[1995] 3 All ER 694

Practice - Service - Service of document on company - Service on 'secretary, treasurer or other similar officer' - Other similar officer - Person in charge of London office - Iraqi airline winding down United Kingdom operations and leaving cargo accounts officer in charge during Gulf War - Whether service of writ on junior employee left in charge valid service of writ on airline - RSC Ord 65, r 3(1).

Practice - Service - Service of document on foreign state - Service on London embassy - Whether service on diplomatic mission valid service on state of that mission - State Immunity Act 1978, s 12(1).

Constitutional law - Foreign sovereign state - Immunity from suit - Exceptions - Acts done in pursuance of foreign legislation - Iraqi national airline seizing aircraft belonging to Kuwaiti national airline during Gulf War - Seizure carried out on orders of Iraqi government - Aircraft incorporated into Iraqi national airline's fleet - Whether Iraqi national airline entitled to claim state immunity in respect of seizure of aircraft - Whether Iraqi national airline entitled to claim state immunity in respect of subsequent use of aircraft as part of its own fleet - State Immunity Act 1978, s 14(2).

In August 1990 Iraq annexed the neighbouring state of Kuwait by armed aggression. On 6 August the Iraqi Minister of Transport directed the Director-General of Iraqi Airways Co (IAC), the first defendant, to take control of ten694 passenger aircraft belonging to the plaintiff, Kuwait Airways Corp (KAC), and arrange for their transfer to Iraq. On 17 September the government of Iraq passed RCC Resolution 369 which purported to dissolve KAC and to transfer all its assets to IAC. Until then, IAC had carried out basic maintenance on the aircraft but had made no use of them. Thereafter, IAC treated the aircraft as its own, incorporated them into its fleet and made such use of them as it was able. At least two of the aircraft were repainted in IAC livery. In 1991 when Iraq was attacked by Coalition forces, including United Kingdom forces, pursuant to United Nations resolutions, six of the aircraft were flown to Iran where they were interned by the Iranian authorities. They were later returned to KAC in 1992 in varying condition. The remaining four aircraft were destroyed in air raids by Coalition forces on Iraq. IAC was at all material times a state owned and controlled entity but it engaged in the commercial activity of operating passenger aircraft as Iraq's national airline and as such it had an office in London. During the conflict between Iraq and the Coalition that office continued to remain open but its operations were wound down and the London manager returned to Baghdad. Five employees remained in London and a cargo accounts officer was left in charge. In 1991 KAC brought an action against IAC and the state of Iraq, the second defendant, claiming delivery up of the ten aircraft together with consequential damages, or alternatively payment of the value of the aircraft ($US630m) by way of damages pursuant to s 3 of the Torts (Interference with Goods) Act 1977 or at common law. The writ was served on IAC by serving it on the cargo accounts officer at IAC's London office and on the state of Iraq by being sent to the Foreign and Commonwealth Office, which sent it to the Iraqi embassy in London with a letter requesting that it be forwarded to the Ministry of Foreign Affairs in Baghdad as the United Kingdom government had no representation in Iraq at that time. The Iraqi diplomat who received the documents made no attempt to forward them to Baghdad. In default of appearance by either defendant damages were assessed in the amount of $500m against both defendants but stays of execution were granted to both defendants 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 IAC pursuant to RSC Ord 12, r 8 disputing the jurisdiction of the court. The judge dismissed IAC's application but granted Iraq's application to set aside the service of the writ at its London embassy. KAC and IAC appealed to the Court of Appeal, which allowed IAC's appeal and set aside the default judgment entered against it and dismissed KAC's appeal against the judge's decision to set aside the judgment entered against the state of Iraq. KAC appealed to the House of Lords. The questions arose (i) whether service had been effected on IAC under RSC Ord 65, r 3(1)^a, which provided for personal service to be effected on a body corporate by service on 'the chairman ... secretary, treasurer or other similar officer thereof', (ii) whether service had been effected on the state of Iraq under s 12(1)^b of the State Immunity Act 1978, which provided for proceedings instituted against a state to be 'served by being transmitted through the Foreign and Commonwealth Office to the Ministry of Foreign Affairs of the State' and that service was 'deemed to have been effected when the writ or document is received at the Ministry', (iii) whether IAC, as a separate entity, was entitled to immunity under s 14(2) of the 1978 Act, which provided that a 'separate entity' was 'immune from the jurisdiction of the courts of the United Kingdom if, and only695 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', and (iv) whether the proceedings related to issues which were not justiciable in the English courts because they concerned sovereign acts of Iraq in the conduct of its foreign affairs with Kuwait and the lawfulness of sovereign acts of Iraq in respect of transfer of control of the aircraft to IAC.

