[HOUSE OF LORDS]

and

Conflict of Laws - Sovereign immunity - Exercise of sovereign authority - Iraq occupying Kuwait by military action - Plaintiffs' civil aircraft removed to Iraq by defendants on Iraqi government orders - Aircraft retained and used by defendants following laws passed by Iraq - Service of writ on defendants in London - Whether proper service - Whether defendants' actions covered by state immunity - State Immunity Act 1978 (c. 33), ss. 12(1), 14(1)(2) - R.S.C., Ord. 65, r. 3(1)

In August 1990 Iraq invaded and occupied Kuwait and passed resolutions proclaiming its integration into Iraq. At that time civil aircraft belonging to the plaintiffs were at Kuwait airport. Pursuant to ministerial directions the Director-General of the first defendants, I.A.C., made arrangements to transport aircraft belonging to the plaintiffs to Iraq. The plaintiffs were purportedly dissolved by Resolution 369 on 17 September. Thereafter I.A.C. treated the aircraft as its own, incorporating them into its own fleet and using them for its own flights. Subsequently four of the aircraft were destroyed and six were sent to Iran, where they were impounded before being returned to the plaintiffs in August 1992. On 11 January 1991 the plaintiffs issued a writ seeking the delivery up of the aircraft. They also sought damages resulting from the defendants' wrongful interference, or alternatively, payment of the value of the aircraft. Since at that time there was no British diplomatic presence in Iraq the plaintiffs lodged the necessary documents pursuant to R.S.C., Ord. 11, r. 7 at the Central Office. They were sent by the Senior Master to the Secretary of State for Foreign Affairs for service under section 12(1) of the State Immunity Act 1978.¹ The Foreign and Commonwealth Office sent the documents to the Iraqi Embassy in London requesting them to forward them to the Ministry of Foreign Affairs in Baghdad. The accredited diplomat at the Embassy faxed a copy to the Iraqi Embassy in Jordan for transmission to Baghdad. He did not receive any reply. No documents were sent to Baghdad direct. The writ was served on a junior employee of I.A.C., then in charge of the London office, under R.S.C., Ord. 65, r. 3.² On 11 February and 24 May judgments were entered against I.A.C. and Iraq in default of appearance. As a consequence of those judgments damages were assessed at about U.S. $500m. On 16 April 1992 Evans J. dismissed I.A.C.'s summons under R.S.C., Ord. 12, r. 8, challenging the jurisdiction, but set aside the service of the writ on Iraq. I.A.C. appealed and the plaintiffs cross-appealed against that order. The Court of Appeal held that I.A.C. was entitled to

1 State Immunity Act 1978, s. 12(1): see post, p. 1155B.

S. 14: see post, p. 1170C-E.

2 R.S.C., Ord. 65, r. 3(1): see post, p. 1153C-D.

immunity under section 14(2) of the State Immunity Act 1978 but had not submitted to the jurisdiction, and did not consider further points.

On appeal by the plaintiffs and cross-appeal by the defendants: -

Held, (1) that although the employee on whom the writ was served was a junior employee of I.A.C. at its London office, since he was in charge of operations at that office, he had the capacity of "other similar officer" within R.S.C., Ord. 65, r. 3(1) and that, accordingly, the writ had been effectively served on I.A.C. (post, pp. 1154F-G, G - 1155A, 1168D-F, 1172G,1175G).

Dunlop Pneumatic Tyre Co. Ltd. v. Actien-Gesellschaft fuer Motor und Motorfahrzeugbau Vorm. Cudell & Co. [1902] 1 K.B. 342, C.A. considered.

(2) That the delivery of the writ by the Foreign and Commonwealth Office to the Iraqi Embassy in London was a request to the Embassy to forward the writ to the Iraqi Ministry of Foreign Affairs; and that, accordingly, since that was not done the writ was never served within section 12(1) of the Act of 1978 (post, pp. 1156C-D, 1168D-F, 1172G,1175G).

(3) That to attract immunity under section 14(2) of the Act of 1978 the acts done by I.A.C., as a separate entity, had to be such that of their own character they were governmental acts; that where a separate entity's acts, although done on the directions of the state, did not have that character there was no entitlement to state immunity; that since I.A.C.'s acts, in taking the aircraft and removing them from Kuwait to Iraq for use as directed by the government of Iraq, were acts in the exercise of sovereign authority those acts would attract immunity under section 14(2); but that (Lord Mustill and Lord Slynn of Hadley dissenting) after Resolution 369 came into force the retention and use of the aircraft were not acts done in the exercise of sovereign authority and thus were not covered by state immunity (post, pp. 1160A-B, 1161E-G, 1163C, E-H, 1168D-F, 1172G, 1175G).

The Philippine Admiral [1977] A.C. 373, P.C.; Trendtex Trading Corporation v. Central Bank of Nigeria [1977] Q.B. 529, C.A. and I Congreso del Partido [1983] 1 A.C. 244, H.L.(E.) considered.

(4) That since on the pleadings it was impossible to arrive at a decision as to the justiciability of the issues between the parties the matter should be remitted to the Commercial Court (post, pp. 1165F-G,1167H - 1168B, 1168D-F, 1175G).

Order of the Court of Appeal [1995] 1 Lloyd's Rep. 25 varied.

The following cases are referred to in their Lordships' opinions:

Alcom Ltd. v. Republic of Colombia [1984] A.C. 580; [1984] 2 W.L.R. 750; [1984] 2 All E.R. 6, H.L.(E.)

Anglo-Iranian Oil Co. Ltd. v. Jaffrate (The Rose Mary) [1953] 1 W.L.R. 246

Arango v. Guzman Travel Advisors Corporation (1980) 621 F.2d 1371

Banco Nacional de Cuba v. Sabbatino (1964) 376 U.S. 398

Brunswick (Duke of) v. King of Hanover (1848) 2 H.L.Cas. 1, H.L.(E.)

Buttes Gas and Oil Co. v. Hammer [1982] A.C. 888; [1981] 3 W.L.R. 787; [1981] 3 All E.R. 616, H.L.(E.)

Claim against the Empire of Iran (1963) 45 I.L.R. 57

Congreso del Partido, I [1978] Q.B. 500; [1977] 3 W.L.R. 778; [1978] 1 All E.R. 1169; [1983] 1 A.C. 244; [1981] 3 W.L.R. 328; [1981] 2 All E.R. 1064, H.L.(E.)

Czarnikow (C.) Ltd. v. Centrala Handlu Zagranicznego Rolimpex [1979] A.C. 351; [1978] 3 W.L.R. 274; [1978] 2 All E.R. 1043, H.L.(E.)

Dunlop Pneumatic Tyre Co. Ltd. v. Actien-Gesellschaft fuer Motor und Motorfahrzeugbau Vorm. Cudell & Co. [1902] 1 K.B. 342, C.A.

Helbert Wagg & Co. Ltd., In re Claim by [1956] Ch. 323; [1956] 2 W.L.R. 183; [1956] 1 All E.R. 129

Oppenheimer v. Cattermole [1976] A.C. 249; [1975] 2 W.L.R. 347; [1975] 1 All E.R. 538, H.L.(E.)

Philippine Admiral, The [1977] A.C. 373; [1976] 2 W.L.R. 214; [1976] 1 All E.R. 78, P.C.

Trendtex Trading Corporation v. Central Bank of Nigeria [1977] Q.B. 529; [1977] 2 W.L.R. 356; [1977] 1 All E.R. 881, C.A.

Underhill v. Hernandez (1897) 168 U.S. 250

The following additional cases were cited in argument:

A. Co. Ltd. v. B. Co. Ltd. (unreported), 1 April 1993, Saville J.

Aksionairnoye Obschestvo A.M. Luther v. James Sagor & Co. [1921] 3 K.B. 532, C.A.

Al-Adsani v. Government of Kuwait (unreported), 21 January 1994; Court of Appeal (Civil Division) Transcript No. 65 of 1994, C.A.

Alberti v. Empresa Nicaraguense de la Carne (1983) 705 F.2d 250

Andersen v. Christensen (1947) 14 A.D. 275

Austrian Treasury (Postal Administration) v. Auer (1947) 14 A.D. 276

Blad v. Bamfield (1674) 3 Swans. 604

Compania Naviera Vascongado v. S.S. Cristina [1938] A.C. 485; [1938] 1 All E.R. 719, H.L.(E.)

Cook v. Sprigg [1899] A.C. 572, P.C.

Drexel Burnham Lambert Group Inc. v. Committee of Receivers for A. W. Galadari [1994] I.L.Pr. 655

Forth Tugs Ltd. v. Wilmington Trust Co., 1987 S.L.T. 153

Haggin v. Comptoir d'Escompte de Paris (1889) 23 Q.B.D. 519, C.A.

International Tin Council, In re [1987] Ch. 419; [1987] 2 W.L.R. 1229; [1987] 1 All E.R. 890

Littrell v. United States of America (No. 2) [1995] 1 W.L.R. 82; [1994] 4 All E.R. 203, C.A.

Mackereth v. Glasgow and South Western Railway Co. (1873) L.R. 8 Exch. 149

Martin v. Bank of Spain (1952) 19 I.L.R. 202

Mortier v. Lauret (1947) 14 A.D. 274

Newby v. Von Oppen (1872) L.R. 7 Q.B. 293

Paley Olga (Princess) v. Weisz [1929] 1 K.B. 718, C.A.

Planmount Ltd. v. Republic of Zaire [1981] 1 All E.R. 1110

Rahimtoola v. Nizam of Hyderabad [1958] A.C. 379; [1957] 3 W.L.R. 884; [1957] 3 All E.R. 441, H.L.(E.)

Rayner (J.H.) (Mincing Lane) Ltd. v. Department of Trade and Industry [1989] Ch. 72; [1988] 3 W.L.R. 1033; [1988] 3 All E.R. 257, C.A.; [1990] 2 A.C. 418; [1989] 3 W.L.R. 969; [1989] 3 All E.R. 523, H.L.(E.)

Reg. v. Boal [1992] Q.B. 591; [1992] 2 W.L.R. 890; [1992] I.C.R. 495; [1992] 3 All E.R. 177, C.A.

Saudi Arabia v. Nelson (1993) 113 S.Ct. 1471

Stanley, In re; Tennant v. Stanley [1906] 1 Ch. 131

Statens Jordlovsudvalg v. Petersen (1948) 16 A.D. 506

Tamlin v. Hannaford [1950] 1 K.B. 18; [1949] 2 All E.R. 237, C.A.

