Case Name & Citation
Greylag Goose Leasing 1410 Designated Activity Company v P.T. Garuda Indonesia Ltd  NSWCA 134 per Bell CJ, Meagher JA, Kirk JA
Date of Judgment
14 June 2023
Winding up application; foreign State immunity; statutory construction
The New South Wales Court of Appeal has confirmed that foreign state immunity extends to a national airline subject to a winding up application. The Court held that there is nothing in the Foreign State Immunities Act 1985 (Cth) (FSIA) to suggest that Parliament intended to render a foreign State and its separate entities vulnerable to bankruptcy, insolvency or winding up proceedings in Australia. The Court held that:
PT Garuda Limited (Garuda) is Indonesia’s national airline and a foreign company registered under Div 2 of Pt 5B.2 of the Corporations Act 2001 (Cth) (Corporations Act). Greylag Goose Leasing 1410 Designated Activity Company and Greylag Goose Leasing 1446 Designated Activity Company (together, Greylag Goose) are companies incorporated in Ireland who leased aircraft to Garuda.
On 15 August 2022, Greylag Goose applied to wind up Garuda under s 583 of the Corporations Act on the basis that Garuda was unable to meet its payment obligations. On 22 September 2022, Garuda sought a declaration that the Court had no jurisdiction over it by reason of the immunity from jurisdiction for separate entities of foreign states arising under s 9 of the FSIA.
Greylag Goose contended that Garuda was not immune as the winding up proceedings concerned a “body corporate” within the meaning of the following exception to foreign state immunity set out in s 14(3)(a) of the FSIA:
“A foreign State is not immune in a proceeding in so far as the proceeding concerns:
The primary judge held that the literal construction advanced by Greylag Goose was inappropriate, and Garuda was consequently immune from the winding up proceedings. The Court’s reasoning comprised the following limbs:
Greylag Goose appealed the decision to the NSW Court of Appeal. A key argument underpinning the appeal was that the FSIA’s purpose was to give effect to the restrictive theory of foreign state immunity, a concept referred to in the Australian Law Reform Commission Report (ALRC Report) and the second reading speech for the Bill that became the FSIA. In support of this argument, Greylag Goose contended that the FSIA created a series of broad exceptions to immunity, extending from commercial transaction to employment, personal injury and taxation, thereby demonstrating the FSIA’s intention to derogate from absolute immunity for foreign states by indicating a broad and literal construction of the exception to immunity in s 14(3)(a) of the FSIA.
The Court of Appeal found that the purpose of s 14(3)(a) of the FSIA can be identified by examining the legislation as a whole, including the nature and context of the statute’s enactment, which in turn included secondary materials such as the ALRC Report, of which the FSIA was a direct product.
The Court of Appeal observed ALRC Report ‘makes plain’ that the legislative reforms recommended by that report for partial implementation of a restrictive theory of foreign state immunity were in no way intended to subject a foreign body corporate having the benefits of foreign State immunity to winding up proceedings in Australia. The Court considered the ALRC Report, the International Law Commission Report, and several foreign State Immunity Acts, and found that unless a foreign State had or claimed an interest in property in Australia that fell to be administered in a local court, foreign State entities will be immune from winding up applications in Australian courts.
Additionally, the Court held that the reference to a ‘body corporate’ in s 14(3)(a) refers to a body corporate “in and of the Commonwealth”, which means that the section cannot refer to Garuda as a body corporate of Indonesia.
The Court ultimately held that s 14(3)(a) does not subject a foreign State (or separate entity of a foreign State) to a winding up proceeding, and that on its proper construction, that section relates to a bankruptcy, insolvency or winding up in which a foreign State has or claims an interest in property with which the relevant proceeding is concerned. Garuda was therefore immune from the winding up proceedings.
Consequently, the Court of Appeal dismissed the appeal.
Be the first to receive the latest articles, news and publications.
A recent Federal Court decision provides a useful distillation of the key principles that apply to unreasonable director-related transactions under s 588FDA of the Corporations Act.
A Federal Court decision, handed down on Friday, is a blunt reminder that the statutory limitation period in section 588FF(3) of the Corporations Act 2001 (Cth) needs to be adhered to strictly, and...
In this decision, the Court of Appeal of the Supreme Court of NSW considered the interplay between the priority regimes under ss 556 and 561 of the Corporations Act 2001 (Cth) (Act) in resolving a...