Held - (1) An employee of a foreign body corporate carrying on business in England, who was in England and was in charge of its business there, fell within the description of 'other similar officer' on whom personal service on the body corporate could be effected pursuant to RSC Ord 65, r 3(1). Accordingly, service had been properly effected on IAC by service on the cargo accounts officer at the London office since, although he was a junior employee, he was the person actually conducting the business of IAC, such as it was, in London and therefore fell within the description of 'other similar officer' of IAC (see p 702 b c h j, p 715 h to p 716 b, p 720 b and p 723 a, post); Dunlop Pneumatic Tyre Co Ltd v AG fŸr Motor und Motorfahrzeugbau vorm Cudell & Co [1902] 1 KB 342 applied.
   (2) Service on a diplomatic mission was not service on the state of that mission for the purposes of s 12(1) of the 1978 Act. The express terms of s 12(1) required service at, not merely on, the Foreign Ministry of the state and service was not effected until there was transmission of the document to the ministry and the document was received at the ministry. Since the writ had never been sent to the Ministry of Foreign Affairs in Baghdad there had been no effective service on the state of Iraq. KAC's appeal against Iraq would therefore be dismissed because the proceedings had not been effectively served on Iraq (see p 704 b, 715 h to p 716 b, p 720 b and p 723 a, post).
   (3) On the state immunity issue, the ultimate test of what constituted an act jure imperii which attracted state immunity was whether the act in question was of its own character a governmental act, as opposed to an act which any private citizen could perform. It followed that, in the case of acts done by a separate entity, it was not enough that the entity acted on the directions of the state, since such an act need not possess the character of a governmental act. To attract immunity under s 14(2) of the 1978 Act, therefore, the act done by the separate entity had to be something which possessed the character of a governmental act and where an act done by a separate entity of the state on the directions of the state did not possess that character, the entity was not entitled to state immunity. 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 was not sufficient to enable the separate entity to claim immunity under s 14(2). Applying that principle, the taking of the aircraft and their removal from Kuwait airport to Iraq constituted an exercise of governmental power by the state of Iraq and, in so acting, IAC was acting in the exercise of sovereign authority and was entitled to state immunity. However (Lord Mustill and Lord Slynn of Hadley dissenting), after RCC Resolution 369 came into effect IAC's retention and use of the aircraft as its own were not acts done in the exercise of sovereign authority but were done pursuant to the Iraqi legislation which vested the aircraft in IAC. Accordingly, IAC was not entitled to claim state immunity in respect of the acts alleged to have been performed by IAC after the coming into effect of RCC Resolution 369 (see p 707 j, p 708 c to e, p 710 j to p 711 b g j, p 715 h to p 716 b, p 720 a to c and p 723 a, post); I Congreso del Partido [1981] 2 All ER 1064 considered.

696

   (4) The justiciability issue depended on whether the general principle that the English courts would 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, applied, but that in turn depended on the issues raised by KAC's claim against IAC and IAC's defence to that claim and whether such issues did or did not, on the facts of the case, raise a question of justiciability. Since IAC's submission on justiciability was raised by way of summons pursuant to RSC Ord 12, r 8 at a stage when the matter had not yet been pleaded out or precisely identified, the appropriate course was for the default judgment against IAC to be set aside and the action remitted to the Commercial Court to determine those parts of KAC's claim in respect of which IAC was not entitled to rely on state immunity. The issues could then be fully pleaded prior to trial and the judge could then decide the issue of justiciability. KAC's appeal would therefore be allowed to that extent (see p 712 d e, p 713 b to f, p 715 d to p 716 b, p 720 b and p 723 a, post).