Vajesingji Joravarsingji v. Secretary of State for India (1924) L.R. 51 I.A. 357

Westland Helicopters Ltd. v. Arab Organisation for Industrialisation [1995] 2 W.L.R. 126; [1995] 2 All E.R. 387; [1994] 2 Lloyd's Rep. 608

Westminster City Council v. Government of Islamic Republic of Iran [1986] 1 W.L.R. 979; [1986] 3 All E.R. 284

Williams and Humbert Ltd. v. W. & H. Trade Marks (Jersey) Ltd. [1986] A.C. 368; [1986] 2 W.L.R. 24; [1986] 1 All E.R. 129, H.L.(E.)

APPEAL and CROSS-APPEALS from the Court of Appeal.

These were an appeal by the plaintiffs, Kuwait Airways Corporation ("K.A.C."), and cross-appeals by the defendants, Iraq Airways Co. ("I.A.C.") and the Republic of Iraq ("Iraq"), pursuant to leave of the Appeal Committee of the House of Lords (Lord Jauncey of Tullichettle, Lord Slynn of Hadley and Lord Nolan) granted on 16 June 1994 from a decision dated 21 October 1993 of the Court of Appeal (Nourse, Leggatt and Simon Brown L.JJ.) allowing an appeal of I.A.C. and dismissing a cross-appeal by K.A.C. against a decision dated 16 April 1992 of Evans J.

On 11 January 1991 K.A.C. issued a writ against I.A.C. and Iraq seeking an order that the defendants should deliver up 10 aircraft which, it was alleged, had been wrongfully interfered with and continued to be interfered with by the defendants and damages consequential on the defendants' wrongful interference, or alternatively, payment of the value of the aircraft amounting to U.S.$630m. On 11 February and 24 May 1991 in the Commercial Court judgments for default of appearance were entered against I.A.C. and Iraq respectively. Damages assessed pursuant to those judgments amounted to nearly U.S.$500m. I.A.C. issued a summons under R.S.C., Ord. 12, r. 8. Iraq issued a summons to set aside the service of the writ at its London Embassy. In July 1991 Webster J. granted the defendants stays of execution of the judgments in default pending the hearing of their summonses. On 16 April 1992 Evans J. dismissed I.A.C.'s summons but set aside the service of the writ on Iraq. I.A.C. appealed and K.A.C. cross-appealed against that order.

The facts are stated in opinion of Lord Goff of Chieveley.

Nicholas Chambers Q.C., Rosalyn Higgins Q.C. and Joe Smouha for K.A.C.

Michael Beloff Q.C., Richard Plender Q.C. and Stephen Nathan Q.C. for I.A.C. and Iraq.

Their Lordships took time for consideration.

24 July. Lord Goff of Chieveley. My Lords, on 2 August 1990, Iraq invaded Kuwait. By 5 August, the occupation of Kuwait by Iraqi forces was complete. On 8 and 9 August respectively the Revolutionary Command Council of Iraq ("R.C.C.") passed Resolutions 313 and 312 proclaiming the integration of Kuwait into Iraq, and designating Kuwait as a Governate forming part of Iraq. It is a matter of history that the Iraqi invasion and annexation of Kuwait provoked a strong international reaction, reflected in successive resolutions of the United Nations Security Council, and ultimately in military action by Coalition forces. After air attacks on Iraq and Kuwait which began on 16 January 1991, Coalition forces launched a successful offensive against Iraqi forces in Kuwait between 24 and 28 January 1991. On 2 March 1991 U.N. Security Council Resolution 686 moved that the Coalition offensive be suspended, required Iraq to rescind immediately its actions purporting to annex Kuwait and to accept liability under international law, and called upon Iraq to return all property seized by it. On the following day, 3 March 1991, Iraq agreed to comply with Resolution 686. On 5 March 1991, the R.C.C. passed Resolution 55, under which all decisions made by the R.C.C. which related to Kuwait were deemed rescinded, together with all laws, etc., made pursuant to such decisions and all their resulting effects. Whether the effect of Resolution 55 was simply to repeal such decisions, or to treat

them as if they had never existed, is a matter still in issue between the parties to this litigation.

The present proceedings are concerned with 10 civil aircraft (two Boeing 767s and eight airbuses), the property of Kuwait Airways Corporation ("K.A.C."), the plaintiffs in the action and the appellants before your Lordships' House. These aircraft were at Kuwait Airport at the time of the invasion, and were seized and removed to Iraq. It is enough for present purposes to record that on 6 August 1990 the Iraqi Minister of Transport and Communications, the minister responsible for civil aviation, directed Mr. Saffi, the Director-General of Iraqi Airways Co. ("I.A.C."), the first defendants in the action and the first respondents before this House, to arrange for the 10 aircraft to be brought to Iraq. Pursuant to Mr. Saffi's instructions the necessary pilots and engineers made their way to Kuwait. On arrival, the engineers carried out the basic checks necessary before the aircraft could be flown. Between 6 and 8 August, the pilots flew the aircraft the short distance to Basra, a civilian airport in Iraq, after which some were dispersed to other airports in Iraq and the others remained at Basra. Mr. Saffi was instructed to "maintain" or "look after" the aircraft. I.A.C. however carried out no more than basic maintenance.

On 17 September there came into effect R.C.C. Resolution 369 which purported to dissolve K.A.C. and to transfer all its assets to I.A.C. Until then, although I.A.C. had carried out the basic maintenance referred to above, it had made no use of the K.A.C. aircraft. Thereafter, however, I.A.C. treated the aircraft as its own, incorporating them into its fleet and making such use of them as it could in the prevailing circumstances, although such use was very limited because of the almost complete cessation of international flights to and from Iraq. After R.C.C. Resolution 369 had come into effect, at least one of the K.A.C. aircraft was used for internal flights, and at least two of the aircraft were repainted with the I.A.C. livery.

In January 1991, shortly before the Coalition air attack began, on the instruction of the Iraqi Government six of the K.A.C. aircraft were flown to Iran where they were interned by the Iranian authorities. Later the four remaining aircraft were partially or wholly destroyed in air raids by Coalition forces on Iraq. The six aircraft in Iran were returned to K.A.C. in August 1992. They were in varying condition.

On 3 April 1991, pursuant to U.N. Security Council Resolution 687, the United Nations decided to establish a compensation commission to receive and dispose of claims against Iraq arising from the invasion of Kuwait and the seizure of property by Iraq. Kuwait had already notified the United Nations on 15 March 1991 of its formal claims to the return of its country's property, including the 10 K.A.C. aircraft, and it then advanced a claim before the compensation commission.

The proceedings

In the present action, which was begun by writ issued on 11 January 1991, K.A.C. claim delivery up of the 10 aircraft together with consequential damages, or alternatively payment of the value of the aircraft (U.S.$630m.) by way of damages pursuant to section 3 of the Torts (Interference with Goods) Act 1977 or at common law. Judgment in default of appearance was entered on 11 February and 24 May 1991, against I.A.C. and Iraq respectively, damages being assessed as against

both defendants in sums in the region of U.S.$500m. plus interest and costs. Stays of execution were granted to both defendants by Webster J. in July 1991, pending the hearing of a summons issued by Iraq to set aside the purported service of the writ at its London Embassy, and a summons issued by I.A.C. pursuant to R.S.C., Ord. 12, r. 8. The two applications were heard by Evans J. who on 16 April 1992 dismissed I.A.C.'s application but granted Iraq's application to set aside the service of the writ at its London Embassy.

Before Evans J., I.A.C. challenged the jurisdiction of the English Court on four grounds. (1) The service of the proceedings on I.A.C. at its office in London was not effective, either under Ord. 65, r. 3, or under section 695 of the Companies Act 1985. (2) I.A.C., as a "separate entity," was entitled to immunity from suit in this country, under section 14(2) of the State Immunity Act 1978, because the proceedings related to things done by it in the exercise of sovereign authority and (contrary to the contention of K.A.C.) I.A.C. was not precluded from invoking state immunity by reason of having submitted to the jurisdiction. (3) The proceedings related to acts which were not justiciable in the English courts, on the principles stated by your Lordships' House in Buttes Gas and Oil Co. v. Hammer [1982] A.C. 888. (4) The compensation commission established pursuant to U.N. Security Council Resolution 687 provided the only appropriate forum for the resolution of the dispute. Evans J. decided all these issues (except that relating to submission to the jurisdiction) in favour of K.A.C. The Court of Appeal however decided that I.A.C. was entitled to immunity under section 14(2) of the Act of 1978 and (in agreement with Evans J.) that it had not submitted to the jurisdiction, and on that basis did not find it necessary to consider the other points upon which I.A.C. relied. They upheld the judge's decision that the purported service of proceedings on Iraq was ineffective. Against the decision of the Court of Appeal K.A.C. now appeals to your Lordships' House.

I shall consider the issues which have arisen for decision by your Lordships' House in the following order: A. whether the writ was effectively served on I.A.C.; B. whether the writ was effectively served on Iraq; C. whether I.A.C., as a separate entity, was entitled to immunity under section 14(2) of the State Immunity Act 1978; and D. whether the proceedings relate to issues which are not justiciable in the English courts.

I.A.C.'s claim that the compensation commission provides the only appropriate forum was not pursued before your Lordships' House, and so does not fall for consideration.

A. Service on I.A.C.

The writ was served on a Mr. Isaac at I.A.C.'s premises at 4, Lower Regent Street, London W.1, on 11 January 1991. K.A.C. has claimed that this service was effective on two alternative grounds. (1) I.A.C. is an "oversea company" within the definition in section 744 of the Companies Act 1985, and in the circumstances the writ was, by virtue of section 695(2) of the same Act, effectively served on I.A.C. by leaving it at I.A.C.'s premises in Lower Regent Street, being the place of business established by I.A.C. in this country. (2) Alternatively, if I.A.C. is not an "oversea

company" as so defined, nevertheless the writ was effectively served on I.A.C. under R.S.C., Ord. 65, r. 3, by being served on Mr. Isaac who was a "similar officer" of I.A.C. within rule 3(1). Both grounds were relied on by K.A.C. before Evans J. He concluded that I.A.C. was an "oversea company" within section 744 of the Act of 1985, and that on that basis the writ was effectively served on I.A.C. The essential question on that point, which is one of some technicality, was whether I.A.C. was a "company" within the statutory definition. Evans J. also inclined to the view that service on I.A.C. was effective under Ord. 65, r. 3, but did not find it necessary to decide the point. The Court of Appeal did not consider this issue, having held that I.A.C. was in any event entitled to claim state immunity. Accordingly I.A.C.'s appeal to your Lordships' House on this issue is effectively an appeal from the decision of Evans J.

