a speech with which Lord Reid, Lord Morris of Borth-y-Gest, Lord Pearce and Lord Wilberforce agreed, Lord Pearson said:

“The relationship of principal and agent can only be established by the consent of the principal and the agent. They will be held to have consented if they have agreed to what amounts in law to such a relationship, even if they do not recognise it themselves and even if they have professed to disclaim it…”

Kerr L.J. has examined the terms of I.T.A.6 with reference to the submissions made for the plaintiffs. I agree with his conclusions and with his comments. I have very little to add. The purpose of I.T.A.6 was, in my view and as I have said above, to create an international organisation with legal personality separate from its members which would carry out the trading and financial transactions in the municipal law of the host country, i.e. the United Kingdom, with whose government the Headquarters Agreement, required by article 16, would be signed. I.T.A.6 provided for contributions by member states to the administrative account of the I.T.C. and to the buffer stock. When provided, those funds and assets would become the separate property of the I.T.C. Actions to be taken by the executives of the I.T.C. would be determined by the decision of the council in accordance with the voting provisions. The wishes of members in the minority might be overruled by those in the required majority. It is, in my view, impossible to argue that the terms of I.T.A.6 demonstrate the real consent of all the members that the I.T.C. should contract as agents for the members.

Nor can I see any basis for holding that the members must be held so to have consented on the ground that they have agreed to what amounts in law to the relationship of agency. The powers and duties of the members and of the I.T.C., and of the officers of the I.T.C., and the use of those powers in the making of contracts, do not, given that the I.T.C. has legal personality separate from its members, amount in law to the relationship of agency and it is not necessary in justice to attribute to the I.T.C. the position of agent in order to account for or to make sense of the actions of the I.T.C. with reference to the trading contracts. I agree with Kerr L.J. that the real relationship between the I.T.C. and its members is that of a contract of association or membership similar to that between shareholders and a company under our law. It is markedly different from the relationship between the parent and subsidiary company in Smith, Stone and Knight Ltd. v. Birmingham Corporation [1939] 4 All E.R. 116. In that case the parent company had acquired the premises and the business in question before formation of the subsidiary company. Neither the business nor the premises were vested in the subsidiary company which, in the view of Atkinson J., [*252] could properly be regarded as managing the business on behalf of and on the instructions of the one controlling member, the parent company.

State immunity

If any arguable cause of action upon justiciable issues had been made out, the question would have arisen whether the proceedings against the foreign states could be permitted to continue having regard to their claims to immunity. Upon this aspect of the appeals I agree with the conclusions expressed by Kerr L.J. As to the issue whether, on the raising of state immunity, a plaintiff can claim to proceed to trial on proof of no more than a “good arguable case” to show that the proceedings are within an exception to state immunity under the State Immunity Act 1978, I am persuaded that the submission made for the states by Mr. Pollock is right because, in my view, the exception to immunity under section 3 is provided:

“as respects proceedings relating to – (a) a commercial transaction entered into by the state; or (b) an obligation of the state which by virtue of a contract… falls to be performed…”

It does not say “allegedly entered into” or “which by virtue of a contract is alleged to fall to be performed.” If a state claims immunity then, in my view, the statute requires that the issue be determined before the court can try the proceedings. It was objected that Parliament cannot have intended that there be what, in some cases, would amount to the trial of the action before the plaintiff could be permitted to go to trial. I do not think that there is any substance in that objection. I would accept Mr. Pollock’s submission that, if proof of the exception to state immunity turned upon issues of fact – as in this case upon the matters dealt with by Staughton J. it did not – the court could give directions for the trial of those issues, including directions for discovery, for the calling of witnesses, and for cross-examination of witnesses upon affidavits. The sovereign state could not be placed under any sanction with reference to discovery but, in deciding issues of fact, the court could have due regard to any failure to disclose relevant documents. I see no reason why issues of fact, such as whether the foreign state is shown to have entered into a commercial transaction, should not be disposed of by trial of the issue in this way. If the plaintiff succeeds on the issue then any remaining issues, such as breach of contract and damages, would be tried thereafter in the normal manner.

E.E.C. immunity

As to the contention made on behalf of the E.E.C. that, if any arguable claim had been made out on behalf of the plaintiffs based upon direct liability of the members of the I.T.C. arising under submission A, or either version of submission B or submission C, the E.E.C. would be entitled under the common law of this country to immunity analogous to that accorded by the common law to a sovereign state, I agree with Kerr L.J. that the contention cannot be accepted. No provision of the E.E.C. Treaty or of the Merger Treaty or in the legislation of this country provides expressly or by any implication for the immunity claimed. No [*253] rule of customary international law, to the effect that the E.E.C. should be accorded such immunity, and which the common law of this country would be required to apply, is shown to exist.

Appeals dismissed with costs.

E.E.C.’s cross-appeal dismissed with costs.

Leave to plaintiffs to appeal.