Notes
For immunities from jurisdiction, see 18 Halsbury's Laws (4th edn) paras 1548-1559.
   For service of proceedings on a body corporate, see 37 Halsbury's Laws (4th edn) paras 159-160, and for cases on the subject, see 37(2) Digest (Reissue) 267, 1742-1751.
   For service of proceedings on a foreign state, see ibid para 165.
   For the Torts (Interference with Goods) Act 1977, s 3, see Halsbury's Statutes (4th edn) (1994 reissue) 876.
   For the State Immunity Act 1978, ss 12, 14, see 10 Halsbury's Statutes (4th edn) 648, 650.

697

Appeal
Kuwait Airways Corp (KAC) appealed with leave granted by the Appeal Committee from the decision of the Court of Appeal (Nourse, Leggatt and Simon Brown LJJ) ([1995] 1 Lloyds Rep 25) delivered on 3 November 1993 (i) allowing the appeal of the first respondent, Iraqi Airways Co (IAC), from the decision of Evans J delivered on 3 July 1992 dismissing IAC's summons dated 2 August 1991 to set aside a judgment for damages in the sum of $US489,455,380 entered against it on 11 February 1991 in default of notice of intention to defend and (ii) dismissing KAC's cross-appeal from the decision of Evans J setting aside a judgment entered against the second respondent, the Republic of Iraq, entered against it on 24 May 1991 in default of notice of intention to defend. The facts are set out in the opinion of Lord Goff of Chieveley.

Their Lordships took time for consideration.

24 July 1995. The following opinions were delivered.

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 (the RCC) passed RCC 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 UN 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 UN Security Council Resolution 686. On 5 March 1991 the RCC passed Resolution 55, under which all decisions made by the RCC 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 RCC 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 ten civil aircraft (two Boeing 767s and eight Airbuses), the property of Kuwait Airways Corp (KAC), the plaintiffs in698 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 (IAC), the first defendant in the action and the first respondent before this House, to arrange for the ten 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. IAC however carried out no more than basic maintenance.
   On 17 September there came into effect RCC Resolution 369 which purported to dissolve KAC and to transfer all its assets to IAC. Until then, although IAC had carried out the basic maintenance referred to above, it had made no use of the KAC aircraft. Thereafter, however, IAC 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 RCC Resolution 369 had come into effect, at least one of the KAC aircraft was used for internal flights, and at least two of the aircraft were repainted with IAC livery.
   In January 1991, shortly before the Coalition air attack began, on the instruction of the Iraqi government, six of the KAC 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 KAC in August 1992. They were in varying condition.
   On 3 April 1991, pursuant to UN 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 ten KAC 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, KAC claims delivery up of the ten aircraft together with consequential damages, or alternatively payment of the value of the aircraft ($US630m) by way of damages pursuant to s 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 IAC and Iraq respectively, damages being assessed as against both defendants in sums in the region of $US500m 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 IAC pursuant to RSC Ord 12, r 8. The two applications were heard by Evans J, who on 16 April 1992 dismissed IAC's application but granted Iraq's application to set aside the service of the writ at its London embassy.