The second ground upon which K.A.C. relies relates to the position of Mr. Isaac, and is very largely a question of fact. Having been taken through the evidence in detail by Mr. Chambers, I have reached the conclusion (as I understand have the remainder of your Lordships) that, assuming that I.A.C. is not an oversea company, nevertheless it was effectively served under Ord. 65, r. 3. I would therefore dismiss the appeal on this point on that ground, preferring to express no view on the question whether I.A.C. was an oversea company.

R.S.C., Ord. 65, r. 3(1) provides as follows:

"Personal service of a document on a body corporate may, in cases for which provision is not otherwise made by any enactment, be effected by serving it in accordance with rule 2 on the mayor, chairman, or president of the body, or the town clerk, clerk, secretary, treasurer or other similar officer thereof."

I am of course assuming for present purposes that section 695(2) of the Act of 1985 does not apply in this case.

The question arises whether, on the facts of the present case, Mr. Isaac was a "similar officer" of I.A.C. Some assistance as to the meaning of this expression may be derived from the decision of the Court of Appeal in Dunlop Pneumatic Tyre Co. Ltd. v. Actien Gesellschaft fuer Motor und Motorfahrzeugbau vorm. Cudell & Co. [1902] 1 K.B. 342, decided under R.S.C., Ord. 9, r. 8, the predecessor of the present rule. That rule, so far as material, provided:

"In the absence of any statutory provision regulating service of process, every writ of summons issued against a corporation aggregate may be served on the mayor or other head officer, or on the town clerk, treasurer, or secretary of such corporation; . . ."

In that case the defendants, a foreign corporation, hired a stand at the Crystal Palace for the exhibition of articles of their manufacture at a show which lasted for nine days. Among the articles so exhibited was a motor car fitted with tyres which were alleged by the plaintiff company to infringe their patent. The stand was in the charge of a man named Struck, who had been sent over to this country for that purpose, and whose duty was to explain the working of the articles exhibited, and to take orders and press for sale of the goods. Struck appears to have held no particular position of authority with the defendants. The plaintiffs' writ claiming infringement of their patent was in fact served on Struck's assistant, but no point had been taken on that below. The Court of Appeal, affirming the decision of Channell J., held that Struck fell within the description of "head officer" within the rule. Collins M.R. said, at p. 346:

"It appears to me that, having regard to the decisions on this rule, Struck must be considered as a head officer of the defendants within its meaning. He was a person sent over by the defendant corporation

as their representative to do for them in this country business of theirs, which, not being a concrete entity, they could not do for themselves like an ordinary individual, namely, the business of exhibiting and vending their wares at the show at the Crystal Palace."

The remainder of the judgment was taken up with the question whether, on the facts and having regard in particular to the short period of the show, the defendants were resident in this country on the basis that they were conducting their business at some fixed place of business within the jurisdiction. In the present case, I.A.C. plainly had a fixed place of business here, though the extent to which they could conduct that business was in the circumstances very limited. However, as Evans J. found, the business at I.A.C.'s Regent Street Office, though much reduced, was never extinguished.

Of course, rule 3(1) which is applicable nowadays does not use the expression "head officer." It does however refer to a number of superior positions, and then uses the expression "or other similar officer." When the new rule was introduced, it was described (see Annual Practice 1964,vol. 1, at p. 1834) as replacing "in simple shorter terms" the former Ord. 9, r. 8. In all the circumstances I am satisfied that, in the case of a foreign body corporate carrying on business in this country, an employee of the body corporate who was in this country and was in charge of its business here would fall within the description of "other similar officer," just as he fell within the description of "head officer" under the old rule.

The manager of I.A.C.'s London office reported to the Out Station Manager at I.A.C.'s headquarters at Baghdad. The manager in London was Mr. Latif until July 1990 and then Mr. Ibrahim until October 1990, when he was transferred to Baghdad. When he left, he said to Mr. Isaac (who was a cargo accounts clerk employed at the office) "You are the old man in the office and you can take [charge]." At the time when Mr. Isaac gave evidence before the judge in March 1991, there were four other employees of I.A.C. in London, three in Lower Regent Street and one at Heathrow. Among the employees in Lower Regent Street was an accountant who reported to Mr. Isaac. All the rest of I.A.C.'s offices in Europe had been closed, only the London office being kept open, largely because of the large number of Iraqi nationals in this country.

It was the submission of Mr. Beloff for I.A.C. that Mr. Isaac was no more than a caretaker. Having regard to the evidence, I am unable to accept that submission. No doubt there was very little business to be transacted at the office; but what was done there was done by Mr. Isaac, though he himself took instructions from Baghdad when it was possible for him to do so. For example, he was concerned in making arrangements for the repatriation of Iraqi nationals by other airlines; and when K.A.C. served proceedings upon him, he not only passed on the writ to I.A.C.'s office in Baghdad via Royal Jordanian Airlines, but did so with a covering letter setting out legal advice which had been obtained in this country. It also appears that he signed a number of documents for I.A.C., including a VAT return. Evans J. found that at the material time Mr. Isaac, although a junior employee, was the "acting manager" of the business of I.A.C. at the Regent Street office. Of course, he was subordinate to the manager in Baghdad; but he was the person actually conducting the business of I.A.C., such as it was, in London. In these circumstances I would hold (as Evans J. was inclined to do) that, at the time when the writ was served upon him, Mr. Isaac fell within the description of "other

similar officer" of I.A.C. For these reasons, I would dismiss I.A.C.'s appeal from the decision of Evans J. that the writ was effectively served on I.A.C.

B. Service on Iraq

Section 12(1) of the State Immunity Act 1978 provides:

"Any writ or other document required to be served for instituting proceedings against a State shall be served by being transmitted through the Foreign and Commonwealth Office to the Ministry of Foreign Affairs of the State and service shall be deemed to have been effected when the writ or document is received at the Ministry."

The question therefore arises whether the provisions of this subsection were complied with in respect of the present proceedings brought by K.A.C. against Iraq. Evans J. held that they were not. The point did not arise for decision before the Court of Appeal, since they held that I.A.C. was entitled to claim state immunity, and Iraq had only been joined in the proceedings as a necessary or proper party to the proceedings against I.A.C. They therefore expressed no opinion upon it. It follows that K.A.C.'s appeal to your Lordships' House on this point too is in substance an appeal from the decision of Evans J. Since I find myself to be in agreement with both his reasoning and his conclusion, I propose to deal with the point briefly.

On 12 January 1991, the British Embassy in Baghdad was closed. At all material times for present purposes, there was no British diplomatic presence in Baghdad, nor were British interests in Iraq represented by another country. However the Iraqi Embassy in London continued to function from its premises at 21, Queen's Gate, in London, and on 15 January 1991 these premises were recognised as the office premises of a diplomatic mission.

Pursuant to Ord. 11, r. 7, the necessary documents for service on Iraq appear to have been lodged at the Central Office and to have been sent by the Senior Master to the Secretary of State for Foreign Affairs for service in accordance with section 12(1). On 14 January 1991 a letter from the Foreign and Commonwealth Office was sent to the Iraqi Embassy enclosing the writ and stating that, as Her Majesty's Government had no representation in Iraq at that time, the Foreign and Commonwealth Office would be grateful if the documents could be forwarded to the Ministry of Foreign Affairs in Baghdad. The documents were received at the Embassy on 15 January by Mr. Ibrahim, an accredited diplomat. He had previously received a copy of the proceedings which had been served at I.A.C.'s London office on 11 January, and had faxed a copy to the Iraqi Embassy in Jordan for onward transmission to the Ministry of Foreign Affairs in Baghdad; but he had received no reply. He did not attempt to forward to Baghdad the documents received from the Foreign and Commonwealth Office on 15 January.

The submission of K.A.C. was that service of the writ on the Iraqi Embassy in London was essentially service on the Iraqi Ministry of Foreign Affairs for the purpose of section 12(1). This argument was advanced by K.A.C. before Evans J., and was rejected by him as being inconsistent with the express terms of section 12(1). He said:

"In my judgment, the requirement of service at, not merely 'on,' the Foreign Ministry of the defendant state is no more and no less than the plain words of section 12(1) demands. Service is effected by

transmission to the Ministry and takes effect when the document is received at the Ministry. In no sense is a diplomatic mission in a foreign state the same as the Ministry of Foreign Affairs of the sending state."

He cited a passage from Lewis, State and Diplomatic Immunity, 3rd ed. (1990), pp. 78-79, which reads as follows:

"9.7 . . . It would have been possible to provide for service within the jurisdiction on the Embassy, on the analogy of a foreign company carrying on business within the jurisdiction. . . . However, it was no doubt considered more diplomatic that the foreign sovereign should not, by reason merely of his mission's presence here for the purpose of diplomatic intercourse between the two countries, be deemed to have a legal presence within the jurisdiction."

I entirely agree. The delivery of the writ by the Foreign and Commonwealth Office to the Iraqi Embassy was at best a request to the Iraqi Embassy to forward the writ on behalf of the Foreign and Commonwealth Office to the Iraqi Ministry of Foreign Affairs. On the evidence, that was not done. It follows that the service of the writ on Iraq was never effected in accordance with section 12(1), and that the appeal of K.A.C. on this point must be dismissed.

C. State immunity

I turn next to the question whether I.A.C. is entitled to claim immunity from jurisdiction on the principles embodied in section 14(2) of the State Immunity Act 1978, as a separate entity distinct from the organs of government of the State of Iraq and capable of suing and being sued. Section 14(2) provides:

"A separate entity is immune from the jurisdiction of the courts of the United Kingdom if, and only if - (a) the proceedings relate to anything done by it in the exercise of sovereign authority; and (b) the circumstances are such that a State . . . would have been so immune."

It follows that both conditions have to be satisfied if I.A.C. is to be entitled to immunity. However, as I see it, the central question in the present case is whether the acts performed by I.A.C. to which the proceedings relate were performed in the exercise of sovereign authority, which here means acta jure imperii (in the sense in which that expression has been adopted by English law from public international law).

