Marine Steel Ltd v Government of the Marshall Islands

• Jurisdiction: New Zealand
• Judgment Date: 29 July 1981
• Date: 29 July 1981
• Court: High Court

New Zealand, High Court.

(Barker J.)

Marine Steel Ltd.

and

Government of The Marshall Islands

NEW ZEALAND

Sovereign immunity Foreign States and territories Restrictive theory of sovereign immunity Development of sovereign immunity Development of restrictive theory in international law Trust Territories Marshall Islands Whether a State Whether Government of the Marshal Islands entitled to sovereign immunity Sovereignty in Trust Territories International law in general Relation to municipal law Whether doctrine of stare decisis relevant The law of New Zealand

Summary: The facts:The plaintiff, Marine Steel Ltd., performed repair work in New Zealand on a vessel owned and operated by the Government of the Marshall Islands, a Trust Territory administered by the United States. The plaintiff applied ex parte to the New Zealand High Court for leave to serve notice of process out of the jurisdiction claiming the balance allegedly due under the repair contract.

Held:Leave to serve the writ on the Government of the Marshall Islands was granted.

(1) Since most of the contract was to have been performed in New Zealand and there was reason to doubt the efficacy of remedies available in the Marshall Islands, this was an appropriate case for service out of the jurisdiction unless the defendant was entitled to sovereign immunity.

(2) The defendant was not entitled to sovereign immunity because the Marshall Islands were not a sovereign State. The exact location of sovereignty in Trust Territories was a matter of doubt but it was clear that the Marshall Islands were not to be regarded as part of the United States. Nor were they independent, although internal self-government existed.

(3) Even if the defendant was to be regarded as an entity which might claim sovereign immunity, it was not entitled to immunity in the present case. The restrictive theory of sovereign immunity was now part of international law in relation both to actions in rem and in personam. A foreign State was not, therefore, entitled to sovereign immunity before the New Zealand courts in a case which, like the present one, concerned a commercial transaction.

(4) There was authority for holding that the Court was not obliged to follow an earlier decision of the Privy Council on sovereign immunity, on the grounds that there might be no doctrine of stare decisis in international law and that the Privy Council decision had been criticised by the House of Lords in a later English case.

The following is the text of the judgment of the Court:

This is an ex parte motion by the plaintiff for leave to serve out of New Zealand a writ of summons and statement of claim or notice thereof and for consequential directions.

The plaintiff is a ship repairer, carrying on business in Auckland. On 7 July 1980, it signed a contract in writing with the Government of the Marshall Islands to carry out certain docking and repair work on a motor vessel, The Militobi, owned and operated by the defendant Government. The contract document which is elaborate, was prepared by the defendant. It did not state what law was to govern the contract; it did, however, contain an arbitration clause which provided that any unresolved disputes between the parties shall be determined by arbitration at a judicial Court in the Marshall Islands. It then provided a procedure for the appointment of arbitrators by each party.

All work on the ship was carried out by the plaintiff in Auckland in 1980; the total amount the plaintiff alleges as due to it under the contract is $797,405.69. The plaintiff acknowledges that the sum of $612,320.21 has been paid by the defendant; it wishes to serve proceedings to recover the alleged balance still owing; i.e. the sum of $NZ185,085.48.

The arbitration clause to which I have referred was not invoked by the defendant; instead, when the plaintiff pressed for payment, the defendant set up what it called a fact-finding committee to investigate the plaintiff's claim and to report back to the Marshall Islands Cabinet. As a result of this report, the parties entered into a so-called settlement agreement on 14 January 1981. This further agreement, also drawn up by the defendant, acknowledged liability to pay $US600,000 and preserved the plaintiff's rights in respect of a further $US97,000. It was signed by the defendant's Minister of Finance and Attorney-General. It contained, inter alia, the following provisions:

The plaintiff does not now consider itself bound by this settlement agreement since, in its view, the defendant had not taken adequate steps to implement the agreement. Even so, the plaintiff could, at a hearing, face difficulty in receiving more than $US97,000 in view of the above releaseclause. Of course, I can express no concluded view on that point nor indeed about the merits of the plaintiff's claim.

In March and April 1981, the plaintiff wrote to various Ministers of the defendant, making demands for payment or for implementation of the agreement. These were ignored.

The managing director of the plaintiff, Mr. P. Ganley, deposed to making several visits to the Marshall Islands in attempts to conclude a settlement of the claim. In the course of one visit to Majuro, the capital of the Marshall Islands, he endeavoured to obtain independent legal advice. He found that Majuro boasted only one lawyer in private practice, other than Government lawyers; he was said to be an American yachtsman, who appeared to conduct his practice from a restaurant. Mr. Ganley was unable to obtain any real assistance from him; the lawyer abused the Assistant Attorney-General when Mr. Ganley accompanied him to see that official. Mr. Ganley states that there is a Courthouse at Majuro, presided over by a Circuit Judge from time to time, but his understanding from local officials is that this Court deals mainly with local land issues. He claims further that, whilst staying in the Marshall Islands, his hotel room was bugged by a listening device, his letters were opened and his cables were vetted.

The only way the plaintiff was able to obtain any payment towards its substantial account was by the constant personal pressure of himself and another representative of the plaintiff on the Marshall Islands Government over a period of 8 weeks. During these negotiations, Mr. Ganley says that no reference was made by the defendant's representatives to arbitration or to Courts. If what he says is correct, then one can understand his doubts whether the plaintiff's claim can properly be adjudicated in the Marshall Islands. Hence, the plaintiff's desire to institute these present proceedings in this Court.

The plaintiff's application is made under Rules 48 to 51A of the Code of Civil Procedure. The grounds on which jurisdiction rests in this Court to make the order sought is Rule 48(b)(iii); the contract sought to be enforced was to be, and was in fact, wholly performed in New Zealand.

In the circumstances detailed above, I have no hesitation in holding that, were it not for the complication of suing a government, the plaintiff has made out...