699

   Before Evans J, IAC challenged the jurisdiction of the English court on four grounds. (1) The service of the proceedings on IAC at its office in London was not effective, either under RSC Ord 65, r 3, or under s 695 of the Companies Act 1985. (2) IAC, as a 'separate entity,' was entitled to immunity from suit in this country, under s 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 KAC) IAC 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 (Nos 2 and 3), Occidental Petroleum Corp v Buttes Gas and Oil Co (Nos 1 and 2) [1981] 3 All ER 616, [1982] AC 888. (4) The compensation commission established pursuant to UN 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 KAC. The Court of Appeal ([1995] 1 Lloyd's Rep 25) however decided that IAC was entitled to immunity under s 14(2) of the 1978 Act 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 IAC 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 KAC 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 IAC; (B) whether the writ was effectively served on Iraq; (C) whether IAC, as a separate entity, was entitled to immunity under s 14(2) of the 1978 Act; and (D) whether the proceedings relate to issues which are not justiciable in the English courts.
   IAC'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 IAC
   The writ was served on a Mr Isaac at IAC's premises at No 4 Lower Regent Street, London W1, on 11 January 1991. KAC has claimed that this service was effective on two alternative grounds: (1) IAC is an 'oversea company' within the definition in s 744 of the 1985 Act, and in the circumstances the writ was, by virtue of s 695(2) of the same Act, effectively served on IAC by leaving it at IAC's premises in Lower Regent Street, being the place of business established by IAC in this country; (2) alternatively, if IAC is not an 'oversea company' as so defined, nevertheless the writ was effectively served on IAC under RSC Ord 65, r 3, by being served on Mr Isaac who was a 'similar officer' of IAC within r 3(1). Both grounds were relied on by KAC before Evans J. He concluded that IAC was an 'oversea company' within s 744 of the 1985 Act, and that on that basis the writ was effectively served on IAC. The essential question on that point, which is one of some technicality, was whether IAC was a 'company' within the statutory definition. Evans J also inclined to the view that service on IAC 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 IAC was in any event entitled to claim state immunity. Accordingly, IAC's appeal to your Lordships' House on this issue is effectively an appeal from the decision of Evans J.

700

   The second ground upon which KAC 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 QC, I have reached the conclusion (as I understand have the remainder of your Lordships) that, assuming that IAC 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 IAC was an oversea company.
   RSC Ord 65, r 3(1) provides as follows:

I am of course assuming for present purposes that s 695(2) of the 1985 Act does not apply in this case.
   The question arises whether, on the facts of the present case, Mr Isaac was a 'similar officer' of IAC. 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 AG fŸr Motor und Motorfahrzeugbau vorm Cudell & Co [1902] 1 KB 342, decided under RSC Ord 9, r 8, the predecessor of the present rule. That rule, so far as material, provided:

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 MR said (at 346):

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 the701 present case, IAC plainly had a fixed place of business here, though the extent to which it could conduct that business was in the circumstances very limited. However, as Evans J found, the business at IAC's Regent Street office, though much reduced, was never extinguished.
   Of course r 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, p 1834) as replacing 'in simple and 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 IAC's London office reported to the out-station manager at IAC'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 IAC 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 IAC'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 QC for IAC 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 KAC served proceedings upon him, he not only passed on the writ to IAC'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 IAC, 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 IAC at the Lower Regent Street office. Of course, he was subordinate to the manager in Baghdad; but he was the person actually conducting the business of IAC, 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 IAC. For these reasons, I would dismiss IAC's appeal from the decision of Evans J that the writ was effectively served on IAC.

(B) Service on Iraq
   Section 12(1) of the 1978 Act provides:

   The question therefore arises whether the provisions of this subsection were complied with in respect of the present proceedings brought by KAC 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 IAC 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 IAC. They therefore expressed no opinion upon it. It follows that KAC'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, 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 s 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 IAC'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 KAC 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 s 12(1). This argument was advanced by KAC before Evans J, and was rejected by him as being inconsistent with the express terms of s 12(1). He said:

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

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 s 12(1) and that the appeal of KAC on this point must be dismissed.

(C) State immunity
   I turn next to the question whether IAC is entitled to claim immunity from jurisdiction on the principles embodied in s 14(2) of the 1978 Act, 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:

   It follows that both conditions have to be satisfied if IAC is to be entitled to immunity. However, as I see it, the central question in the present case is whether the acts performed by IAC 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 Philippine Admiral (owners) v Wallem Shipping (Hong Kong) Ltd [1976] 1 All ER 78, [1977] AC 373 and Trendtex Trading Corp v Central Bank of Nigeria [1977] 1 All ER 881, [1977] QB 529 to I Congreso del Partido [1981] 2 All ER 1064, [1983] 1 AC 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 ([1981] 2 All ER 1064 at 1070, [1983] 1 AC 244 at 262):