Acta jure imperii

It is unnecessary for the purposes of the present case to trace the adoption by English law of the distinction between acta jure imperii (which, when performed by a foreign sovereign, attract immunity) and acta jure gestionis (which do not). The development can be traced through The Philippine Admiral [1977] A.C. 373 and Trendtex Trading Corporation v. Central Bank of Nigeria [1977] Q.B. 529 to I Congreso del Partido [1983] 1 A.C. 244. In the latter case the members of the Appellate Committee were in agreement that the applicable principles were as stated in the leading speech of Lord Wilberforce, though there was disagreement as to their application to one of the two cases on appeal before them. Your Lordships can therefore turn to Lord Wilberforce's speech as providing

an authoritative statement of the principles underlying the distinction. He said [1983] 1 A.C. 244, 262:

"The relevant exception, or limitation, which has been engrafted upon the principle of immunity of states, under the socalled 'restrictive theory,' arises from the willingness of states to enter into commercial, or other private law, transactions with individuals. It appears to have two main foundations: (a) It is necessary in the interest of justice to individuals having such transactions with states to allow them to bring such transactions before the courts. (b) To require a state to answer a claim based upon such transactions does not involve a challenge to or inquiry into any act of sovereignty or governmental act of that state. It is, in accepted phrases, neither a threat to the dignity of that state, nor any interference with its sovereign functions.

"When therefore a claim is brought against a state . . . and state immunity is claimed, it is necessary to consider what is the relevant act which forms the basis of the claim: is this, under the old terminology, an act 'jure gestionis' or is it an act 'jure imperii:' is it (to adopt the translation of these catchwords used in the 'Tate letter') a 'private act' or it is a 'sovereign or public act,' a private act meaning in this context an act of a private law character such as a private citizen might have entered into?"

Later he said, at p. 267:

"The conclusion which emerges is that in considering, under the 'restrictive' theory, whether state immunity should be granted or not, the court must consider the whole context in which the claim against the state is made, with a view to deciding whether the relevant act(s) upon which the claim is based, should, in that context, be considered as fairly within an area of activity, trading or commercial, or otherwise of a private law character, in which the state has chosen to engage, or whether the relevant act(s) should be considered as having been done outside that area, and within the sphere of governmental or sovereign activity."

However, at p. 269, he stressed (here approving a passage from the judgment of the judge of first instance [1978] Q.B. 500, 528) that the ultimate test:

"is not just that the purpose or motive of the act is to serve the purposes of the state, but that the act is of its own character a governmental act, as opposed to an act which any private citizen can perform."

The State Immunity Act 1978

I turn to the Act of 1978. Although the Act followed after the European Convention on State Immunity 1972 (Cmnd. 7742), the long title of the Act does not refer to the Convention except in relation to giving effect to judgments given against the United Kingdom in the courts of States parties to the Convention (which is the subject of Part II of the Act). Part I of the Act, within which section 14 falls, is concerned with proceedings in the United Kingdom by or against other states, and simply makes new provision with respect to such proceedings. It takes the form of providing (in section 1) for a general immunity of states from jurisdiction, and then providing (in sections 2 to 11) for a number of exceptions to that immunity. Some but not all of these exceptions reflect

the provisions of the Convention. Here I wish to refer in particular to the exceptions, contained in section 3, relating to (1) commercial transactions and (2) contracts to be performed in the United Kingdom. So far as the latter exception is concerned, the section reflects article 4 of the Convention; but the Convention does not make provision for an absence of immunity in respect of commercial transactions. However, in a declaration made by the United Kingdom (pursuant to article 24(1) of the Convention) on depositing (on 3 July 1979) its instrument of ratification of the Convention, it was declared, inter alia, that:

"(a) In pursuance of the provisions of paragraph 1 of article 24 thereof, the United Kingdom hereby declare that, in cases not falling within article 1 to 13, their courts . . . shall be entitled to entertain proceedings against another contracting state to the extent that these courts are entitled to entertain proceedings against States not Party to the present Convention. This declaration is without prejudice to the immunity which foreign states enjoy in respect of acts performed in the exercise of sovereign authority (acta jure imperii)."

This declaration must have been intended to recognise the inapplicability in English law of the principle of sovereign immunity in cases in which the sovereign was not acting jure imperii, as had by then been recognised both in The Philippine Admiral [1977] A.C. 373 and in the Trendtex case [1977] Q.B. 529, though the authoritative statement of the law by Lord Wilberforce in I Congreso del Partido [1983] 1 A.C. 244, 262, was not then available. At all events, the consequential exception included in section 3 of the Act of 1978 related to commercial transactions, though in section 3(3) the expression "commercial transactions" is very broadly defined.

Section 14 of the Act, however, so far as it relates to separate entities, plainly has its origin in article 27 of the Convention, which provides:

"1. For the purposes of the present Convention, the expression 'contracting state' shall not include any legal entity of a contracting state which is distinct therefrom and is capable of suing or being sued, even if that entity has been entrusted with public functions.

"2. Proceedings may be instituted against any entity referred to in paragraph 1 before the courts of another contracting state in the same manner as against a private person; however, the courts may not entertain proceedings in respect of acts performed by the entity in the exercise of sovereign authority (acta jure imperii).

"3. Proceedings may in any event be instituted against any such entity before those courts if, in corresponding circumstances, the courts would have had jurisdiction if the proceedings had been instituted against a contracting state."

I interpolate that it seems probable that the expressions "any entity" and "separate entity" in section 14 of the Act are intended to refer to an entity or separate entity of a state, a construction which is reinforced by the description in section 14(1) of such an entity as being "distinct from the executive organs of the government of the State," and by the fact that section 14(1) finds it necessary to provide expressly that references to a state do not include references to such an entity. However, although the point was touched upon in argument, it does not arise directly for decision in the present case, there being no doubt that I.A.C. is a separate entity of the State of Iraq.

The two conditions imposed by section 14(2) (viz. that the proceedings must relate to something done by the separate entity in the exercise of sovereign authority, and that the circumstances must be such that a state would have been so immune) derive from paragraphs 2 and 3 of article 27 of the Convention. The question however arises whether immunity is excluded in the case of acta jure gestionis under the first or the second of these conditions. The puzzle arises from the fact that commercial transactions within section 3 appear to be excluded both as something not done in the exercise of sovereign authority under the first condition (i.e. not acta jure imperii as stated in article 27(2) of the Convention), and as a case in which (by virtue of section 3) a state would not be immune under the second condition. This tautology appears to be the effect of the introduction into section 3 of the Act of an exception relating to commercial transactions, while at the same time enacting section 14(2) in a form reflecting article 27 of a Convention which did not recognise any such exception. The logical answer would appear to be first to apply the condition in section 14(2)(a), which would have the effect of excluding acta jure gestionis, with the practical effect that questions relating to commercial transactions should not arise under section 14(2)(b). The latter subsection would of course still apply in other cases in which a state would not have been immune, as for example where there had been a submission to the jurisdiction within section 2. At all events, in considering whether acts done by a separate entity are or are not acts done by it in the exercise of sovereign authority under section 14(2)(a), it would, in my opinion, be appropriate to have regard to the English authorities relating to the distinction between acta jure imperii and acta jure gestionis as adopted from public international law, including the statement of principle by Lord Wilberforce in the I Congreso del Partido [1983] 1 A.C. 244, to which I have already referred. Such an approach is consistent with the opinion expressed by Lord Diplock in Alcom Ltd. v. Republic of Colombia [1984] A.C. 580, 600, that section 14(2) comes close to adopting the straightforward dichotomy between acta jure imperii and acta jure gestionis which had become familiar doctrine in public international law.

I wish to add in parenthesis that there appear at first sight to be differences between the exception relating to commercial transactions introduced in section 3 of the Act, and the distinction between acta jure imperii and acta jure gestionis as drawn by Lord Wilberforce in the I Congreso del Partido. In the first place, Lord Wilberforce recognised, at p. 263D, that, even where a state engages in trade, it remains a state and is capable at any time of sovereign or governmental action. Accordingly, the inquiry still had to be made whether the relevant acts were within or outside the trading commercial activity. I suppose that it is possible (though I express no opinion on the point) that the same inquiry may have to be made under section 3 of the Act, when considering whether the proceedings relate to a commercial transaction. Second, Lord Wilberforce, at p. 267C, considered acta jure gestionis to be acts "within an area of activity, trading or commercial, or otherwise of a private law character . . ." However, having regard to the very broad definition of "commercial transactions" in section 3(3) of the Act, it is probable that most, if not all, of the actions of a private law character in which a separate entity of a state is likely to engage will fall within that definition. At all events I do not consider that these differences (such as they are) should require us to construe the words "in the exercise of sovereign authority" in section 14(2)(a) otherwise than in accordance with the accepted meaning of acta

jure imperii, especially as that is plainly in accordance with article 27(2) of the Convention, which is reflected in section 14(2) of the Act.

It is apparent from Lord Wilberforce's statement of principle that the ultimate test of what constitutes an act jure imperii is whether the act in question is of its own character a governmental act, as opposed to an act which any private citizen can perform. It follows that, in the case of acts done by a separate entity, it is not enough that the entity should have acted on the directions of the state, because such an act need not possess the character of a governmental act. To attract immunity under section 14(2), therefore, what is done by the separate entity must be something which possesses that character. An example of such an act performed by a separate entity is to be found in Arango v. Guzman Travel Advisors Corporation (1980) 621 F.2d 1371 in which Dominicana (the national airline of the Dominican Republic), faced with a claim by a passenger in respect of inconvenience suffered in "involuntary rerouting," was held entitled to plead sovereign immunity under the United States Foreign Sovereign Immunities Act 1976, on the ground that it was impressed into service, by Dominican immigration officials acting pursuant to the country's laws, to perform the functions which led to the rerouting of the plaintiff. Reavley J., delivering the judgment of the court, said, at p. 1379:

"Dominicana acted merely as an arm or agent of the Dominican government in carrying out this assigned role, and, as such, is entitled to the same immunity from any liability arising from that governmental function as would inure to the government, itself." (Emphasis supplied.)

But where an act done by a separate entity of the state on the directions of the state does not possess the character of a governmental act, the entity will not be entitled to state immunity, though it may be able to invoke a substantive defence such as force majeure despite the fact that it is an entity of the state: see, e.g., C. Czarnikow Ltd. v. Centrala Handlu Zagranicznego Rolimpex [1979] A.C. 351. Likewise, in the absence of such character, the mere fact that the purpose or motive of the act was to serve the purposes of the state will not be sufficient to enable the separate entity to claim immunity under section 14(2) of the Act.

The things done by I.A.C. to which the proceedings relate

The action was commenced by a specially endorsed writ. In the points of claim endorsed on the writ, K.A.C. claimed that the two defendants (I.A.C. and Iraq) on and/or after 2 August 1990 wrongfully interfered and had continued so to interfere with the aircraft in question, and they claimed an order for delivery of the aircraft and damages consequential on the defendants' wrongful interference, or alternatively damages to the amount of the value of the aircraft, viz. $630m. This pleading reflects the provisions of the Torts (Interference with Goods) Act 1977. By section 2 of that Act, the tort of detinue was abolished, leaving the tort of conversion as the principal vehicle for the protection of proprietary rights in chattels. Section 3 however provides for the form of judgment where goods are detained; and the prayer in the points of claim reflects the provisions of subsection (2) of that section.