Later he said ([1981] 2 All ER 1064 at 1074, [1983] 1 AC 244 at 267):

However, he stressed (here approving a passage from the judgment of the judge of first instance [1978] 1 All ER 1169 at 1192, [1978] QB 500 at 528) that the ultimate test-

The State Immunity Act 1978
   I turn to the 1978 Act. Although the Act followed after the European Convention on State Immunity 1972 (Cmnd 5081), 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 Pt II of the Act). Part I of the Act, within which s 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 s 1) for a general immunity of states from jurisdiction and then providing (in ss 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 s 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 art 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 art 24(1) of the convention) on depositing (on 3 July 1979) its instrument of ratification of the convention, it was declared (inter alia):

705

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 case and in the Trendtex case, though the authoritative statement of the law by Lord Wilberforce in I Congreso del Partido [1981] 2 All ER 1064 at 1064, [1983] 1 AC 244 at 262 was not then available. At all events, the consequential exception included in s 3 of the 1978 Act related to commercial transactions, though in s 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 art 27 of the convention, which provides:

I interpolate that it seems probable that the expressions 'any entity' and 'separate entity' in s 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 s 14(1) of such an entity as being 'distinct from the executive organs of the government of the state', and by the fact that s 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 IAC is a separate entity of the state of Iraq.
   The two conditions imposed by s 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 paras 2 and 3 of art 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 s 3 appear to be excluded both as something not done in the exercise of sovereign authority under the first condition (ie not acta706 jure imperii as stated in art 27(2) of the convention), and as a case in which (by virtue of s 3) a state would not be immune under the second condition. This tautology appears to be the effect of the introduction into s 3 of the Act of an exception relating to commercial transactions, while at the same time enacting s 14(2) in a form reflecting art 27 of a convention which did not recognise any such exception. The logical answer would appear to be first to apply the condition in s 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 s 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 s 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 s 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 I Congreso del Partido, 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] 2 All ER 6 at 10, [1984] AC 580 at 600, that s 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 s 3 of the Act, and the distinction between acta jure imperii and acta jure gestionis as drawn by Lord Wilberforce in the I Congreso case. In the first place, Lord Wilberforce recognised that, even where a state engages in trade, it remains a state and is capable at any time of sovereign or governmental action (see [1981] 2 All ER 1064 at 1071, [1983] 1 AC 244 at 263). 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 s 3 of the Act, when considering whether the proceedings relate to a commercial transaction. Second, Lord Wilberforce considered acta jure gestionis to be acts 'within an area of activity, trading or commercial, or otherwise of a private law character ...' (see [1981] 2 All ER 1064 at 1074, [1983] 1 AC 244 at 267). However, having regard to the very broad definition of 'commercial transactions' in s 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 s 14(2)(a) otherwise than in accordance with the accepted meaning of acta jure imperii, especially as that is plainly in accordance with art 27(2) of the convention, which is reflected in s 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 s 14(2), therefore, what is done by the separate entity must be707 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 Corp (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 re-routing', 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 re-routing of the plaintiff. Judge Reavley, delivering the judgment of the court, said (at 1379):

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 eg C Czarnikow Ltd v Centrala Handlu Zagranicznego 'Rolimpex' [1978] 2 All ER 1043, [1979] AC 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 s 14(2) of the 1978 Act.

The things done by IAC to which the proceedings relate
   The action was commenced by a specially indorsed writ. In the points of claim indorsed on the writ, KAC claimed that the two defendants (IAC 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 s 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 sub-s (2) of that section.
   The particulars of the alleged wrongful interference with the aircraft are set out in para 2 of the points of claim, which reads as follows:

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   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 IAC 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 IAC, it should be read as embracing several liability on the part of IAC.
   It will be seen that the only specific allegation against IAC relates to the period after the transfer of possession and control of the aircraft to IAC 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 RCC Resolution 369, which purported to dissolve KAC and to vest all of its assets (including the aircraft in question) in IAC, came into effect. However, since the onus rests on the state entity to establish that it is entitled to state immunity within s 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, IAC sent engineers and pilots to Kuwait who there prepared the aircraft for flying and then flew them to Iraqi airports. Thereafter IAC, on the directions of the minister, looked after the aircraft by carrying out basic maintenance on them, until after the coming into effect of RCC Resolution 369 when IAC treated the aircraft as part of its fleet and made what use of them it could in the prevailing circumstances. In particular, IAC used at least one of the aircraft for internal flights, and repainted at least two of the aircraft in IAC livery. These matters throw light (inter alia) on the nature of the interference with the aircraft alleged by KAC 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 IAC are (1) the removal of the aircraft from Kuwait airport to Iraq, and (2) the treatment of the aircraft by IAC as part of its fleet after the coming into force of RCC Resolution 369.

The decisions of the courts below
   Evans J concluded that IAC was not immune from the court's jurisdiction under s 14(2) of the 1978 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 IAC to take possession of the ten Kuwaiti aircraft for commercial purposes, and to look after them until such time as commercial operations could resume. IAC was engaged, on the minister's instructions, in the preliminary stages of establishing an Airbus operation and to this extent was anticipating the transfer of ownership in the aircraft which later became effective. On this basis he concluded that, the aircraft having been removed and thereafter detained by IAC not for governmental purposes but for commercial purposes, it709 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 ICLQ 193 at 198-199, in particular on the ground that he found the commerciality of the acts of IAC 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 this criticism was accepted as sound. As Simon Brown LJ said of the judge's reasoning ([1995] 1 Lloyd's Rep 25 at 36):

   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 KAC by Mr Chambers QC, who had not appeared below. This was that, following the implementation of RCC Resolution 369, the acts performed by IAC in relation to the aircraft could not be said to have constituted the exercise of sovereign authority; on the contrary, IAC 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 LJJ gave it short shrift. Simon Brown LJ regarded it with greater respect, but still dismissed it on substantially the same grounds as the other members of the court. He said (at 37):

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 IAC 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, IAC 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 for710 such purposes as the government of Iraq should direct, which in point of fact was to be their incorporation into IAC's fleet. On this basis I am of the opinion that IAC, in so acting, was acting in the exercise of sovereign authority.
   But, as I see the position, the situation changed after RCC Resolution 369 came into effect. Thereafter, as I see it, it cannot be said that IAC'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 IAC, the fact that RCC Resolution 369 was itself a governmental act by the state of Iraq could not of itself render IAC'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 IAC 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 IAC 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 IAC to KAC. For the fact remains that IAC, in treating the aircraft as its own, was doing so pursuant to the Iraqi legislation which vested the aircraft in IAC; 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 IAC in looking after the aircraft between the date of their arrival in Iraq and the coming into effect of RCC Resolution 369, involving no more than basic maintenance of the aircraft, constituted acts done by IAC 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 IAC 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 s 14(2).
   For these reasons I am satisfied that IAC cannot claim state immunity in respect of the allegations made in paras (c) and (d) of the particulars under para 2 of the points of claim, in so far as they relate to acts alleged to have been performed by IAC after the coming into effect of RCC Resolution 369.

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Submission to the jurisdiction
   Before Evans J, KAC submitted in the alternative that IAC had submitted to the jurisdiction and so was precluded from claiming state immunity by reason of the exception contained in s 2 of the 1978 Act. Evans J however rejected the submission; and his decision was upheld by the Court of Appeal, though on rather different grounds, for the reasons stated in the judgments of Nourse and Simon Brown LJJ. Before the Appellate Committee Mr Chambers for KAC, 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 KAC's appeal should in any event be dismissed because the issues arising from the acts of which KAC 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 IAC alone.
   The submission of IAC 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 the Buttes Gas case [1981] 3 All ER 616, [1982] AC 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 IAC in Kuwait, since this would entail adjudicating on transactions of Iraq in the conduct of its foreign affairs, ie the invasion and annexation of Kuwait. However, since I am satisfied that IAC 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 IAC 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 LC in Duke of Brunswick v King of Hanover (1848) 2 HL Cas 1 at 21-22, 9 ER 993 at 1000 and on the much quoted statement of Fuller CJ in Underhill v Hernandez (1897) 168 US 250 at 252, when he said:

   In the course of argument, these submissions were developed by Dr Plender QC on behalf of IAC. 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 IAC. I have to observe that both these points appear to have been pleaded, primarily at least, as part of KAC's case against Iraq and are no longer relevant as such. Dr Plender however also submitted that, if IAC had been able to enter a defence, this would inevitably have raised further aspects of conduct of foreign affairs of sovereign712 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 IAC 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 1978 Act] expressly withholds immunity from jurisdiction because they arise out of a commercial transaction'. I have however already expressed the opinion that KAC's claim against IAC in respect of its interference with KAC's aircraft pursuant to RCC Resolution 369 could not be the subject of a claim to state immunity by IAC since IAC'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 IAC from raising the issue of justiciability. Everything must, as I see it, depend upon the issues raised by KAC's claim against IAC and IAC'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 IAC's submission on justiciability is being raised by way of summons pursuant to RSC 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 IAC will rely on RCC 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 IAC is unable to rely upon the resolution, is it yet clear precisely what (if any) actions of the Iraqi government IAC 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 Professor Higgins QC for KAC that it will be a matter for consideration at a later stage whether the invocation by IAC of any public acts by Iraq should render the issues so arising not justiciable in the English courts.
   It was the submission of Professor Higgins that what was described by Lord Wilberforce (in the Buttes Gas case [1981] 3 All ER 616 at 630, [1982] AC 888 at 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 Gas case [1981] 3 All ER 616 at 628-630, [1982] AC 888 at 931-934 per Lord Wilberforce. This is a point to which I will return in a moment. It was the further submission of Professor Higgins that, if public acts of the state of Iraq were to be relied upon by IAC 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 UN resolutions for the purpose of ascertaining public policy-a submission which was challenged by Dr Plender. The matter was not examined713 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 WLR 246 and the subsequent observations of Upjohn J in Re Helbert Wagg & Co Ltd [1956] 1 All ER 129 at 139-141, [1956] Ch 323 at 346-349, and of Lord Cross of Chelsea in Oppenheimer v Cattermole (Inspector of Taxes) [1975] 1 All ER 538 at 566-567, [1976] AC 249 at 277-278, not to mention the decision of the Supreme Court of the United States in Banco Nacional de Cuba v Sabbatino (1964) 376 US 398.
   A further difference arose between Professor Higgins and Dr Plender with regard to the scope of the general principle of 'judicial restraint or abstention' recognised by your Lordships' House in the Buttes Gas case, in so far as it relates not to act of state in its normal meaning but to transactions of foreign sovereign states. Dr 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. Professor 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 Professor 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 indorsed on the writ and evidence directed primarily to questions of state immunity and service of process, with the situation in the Buttes Gas 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 Gas 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 Gas 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 person714 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 and Morris on the Conflict of Laws (12th edn, 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 Professor 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 Supreme Court Practice 1995 para 12/7-8/1).
   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 IAC is as follows. First (as I understand the Court of Appeal to have ordered) the default judgment against IAC 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 IAC in relation to those parts of KAC's claim in respect of which IAC 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 IAC, having regard to the limited context in which that point is now set following IAC'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 IAC.

Conclusion
   It follows from what I have said that the appeal by KAC against Iraq should be dismissed with costs, since the proceedings were not effectively served on Iraq. With regard to KAC's claim against IAC, proceedings were effectively served upon IAC, and KAC'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 KAC against IAC 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.

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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 Iraq Airways Corp (IAC) comprised in paras (a) and (b) of the particulars under para 2 of the points of claim are the subject of sovereign immunity. With regret, however, I must differ from the conclusion that IAC is not immune in respect of the claims in paras (c) and (d). My reasons can be stated quite briefly.
   For this purpose it is necessary to summarise the course of the action against IAC. Although more than one writ was issued by the plaintiffs the one from which the present appeal derives was addressed to both Iraq and IAC and was indorsed with points of claim which I must set out in full, except for the particulars of the value of the aircraft.