The particulars of the alleged wrongful interference with the aircraft are set out in paragraph 2 of the points of claim, which reads as follows:

"(a) On 2 August 1990 the second defendants invaded Kuwait, took control of the airport and deprived the plaintiffs of possession

and control of, inter alia, the aircraft particularised above. (b) Between 2 August and 9 August the aircraft were removed from the airport. (c) On a date or dates between 9 August and 17 September the second defendants unlawfully transferred possession and control of the aircraft to the first defendants. The stated intention of the defendants was to incorporate the aircraft within the First Defendants' fleet and to use them for commercial purposes. (d) The first and second defendants have continued wrongfully to interfere with the aircraft by their unlawful possession and control of the aircraft and refusal and/or failure to deliver up the aircraft to the plaintiffs."

It was suggested in argument that the allegation in sub-paragraph (d) can only be read as an allegation of joint liability on the part of I.A.C. and Iraq. I do not accept this submission. In my opinion, it is capable of being read as an allegation of several liability and, having regard to the allegation in sub-paragraph (c) that possession and control had been transferred to I.A.C., it should be read as embracing several liability on the part of I.A.C.

It will be seen that the only specific allegation against I.A.C. relates to the period after the transfer of possession and control of the aircraft to I.A.C. on a date or dates between 9 August and 17 September. The former date evidently marks the last date on which the aircraft are alleged to have been removed from Kuwait Airport. The latter date was that on which R.C.C. Resolution 369, which purported to dissolve K.A.C. and to vest all of its assets (including the aircraft in question) in I.A.C., came into effect. However since the onus rests on the state entity to establish that it is entitled to state immunity within section 14(2), it is likely that evidence will be called for that purpose, and such evidence may be taken into account in considering whether the claim to state immunity has been established. Here evidence given before Evans J. showed (as I have already recorded) that, on the directions of the Iraqi Minister of Transport and Communications, I.A.C. sent engineers and pilots to Kuwait who there prepared the aircraft for flying and then flew them to Iraqi airports. Thereafter I.A.C., on the directions of the minister, looked after the aircraft by carrying out basic maintenance on them, until after the coming into effect of R.C.C. Resolution 369 when I.A.C. treated the aircraft as part of its fleet and made what use of them it could in the prevailing circumstances. In particular, I.A.C. used at least one of the aircraft for internal flights, and repainted at least two of the aircraft in the I.A.C. livery. These matters throw light (inter alia) on the nature of the interference with the aircraft alleged by K.A.C. in the points of claim.

Of these events, the basic maintenance carried out after the aircraft had been removed from Kuwait Airport seems to be of little or no significance. The essential things done which constitute the gravamen of the proceedings against I.A.C. are (1) the removal of the aircraft from Kuwait Airport to Iraq, and (2) the treatment of the aircraft by I.A.C. as part of its fleet after the coming into force of R.C.C. Resolution 369.

The decisions of the courts below

Evans J. concluded that I.A.C. was not immune from the court's jurisdiction under section 14(2) of the Act. He recognised that the acts of the Government of Iraq in invading Kuwait were acta jure imperii and that, to the extent that Kuwaiti property was appropriated for governmental purposes, such acts too would have been governmental acts.

But in the present case, as he saw the position, the Iraqi government directed I.A.C. to take possession of the 10 Kuwaiti aircraft for commercial purposes, and to look after them until such time as commercial operations could resume. I.A.C. was engaged, on the minister's instructions, in the preliminary stages of establishing an Airbus operation and to this extent was anticipating the transfer of ownership in the aircraft which later became effective. On this basis he concluded that, the aircraft having been removed and thereafter detained by I.A.C. not for governmental purposes but for commercial purposes, it could not be said that its acts were carried out in the exercise of sovereign authority (acta jure imperii).

The conclusion and reasoning of Evans J. was the subject of criticism by Lady Fox in "A 'Commercial Transaction' under the State Immunity Act 1978" (1994) 43 I.C.L.Q. 193, 198-199, in particular on the ground that he found the commerciality of the acts of I.A.C. to derive from the future intention to operate the aircraft as part of its civil airfleet. However, as she pointed out, it is a cardinal feature of the restrictive approach to state immunity that regard should be had to the nature, not the purpose, of the relevant act. In the Court of Appeal [1995] 1 Lloyd's Rep. 25 this criticism was accepted as sound. As Simon Brown L.J. said of the judge's reasoning, at p. 36:

"The difficulty I have with that reasoning is this: it seems to me inevitably to accord precedence to the ultimate objective of the appropriation over and above what I for my part would regard as the dominant circumstance - the very act of appropriation itself. The plain fact is that Iraq invaded and occupied Kuwait by force of arms, here subsequent expropriation of Kuwaiti assets being the action of a victorious military power exercising rights of conquest. So far as the seizure of K.A.C.'s 10 aircraft was concerned, I.A.C. was no more and no less than Iraq's tool and partner in the adventure."

Accordingly, the Court of Appeal rejected the reasoning of Evans J. as unsound. However they were faced with a new argument advanced on behalf of K.A.C. by Mr. Chambers, who had not appeared below. This was that, following the implementation of R.C.C. Resolution 369, the acts performed by I.A.C. in relation to the aircraft could not be said to have constituted the exercise of sovereign authority; on the contrary, I.A.C. was simply acting upon the vesting of title in it under the Resolution. This argument was however also rejected by the Court of Appeal. Nourse and Leggatt L.JJ. gave it short shrift. Simon Brown L.J. regarded it with greater respect, but still dismissed it on substantially the same grounds as the other members of the court. He said, at p. 37:

"The answer is, I believe, this: that on the particular facts of this case, it is unreal and impermissible to seek to separate out I.A.C.'s eventual use of the disputed aircraft pursuant to the State's Decree from the circumstances of their initial acquisition. The reality is, as already indicated, that I.A.C. was intimately involved throughout the entire expropriatory process: the planes were spoils of war and I.A.C. was party to their taking."

The argument before the Appellate Committee

Before the Appellate Committee Mr. Chambers repeated the same argument which he had unsuccessfully advanced before the Court of Appeal, and I have come to the conclusion that it cannot be dismissed as it was below.

I approach the matter as follows. First, the taking of the aircraft and their removal from Kuwait Airport to Iraq constituted an exercise of governmental power by the State of Iraq. Mr. Chambers submitted that the participation of I.A.C. in that action, by supplying engineers and pilots who performed the mundane task of preparing the aircraft for flying and then flying them from Kuwait to Iraq, was not that of a sovereign but of a carrier. There is force in this argument; but I am satisfied that, in so acting, I.A.C. was not just doing a job of work, but was closely involved with the State of Iraq in the last stage of an enterprise which entailed both the seizure of the aircraft and their removal to Iraq to be used for such purposes as the Government of Iraq should direct, which in point of fact was to be their incorporation into I.A.C.'s fleet. On this basis I am of the opinion that I.A.C., in so acting, was acting in the exercise of sovereign authority.

But, as I see the position, the situation changed after R.C.C. Resolution 369 came into effect. Thereafter, as I see it, it cannot be said that I.A.C.'s retention and use of the aircraft as its own constituted acts done in the exercise of sovereign authority. They were acts done by it in consequence of the vesting or purported vesting of the aircraft in it by legislative decree. Certainly, contrary to the argument of Mr. Beloff for I.A.C., the fact that Resolution 369 was itself a governmental act by the State of Iraq could not of itself render I.A.C.'s consequent retention and use of the aircraft a governmental act. Plainly, a separate entity of a state which receives nationalised property from the state cannot ipso facto claim sovereign immunity in respect of a claim by the former owner, though it may well be able to plead, by way of defence, that its actions were not unlawful. Nor can it be said, as Mr. Beloff submitted, that the acts done by I.A.C. after 17 September 1990 were mere outward manifestations of a denial of title which occurred at the time of seizure of the aircraft. As I understand the position, such acts constituted fresh acts of conversion, though the limitation period may, under the statute, run from an earlier date. Then, does it make any difference that, in the present case, the state entity was at an earlier stage involved in the seizure of the property from the former owner in the exercise of sovereign authority? I for my part cannot see that the characterisation as an act jure imperii of the earlier involvement by the entity in the act of seizure can, on the facts of the present case, be determinative of the characterisation of the subsequent retention and use of the property by the state entity following the formal vesting of the property in the entity by a legislative act of the state. Indeed, if the Court of Appeal's approach were right, it would lead to the consequence that, however long I.A.C. had been able to keep the aircraft and to use them following the vesting of the aircraft in it by Iraqi legislation, for example by employing them in flights to other countries, it would still have been able to invoke state immunity in the case of a claim by the former owner for damages for wrongful interference with the aircraft in the form of conversion founded solely upon retention of the goods after the Iraqi legislation had taken effect. I cannot think that can be right. Finally I do not think it relevant that (as was very probably the case) the Iraqi government would not have tolerated return of the aircraft by I.A.C. to K.A.C. For the fact remains that I.A.C., in treating the aircraft as its own, was doing so pursuant to the Iraqi legislation which vested the aircraft in I.A.C.; and by so doing it cannot be said to have acted in the exercise of sovereign authority.

There remains the question (which may well be of no relevance) whether the acts performed by I.A.C. in looking after the aircraft between the date of their arrival in Iraq and the coming into effect of R.C.C. Resolution 369, involving no more than basic maintenance of the aircraft, constituted acts done by I.A.C. in the exercise of sovereign immunity. On the assumption that these acts constitute acts of conversion and as such are of relevance in these proceedings, I would hold that, like the acts of I.A.C. in flying the aircraft out of Kuwait, these acts were still sufficiently related to the act of seizure of the aircraft by Iraq to amount to acta jure imperii and so would attract immunity under section 14(2).

For these reasons I am satisfied that I.A.C. cannot claim state immunity in respect of the allegations made in paragraphs (c) and (d) of the particulars under paragraph 2 of the points of claim, in so far as they relate to acts alleged to have been performed by I.A.C. after the coming into effect of R.C.C. Resolution 369.

Submission to the jurisdiction

Before Evans J., K.A.C. submitted in the alternative that I.A.C. had submitted to the jurisdiction and so was precluded from claiming state immunity by reason of the exception contained in section 2 of the Act of 1978. Evans J. however rejected the submission; and his decision was upheld by the Court of Appeal [1995] 1 Lloyd's Rep. 25, though on rather different grounds, for the reasons stated in the judgments of Nourse and Simon Brown L.JJ. Before the Appellate Committee Mr. Chambers for K.A.C., while not formally abandoning the point, addressed no argument to the Committee upon it. In all the circumstances, I am not prepared to depart from the decision of the Court of Appeal on this point.

D. Justiciability

I turn finally to the submission that K.A.C.'s appeal should in any event be dismissed because the issues arising from the acts of which K.A.C. complained were not justiciable in the English courts. Since I am of the opinion (which I understand to be shared by the remainder of your Lordships) that the writ was never effectively served on Iraq, I shall treat this submission as having been advanced on behalf of I.A.C. alone.

The submission of I.A.C. was founded upon a general principle that the English courts will not adjudicate on transactions of foreign states in the conduct of foreign affairs, or on sovereign acts done by foreign states in respect of persons or property within their jurisdiction. This submission was derived from the speech of Lord Wilberforce in Buttes Gas and Oil Co. v. Hammer [1982] A.C. 888. The principle is, it was submitted, one which limits the jurisdiction of the English courts, rather than operates as a substantive defence. In the present case, it was said, first that an English court would not pass judgment on the acts of I.A.C. in Kuwait, since this would entail adjudicating on transactions of Iraq in the conduct of its foreign affairs, i.e. the invasion and annexation of Kuwait. However, since I am satisfied that I.A.C. can claim state immunity in respect of its action in Kuwait, that point no longer arises directly. Second, it was said that an English court cannot pass judgment on acts of I.A.C. in Iraq, since this would entail adjudicating on the (legislative) acts of Iraq with respect to property in its own territory. Here reliance was placed in particular on the statement of principle by the Lord Cottenham L.C. in Duke of Brunswick v. King of Hanover (1848) 2 H.L.Cas. 1, 21-22, and on the much quoted

statement of Fuller C.J. in Underhill v. Hernandez (1897) 168 U.S. 250, 252 when he said:

"Every sovereign state is bound to respect the independence of every other sovereign state, and the courts of one country will not sit in judgment on the acts of government of another done within its own territory."

In the course of argument, these submissions were developed by Mr. Plender on behalf of I.A.C. He invoked in particular certain allegations in the points of claim which, he said, asked the English courts to adjudicate on (1) sovereign acts of Iraq in the conduct of its foreign affairs with Kuwait, viz. the "invasion" of Kuwait and appropriation of Kuwaiti state property, as part of the attempt to incorporate Kuwait and its institutions into Iraq; and (2) the lawfulness of sovereign acts of Iraq in respect of transfer of control of the aircraft to I.A.C. I have to observe that both these points appear to have been pleaded, primarily at least, as part of K.A.C.'s case against Iraq and are no longer relevant as such. Mr. Plender however also submitted that, if I.A.C. had been able to enter a defence, this would inevitably have raised further aspects of conduct of foreign affairs of sovereign states, in particular whether Iran was unwilling, before the judgment of Evans J. was delivered, to release the six aircraft taken to that country.

At first instance, Evans J. had rejected the submission of I.A.C. on justiciability because he could not see any reason for the application of the principle in that case "so as to preclude jurisdiction where the nature of the issues is such that [the State Immunity Act 1978] expressly withholds immunity from jurisdiction because they arise out of a commercial transaction." I have however already expressed the opinion that K.A.C.'s claim against I.A.C. in respect of its interference with K.A.C.'s aircraft pursuant to R.C.C. Resolution 369 could not be the subject of a claim to state immunity by I.A.C. since I.A.C.'s acts were not performed in the exercise of sovereign authority (acta jure imperii), and I for my part cannot see why that fact necessarily precludes I.A.C. from raising the issue of justiciability. Everything must, as I see it, depend upon the issues raised by K.A.C.'s claim against I.A.C. and I.A.C.'s defence to that claim, and whether such issues do or do not, on the facts of the case, raise a question of justiciability.

One of the problems in the present case is that it is not yet possible to know with any precision what those issues are. This is because I.A.C.'s submission on justiciability is being raised by way of summons pursuant to R.S.C., Ord. 12, r. 8, and therefore at a stage when the matter has not yet been pleaded out. If the matter is pleaded, it is predictable that I.A.C. will rely on R.C.C. Resolution 369. But that Resolution has been rescinded by the Iraqi government, and there is no agreement between the parties as to the effect of such rescission, in particular whether it meant that the Resolution had been repealed, or that it had been rescinded ab initio with the result that it never had any legal effect. Nor, if for any reason I.A.C. is unable to rely upon the Resolution, is it yet clear precisely what (if any) actions of the Iraqi government I.A.C. may invoke and, if it does invoke any such actions, to what extent it will have been relevant for it to do so. In these circumstances it is perhaps not surprising that it was the submission of Mrs. Higgins for K.A.C. that it will be a matter for consideration at a later stage whether the invocation by I.A.C. of any

public acts by Iraq should render the issues so arising not justiciable in the English courts.

It was the submission of Mrs. Higgins that what was described by Lord Wilberforce (in the Buttes case [1982] A.C. 888, 934) as act of state "in the normal meaning," under which the English courts will not adjudicate upon, or call into question, public acts of a recognised foreign sovereign in his own territory, arises as a defence to the merits and not as a bar to jurisdiction. No doubt such acts may be pleaded and relied upon by way of defence and, since they cannot be called into question in the English courts, may be effective as such; indeed the same result may be achieved by the application of the ordinary principles of conflict of laws. Even so, the principle that such public acts will not be called into question does, as I understand the position, raise a question of jurisdiction in the sense that the English court will decline to adjudicate as a matter of judicial restraint or abstention:" see the Buttes case, at pp. 931F - 934C, per Lord Wilberforce. This is a point to which I will return in a moment. It was the further submission of Mrs. Higgins that, if public acts of the State of Iraq were to be relied upon by I.A.C. in the present case, it would then fall for consideration whether those public acts should be recognised and given effect to on grounds of public policy. In this connection, she submitted, the court would not be precluded from looking at binding U.N. Resolutions for the purpose of ascertaining public policy - a submission which was challenged by Mr. Plender. The matter was not examined in depth before the Appellate Committee; but your Lordships' House is of course well aware of, for example, the controversy which has arisen with regard to confiscation of property without compensation, especially following the decision of the Supreme Court of Aden in Anglo-Iranian Oil Co. Ltd. v. Jaffrate (The Rose Mary) [1953] 1 W.L.R. 246, and the subsequent observations of Upjohn J. in In re Claim by Helbert Wagg & Co. Ltd. [1956] Ch. 323, 346-349, and of Lord Cross of Chelsea in Oppenheimer v. Cattermole [1976] A.C. 249, 277-278, not to mention the decision of the Supreme Court of the United States in Banco Nacional de Cuba v. Sabbatino (1964) 376 U.S. 398.

A further difference arose between Mrs. Higgins and Mr. Plender with regard to the scope of the general principle of "judicial restraint or abstention" recognised by your Lordships' House in the Buttes case [1982] A.C. 888, in so far as it relates not to an act of state in its normal meaning but to transactions of foreign sovereign states. Mr. Plender submitted that the principle should be interpreted broadly so as to embrace, for example, the attempted annexation of Kuwait by Iraq and the appropriation of property following upon that act. Mrs. Higgins, on the other hand, submitted that the principle accommodated no more than a relatively slight expansion of the traditional rule that English courts will not adjudicate upon treaties which are not incorporated into English law, with the effect that certain other transactions between sovereign states should not be adjudicated upon by the English courts, where there exist no manageable standards. On Mrs. Higgins' approach, the invasion and annexation of Kuwait by Iraq did not fall within that category, and did no more than provide the factual background to the issues which fell for decision in this case.

I have to confess that, the more I have considered these rival submissions, which raise questions of some difficulty and of considerable importance, the more unhappy I have felt that they should have come before your Lordships' House in circumstances in which the issues have

not been precisely identified and moreover have not been considered by the courts below. Of course, with an authoritative ruling by this House on the issues of service of process and state immunity, the ambit of the proceedings will become much clearer. But it is only necessary to contrast the manner in which the present case has come before the Appellate Committee, where the identification of the issues depends on no more than a brief statement of claim specially endorsed on the writ and evidence directed primarily to questions of state immunity and service of process, with the situation in the Buttes case itself, where the issues could be identified with some precision by reference to the pleadings, to realise how slender is the foundation upon which your Lordships are here being invited to proceed.

At this stage I return to the point that the principle here under consideration raises a question of jurisdiction in the sense that the English court will, as described by Lord Wilberforce in the Buttes case, decline from adjudicating as a matter of judicial restraint or abstention. As I understand the position, a party is not precluded from invoking the principle by reason of his having taken a step in the action or otherwise having submitted to the jurisdiction. This appears from the course of proceedings in the Buttes case itself. No doubt it derives from the fact that, unlike (for example) the privilege embodied in the principle of state immunity, a principle derived from a policy of judicial restraint or abstention from adjudicating upon certain affairs of sovereign states cannot sensibly be subject, as a matter of law, to any such rule, under which a person who would not otherwise be subject to the jurisdiction of the court may by his own conduct confer on the court an authority over him which otherwise it would not possess (see Dicey & Morris, The Conflict of Laws, 12th ed. (1993) p. 310). Indeed there may be cases in which the relevance of the principle may not become apparent until a later stage in the proceedings, for example in the course of discovery. Again, an act of state in the normal sense - for example, a legislative act nationalising private property - may, as Mrs. Higgins submitted, be relied upon by way of defence. If the plaintiff seeks to call in question the propriety of such an act, the defendant is then entitled to assert that the English court should decline to do so, notwithstanding that he has already submitted to the jurisdiction of the English court. From this it follows that Ord. 12, r. 8, has little or no function in cases of this kind; for a principal purpose of the rule is to ensure that defendants who wish to object to the jurisdiction can do so without having disqualified themselves by submitting to the jurisdiction - a trap into which unwary defendants could well have fallen under the previous procedure (see the note at 12/7 - 8/1 of The Supreme Court Practice 1995, vol 1, p. 118).