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   It will be seen that the plaintiffs claimed two principal items of relief. First, an order for delivery up of the ten aircraft and secondly damages equal to the pleaded value of the aircraft. After service of the writ on IAC in the manner described by my Lord, IAC 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 IAC 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 $US489,455,380. 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 Pt I of the Act forms the context to s 3 it is necessary to quote only the following provisions:

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   My Lords, I think it clear that ss 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 IAC are the subject of the proceedings against which IAC claims to be immune? Secondly, did these things amount to a 'commercial transaction' within the extended definition in s 3(3)(c)? Finally, were these things done by IAC 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 IAC 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 $US500m, 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 s 1 of the Act, the answer would be affirmative unless the claim fell within one of the exceptions in Pt I, which in the present instance means s 3. Thus the immunity of Iraq against the hypothetical claim contemplated by s 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 s 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 s 3 is the counterpart, is that where the sovereign chooses to doff his robes and descend into the marketplace 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 s 3(3)(c) to embrace an 'activity' as well as a 'transaction', the word is qualified by the parenthesis '(whether of a718 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 [IAC] 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 s 14(2)(a) can simply be an echo of s 3, or Pt I of the Act as a whole, for otherwise it would duplicate s 14(2)(b): and s 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 s 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 s 14(2)(a), but which if done by the sovereign would lie outside the 'commercial transaction' exception, and all the other exceptions in Pt I of the Act, and hence would attract the general immunity under s 1.
   Assuming, therefore, that s 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 s 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 IAC 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 IAC 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 IAC 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 IAC 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 IAC 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.

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   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 Iraqi Airways Corp (IAC) to the jurisdiction on the ground of sovereign immunity.
   IAC 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 s 14(2) of the State Immunity Act 1978 a 'separate entity' (which it is common ground that IAC is)-

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

   In I Congreso del Partido [1981] 2 All ER 1064 at 1074, [1983] 1 AC 244 at 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:

   Lord Wilberforce approved what had been said in Claim against the Empire of Iran Case (1963) 45 ILR 57 at 80:

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   The facts of the present case as found by the judge are summarised clearly by Nourse LJ in the Court of Appeal ([1995] 1 Lloyd's Rep 25) and I do not repeat them. Kuwait Airways Corp (KAC) put its claim on the basis that on or after 2 August 1990 both IAC (the first defendant) and Iraq (the second defendant) wrongfully interfered and have continued to interfere with the ten 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:

   KAC 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 ten 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 s 14(1) of the 1978 Act and, subject to the provisions of s 3(3)(c), Iraq was entitled to claim sovereign immunity pursuant to s 1 of that Act.
   IAC, being a separate entity within the meaning of s 14, is only entitled to claim immunity if the proceedings relate to anything done by it in the exercise of sovereign authority. IAC 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 IAC 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 of the Revolutionary Command Council of Iraq on 9 September vested those aircraft in IAC on 17 September that was the act of a sovereign state. IAC's use of those aircraft subsequently, and in defeasance of KAC's rights, pursuant to that decree was an act done in the exercise of Iraq's sovereign authority.
   On the facts found by the learned judge I do not consider that IAC 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 IAC 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 purpose721 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 IAC 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 IAC under its authority. Nor do I think that it can be said that if IAC had sold these aircraft to another airline, because that airline could not rely on a claim for sovereign immunity, therefore IAC 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 IAC's acts remained the same throughout. I do not accept the suggestion of KAC which is referred to by Legatt LJ ([1995] 1 Lloyd's Rep 25 at 32) that IAC'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': s 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 IAC 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-ie 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 RCC 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 IAC and flown by them that is done in the exercise of sovereign authority.
   The provision of the 1978 Act 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 KAC'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 s 3(3)(c), 'whether of a commercial, industrial, financial, professional or other similar character'. I would therefore for my part uphold IAC's objection to the jurisdiction on this basis.

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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.