I wish to add that, particularly in cases of some complexity, it may be more appropriate that an invocation of this principle should be considered only after the issues in the action have been properly defined on the pleadings. The present case falls, in my opinion, within that category. In all the circumstances, I have come to the conclusion that the proper course for your Lordships' House to take in relation to the proceedings against I.A.C. is as follows. First (as I understand the Court of Appeal to have ordered) the default judgment against I.A.C. must be set aside, as must also the ruling of Evans J. on the issue of justiciability. Second, the action should now be remitted to the Commercial Court, so that it may now proceed against I.A.C. in relation to those parts of K.A.C.'s claim in respect of which I.A.C. cannot rely upon state immunity. The matter can

then be fully pleaded, in the ordinary way. When this has taken place, it will be for the judge to decide, in the light of the submissions of the parties, how he should deal with the point on justiciability raised by I.A.C., having regard to the limited context in which that point is now set following I.A.C.'s partially successful plea of state immunity. In particular it will be open to him, if he thinks fit, to order that any points of justiciability as identified on the pleadings should be disposed of on the trial of a preliminary issue in the action, such a course not being precluded in the present case by any submission to the jurisdiction on the part of I.A.C.

Conclusion

It follows from what I have said that the appeal by K.A.C. against Iraq should be dismissed with costs, since the proceedings were not effectively served on Iraq. With regard to K.A.C.'s claim against I.A.C., proceedings were effectively served upon I.A.C., and K.A.C.'s appeal on the issue of state immunity should be allowed to the extent I have indicated. The order of the Court of Appeal setting aside both the default judgment entered by K.A.C. against I.A.C. and the orders consequential upon the default judgment will stand, and the action should now proceed in the Commercial Court.

Lord Jauncey of Tullichettle. I have had the advantage of reading in draft the speech of my noble and learned friend, Lord Goff of Chieveley. I agree that an order should be made in the terms proposed by him.

Lord Mustill. My Lords, my noble and learned friend, Lord Goff of Chieveley, has identified four issues for consideration. On those labelled A, B and D I agree in all respects with the orders proposed and the reasons given by my Lords, and need add nothing. Regarding issue C, I also agree that the claims against I.A.C. comprised in paragraphs (a) and (b) of the particulars under paragraph 2 of the points of claim are the subject of sovereign immunity. With regret, however, I must differ from the conclusion that I.A.C. is not immune in respect of the claims in paragraphs (c) and (d) My reasons can be stated quite briefly.

For this purpose it is necessary to summarise the course of the action against I.A.C. Although more than one writ was issued by the plaintiffs the one from which the present appeal derives was addressed to both Iraq and I.A.C. and was endorsed with points of claim which I must set out in full, except for the particulars of the value of the aircraft.

"The plaintiffs' claim is for:

"POINTS OF CLAIM

"1. The plaintiffs are and were at all material times the registered and beneficial owners of inter alia, eight Airbus 300-310 aircraft and two Boeing 767 aircraft, the insured value of which was $630m.

[Particulars of the values of the aircraft]

"2. On and/or after 2 August 1990 the first and second defendants wrongfully interfered and have continued to interfere with the said aircraft.

"PARTICULARS

"(a) On 2 August 1990 the second defendants invaded Kuwait, took control of the aircraft and deprived the plaintiffs of possession and control of, inter alia, the aircraft particularised above. (b) Between 2 August and 9 August the aircraft were removed from the airport. (c) On a date or dates between 9 August and 17 September the second defendants unlawfully transferred possession and control of the aircraft to the first defendants. The stated intention of the defendants was to incorporate the aircraft within the first defendants' fleet and to use them for commercial purposes. (d) The first and second defendants have continued wrongfully to interfere with the aircraft by their unlawful possession and control of the aircraft and refusal and/or failure to deliver up the aircraft to the plaintiffs.

"3. By reason of the said interference the plaintiffs have suffered loss and damage.

"4. In the premises the plaintiffs are entitled to and claim against the first and/or second defendants an order for delivery of the aircraft with consequential damages alternatively payment of the value of the aircraft (being U.S.$630m.) by way of damages pursuant to section 3 [of the] (Torts Interference with Goods) Act 1977 and at common law.

"5. The plaintiffs further claim interest pursuant to section 35A of the Supreme Court Act 1981.

"And the plaintiffs claim:

"(1) An order that the first and/or second defendants deliver to the plaintiffs the aircraft particularised in paragraph 1 above;

"(2) Damages consequential on the defendants' wrongful interference;

"(3) Alternatively damages in the amount of the value of the aircraft, being $630m.

"(4) Interest pursuant to section 35A of the Supreme Court Act 1981;

"(5) Further or other relief;

"(6) Costs."

It will be seen that the plaintiffs claimed two principal items of relief. First, an order for delivery up of the 10 aircraft, and secondly damages equal to the pleaded value of the aircraft. After service of the writ on I.A.C. in the manner described by my Lord, I.A.C. did not give notice of intention to defend. The documents do not disclose exactly what happened next, but on 11 February 1991 the plaintiffs obtained judgment against I.A.C. for damages to be assessed. Evidently they had elected to surrender their claim for delivery-up, and to proceed for damages on the basis that they had been totally deprived of the aircraft. This is borne out by the evidence adduced on the hearing of the assessment of damages, which was directed to the market value of the aircraft, and also by the amount which the master actually awarded, namely U.S.$489,455,380. It appears that charging orders absolute were subsequently made, together with the appointment of a receiver.

I turn to the State Immunity Act 1978. Although the whole of Part I of the Act forms the context to section 3 it is necessary to quote only the following provisions:

"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 the Act. . . .

"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. (2) This section does not apply if the parties to the dispute are States or have otherwise agreed in writing; and subsection (1)(b) above does not apply if the contract (not being a commercial transaction) was made in the territory of the State concerned and the obligation in question is governed by its administrative law. (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; but neither paragraph of subsection (1) above applies to a contract of employment between a State and an individual."

"14(1) The immunities and privileges conferred by this Part of this Act apply to any foreign or commonwealth State other than the United Kingdom; and references to a State include references to - (a) the sovereign or other head of that State in his public capacity; (b) the government of that State; and (c) any department of that government, but not to any entity (hereafter referred to as a 'separate entity') which is distinct from the executive organs of the government of the State and capable of suing or being sued. (2) A separate entity is immune from the jurisdiction of the courts of the United Kingdom if, and only if - (a) the proceedings relate to anything done by it in the exercise of sovereign authority; and (b) the circumstances are such that a State (or, in the case of proceedings to which section 10 above applies, a State which is not a party to the Brussels Convention) would have been so immune."

My Lords, I think it clear that sections 3 and 14(2), read together, call for an inquiry in three stages, which in the context of the present facts may be stated as follows. First, what "thing" or things alleged to have been done by I.A.C. are the subject of the proceedings against which I.A.C. claims to be immune? Secondly, did these things amount to a "commercial transaction" within the extended definition in section 3(3)(c)? Finally, were these things done by I.A.C. in the exercise of sovereign authority?

As to the first question, although it may in some cases be difficult to be sure precisely what things alleged to have been done by the defendant are the subject of the proceedings, particularly if the issue of immunity is raised before the plaintiffs' claim is pleaded, there is no such problem here. The statement of claim is perfectly clear, and is of central importance in identifying and limiting the matters constituting the cause of action in respect of which the plaintiffs sought a money judgment. I do not however rest simply on the formulation of the pleading, but rather on the fact that it accurately corresponds with the real substance of the complaint. The amount is very large and the circumstances most unusual, but there is nothing recondite about the claim itself. The plaintiffs allege a proprietary tort which I.A.C. committed by wrongfully remaining in possession of the

aircraft and refusing to give them back, thus causing the plaintiffs to lose their entire value. It is true that the plaintiffs can point to activities, such as working on the aircraft and moving them from one place to another, which may, subject to any available defences, have been wrongful and which might have founded a tortious claim; and if this had been the real gist of the complaint different considerations might have applied. But there can be no more convincing demonstration that it was not than the fact that after obtaining a judgment for damages to be assessed, the plaintiffs led evidence about the value of the aircraft, and obtained an assessment of nearly U.S.$500m., a sum which could not possibly represent the financial consequences of the peripheral activities just mentioned.

Accordingly, at the second stage of the inquiry it must be asked whether, if the relevant defendant had been the Republic of Iraq, it would have been entitled to immunity against a claim based on an allegation that the Republic had wrongfully retained the aircraft and refused to hand them back. Since Iraq is a sovereign and therefore entitled to a prima facie general immunity under section 1 of the Act, the answer would be affirmative unless the claim fell within one of the exceptions in Part I, which in the present instance means section 3. Thus the immunity of Iraq against the hypothetical claim contemplated by section 14(2)(b) would depend on whether the retention and non-return of the aircraft was a "commercial transaction." I venture to think that without the expanded definition in section 3(3)(c) it could not plausibly be suggested that the retention of the aircraft was a "transaction" and still less that it was "commercial." It was quite simply a wrongful detention, with no commercial attributes. The rationale of the common law doctrine of the restricted immunity, of which section 3 is the counterpart, is that where the sovereign chooses to doff his robes and descend into the market place he must take the rough with the smooth, and having condescended to engage in mundane commercial activities he must also condescend to submit himself to an adjudication in a foreign court on whether he has in the course of those activities undertaken obligations which he has failed to fulfil. A claim of the present kind falls entirely outside this reasoning. Equally, although the meaning of "commercial transactions" is broadened by section 3(3)(c) to embrace an "activity" as well as a "transaction," the word is qualified by the parenthesis "(whether of a commercial, industrial, financial, professional or other similar character)," which conforms with the general policy which I have suggested. In my opinion the plaintiffs' claim for wrongful misappropriation is within neither the letter nor the spirit of the commercial exception to the general immunity of the state.

There remains the third stage of the inquiry, which is whether the retention of the aircraft was "done by [I.A.C.] in the exercise of sovereign authority." This is much more difficult, since a separate entity is not sovereign and has no authority. For my part, I do not think that section 14(2)(a) can simply be an echo of section 3, or Part I of the Act as a whole, for otherwise it would duplicate section 14(2)(b): and section 14 as a whole assumes that the state may be immune in circumstances where an entity is not. The immunities of the sovereign and of the entity are of an entirely different character. The former is a matter of status, inherent in the nature of the person or body claiming it, and all-embracing except where specifically excluded by the Act. By contrast the separate entity has no status entitling it to a general immunity, and is endowed by section 14 only with a case-by-case immunity in the situations there described. Moreover, the immunities differ in extent as well as kind, for

there must be many activities of separate entities which could not on any view be described as done under sovereign authority for the purposes of section 14(2)(a), but which if done by the sovereign would lie outside the "commercial transaction" exception, and all the other exceptions in Part I of the Act, and hence would attract the general immunity under section 1.

Assuming, therefore, that section 14(2)(a) is intended to create an additional requirement for immunity, one must ask again what is meant by the reference to things done by the entity in the exercise of a sovereign authority which the entity does not possess. The best I can do, to convey what I believe to be the flavour of section 14(2)(a), is to assert that the entity is immune only if in some sense the act, although not done by the sovereign, is a manifestation of the sovereign's authority. Looking at the matter in this way, it is not enough to show that a sovereign act was an essential preliminary to the conduct by the entity of which the plaintiff complains, for the sovereign quality of the train of events may have died away by the time that the entity comes to play its part; so it is not in my opinion sufficient for I.A.C. to claim immunity in respect of items c. and d. of the particulars just because the conduct of Iraq in the early stages, which put I.A.C. in a position where the acts in question could be done, may for the sake of argument be assumed to have had a sovereign character. But in the present case I cannot detect any change in the character of the successive events. Put at its bluntest and most colourful, the plaintiffs' complaint is that the Republic of Iraq stole the aircraft and that I.A.C. is unlawfully in possession of them. It is not an accident that when this complaint was clothed in the language of a civil pleading the same cause of action founded on the same allegations of fact, and leading to the same monetary claim, was asserted against both defendants alike: and it appears to me that in this respect the pleader's instinct was right. In my opinion I.A.C. was not acting autonomously, but in harness with the Republic of Iraq, and under the shadow of the sovereign authority by which the latter itself was acting, so that its acts were a manifestation of that authority.

For these reasons I would for my part hold that all three conditions for the immunity of I.A.C. are satisfied in relation to the whole of the claim advanced in the writ. I would therefore propose that the writ and all subsequent proceedings, including the judgment and the various steps taken by way of execution should be set aside.

Since however I understand that the majority of your Lordships are of a different opinion on this aspect of the appeal, I concur in the order proposed by my noble and learned friend, Lord Goff of Chieveley.

Lord Slynn of Hadley. My Lords, I have had the advantage of reading in draft the speech prepared by my noble and learned friend, Lord Goff of Chieveley. I agree with his conclusions as to the issues raised in this case save as to one where I consider, contrary to his view, that all the Lords Justices in the Court of Appeal came to the right result. That issue arises out of the objection by I.A.C. to the jurisdiction on the ground of sovereign immunity.

I.A.C. is, by virtue of Iraqi Law No. (108) of 1988 a state owned entity, supervised by the Council of Ministers of Iraq, and having only State officials on its Board of Directors. Its properties are deemed public property.

By section 14(2) of the State Immunity Act 1978 a "separate entity" (which it is common ground that I.A.C. is):

"is immune from the jurisdiction of the courts of the United Kingdom if, and only if - (a) the proceedings relate to anything done by it in the exercise of sovereign authority; and (b) the circumstances are such that a State (or, in the case of proceedings to which section 10 above applies, a State which is not a party to the Brussels Convention) would have been so immune."

For the purposes of section 14(2)(b) it is relevant to note that by section 3(1)(b) a state is not immune as respects proceedings relating to a commercial transaction entered into by the state. By subsection (3)(c) "commercial transaction" means:

"any other transaction or activity [than a contract of loan of the type specified in (a) and (b)] (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; . . ."

In I Congreso del Partido [1983] 1 A.C. 244, 267 Lord Wilberforce gave guidance as to the way in which the distinction between acts which are and acts which are not covered by state immunity has to be drawn:

"The conclusion which emerges is that in considering, under the 'restrictive' theory whether state immunity should be granted or not, the court must consider the whole context in which the claim against the state is made, with a view to deciding whether the relevant act(s) upon which the claim is based, should, in that context, be considered as fairly within an area of activity, trading or commercial, or otherwise of a private law character, in which the state has chosen to engage, or whether the relevant act(s) should be considered as having been done outside that area, and within the sphere of governmental or sovereign activity."

Lord Wilberforce approved what had been said in Claim against theEmpire of Iran Case (1963) 45 I.L.R. 57, 80:

"As a means for determining the distinction between acts jure imperii and jure gestionis one should rather refer to the nature of the state transaction or the resulting legal relationships, and not to the motive or purpose of the state activity. It thus depends on whether the foreign state has acted in exercise of its sovereign authority, that is in public law, or like a private person, that is in private law." (The Empire of Iran Case, approved in I Congreso del Partido case [1983] 1 A.C. 244, 263.)

The facts of the present case as found by the judge are summarised clearly by Nourse L.J. in the Court of Appeal [1995] 1 Lloyd's Rep. 25, 26-27, and I do not repeat them. Kuwait Airways Corporation ("K.A.C.") put its claim on the basis that on or after the 2 August 1990 both I.A.C. (the first defendants) and Iraq (the second defendants) wrongfully interfered and have continued to interfere with the 10 aircraft concerned. The first act relied on was the taking control and possession of the aircraft by Iraq on 2 August after the invasion of Kuwait and the second was their removal from Kuwait airport between 2 and 9 August 1990. I agree with Lord Goff's analysis of these two events in relation to the claim for sovereign immunity. I do not consider that it is seriously arguable that

these two acts were not covered by the claim to sovereign immunity. The difficulty arises in relation to the third and fourth particulars of claim alleged viz.:

"(c) On a date or dates between 9 August and 17 September the second defendants unlawfully transferred possession and control of the aircraft to the first defendants. The stated intention of the defendants was to incorporate the aircraft into the first defendants' fleet and to use them for commercial purposes.

"(d) The first and second defendants have continued wrongfully to interfere with the aircraft by their unlawful possession and control of the aircraft and refusal and/or failure to deliver up the aircraft to the plaintiffs."

K.A.C. claimed delivery up of the aircraft, alternatively damages for the defendants' wrongful interference, alternatively damages in the value of the aircraft.

The acts done are thus the taking, keeping and using of these 10 aircraft in breach of the plaintiffs' right to have them. The acts done by Iraq itself were clearly done either by the head of state in his public capacity or by the government of that state within the meaning of section 14(1) of the Act of 1978 and, subject to the provisions of section 3(3)(c), Iraq was entitled to claim sovereign immunity pursuant to section 1 of that Act.

I.A.C. being a separate entity within the meaning of section 14 is only entitled to claim immunity if the proceedings relate to anything done by it in the exercise of sovereign authority. I.A.C. does not have an independent sovereign status; the question is therefore whether it was acting in the exercise of or pursuant to Iraq's sovereignty.

On the facts of the present case it seems to me clear that when the Minister of Transport gave the Director-General of I.A.C. directions to arrange for the airbuses and the Boeing 767s to be brought to Iraq he was acting on behalf of the head or the government of the state and his action is one for which the state is immune in the British courts. When the Director-General received and carried out those directions he was acting in the exercise of sovereign authority vested in Iraq. The maintenance of the aircraft was done under the same authority. When Resolution 369 on 9 September vested those aircraft in I.A.C. on 17 September that was the act of a sovereign state. I.A.C.'s use of those aircraft subsequently, and in defeasance of K.A.C.'s rights, pursuant to that decree was an act done in the exercise of Iraq's sovereign authority.

On the facts found by the judge I do not consider that I.A.C. played at any time an independent role. It flew the aircraft out of Kuwait and it used them because Iraq in the exercise of its sovereignty told I.A.C. to do so. The intention, it is accepted, all along was that these aircraft should be seized and used for civil aviation purposes in and from Iraq. The seizure and detention for that purpose was, however, wholly done pursuant to the actions of Iraq in its sovereign capacity.

I do not for my part accept that these events can be kept apart and fine distinctions made as to the moment at which it could be said that I.A.C. was acting independently of Iraq. To do so on the facts of this case seems to me to be unreal. It was essentially one transaction decided upon by Iraq and carried out both by Iraq and by I.A.C. under its authority. Nor do I think that it can be said that if I.A.C. had sold these aircraft to another airline, because that airline could not rely on a claim for sovereign

immunity, therefore I.A.C. could not do so since it was flying the aircraft on commercial routes even if largely inside Iraq. The sale to another airline would break the chain of causation between Iraq's own acts and the exercise of sovereign authority pursuant to those acts. Though I accept that in other situations there may arise a change in the characterisation of the acts of the "separate entity" - it may have gone right outside the exercise of sovereign authority and be acting autonomously - I do not consider on the facts found that that happened here. The nature of I.A.C.'s acts remained the same throughout. I do not accept the suggestion of K.A.C. which is referred to by Legatt L.J. [1995] 1 Lloyd's Rep. 25, 33 that I.A.C.'s conversion simply "consisted of one civil airline tortiously interfering with the property of another civil airline."

It remains to consider whether "the circumstances are such that a State . . . would have been so immune:" section 14(2)(b). This means as I read it - could Iraq claim sovereign immunity if it or its head of state in his public capacity or the government had done the acts which I.A.C. did? It could not have claimed such immunity if what was done was a "commercial transaction entered into by the State" being for present purposes a transaction or activity into which the state enters or engages otherwise than in the exercise of sovereign authority. If, as I consider, this whole incident is to be regarded as one - i.e. the seizure, removal and use of the aircraft - then it is plain that it was being done under sovereign authority and not otherwise. I take the same view if the various stages have to be separated. If Iraq had used Resolution 369 to vest the title to the aircraft in the Minister of Transport and his department had flown the aircraft on civil routes that would have been done as an act of sovereign authority. When the aircraft are vested in I.A.C. and flown by them that is done in the exercise of sovereign authority.

The provision of the Act of 1978 excluding commercial transactions from acts properly seen as the exercise of sovereign authority is derived from decisions of the courts which introduced into the concept of sovereign immunity an exception in order to prevent sovereigns or sovereign states from avoiding foreign courts investigating their activities in what were plainly the sort of commercial transactions which could equally be carried out by other persons. What happened here was totally different. Iraq is not being sued for carelessly flying an aircraft or running a commercial airline in such a way as to cause damage to people or property. It is being sued because of the direct consequences of its act of aggression towards Kuwait, the seizure of K.A.C.'s aircraft and their subsequent detention and use. That is not in any sense the kind of commercial transaction contemplated by the restricted immunity doctrine; it is certainly not within the words in section 3(3)(c) "(whether of a commercial, industrial, financial, professional or other similar character)." I would therefore for my part uphold I.A.C.'s objection to the jurisdiction on this basis.

Lord Nicholls of Birkenhead. My Lords, for the reasons set out in the speech of my noble and learned friend, Lord Goff of Chieveley, I agree that an order should be made in the terms proposed by him.

Solicitors: Clyde & Co.; Landau and Scanlan.

A. R.