The High Court of Australia today unanimously declared that airline Garuda Indonesia could not claim immunity from Australian Competition and Consumer Commission allegations of cartel conduct in breach of the Trade Practices Act 1974.
The ACCC has been pursuing a number of international airlines for cartel conduct relating to surcharges applied to the carriage of air freight. Garuda had claimed that it was entitled to sovereign immunity under the Foreign State Immunities Act 1985, as it is owned by the Indonesian Government. The Foreign State Immunities Act grants immunity to foreign states, as well as ‘separate entities’ of foreign states, from proceedings against them in Australian courts.
Garuda’s application had been dismissed by the Federal Court and failed again on appeal to the Full Federal Court. Today, the High Court unanimously upheld that decision. Garuda’s appeal was dismissed with costs.
“The ACCC welcomes this decision. Garuda has been carrying on business in Australia for many years and this decision will enable the ACCC action alleging cartel conduct to be determined on its merits,” ACCC Chairman Rod Sims said.
The High Court found that Garuda could not claim sovereign immunity because the ACCC’s proceedings against it concern a ‘commercial transaction’ within the meaning of s11(1) of the Foreign State Immunities Act. This effectively means that foreign states cannot claim immunity from proceedings relating to their commercial or business dealings.
In their joint judgement, French CJ, Gummow J, Hayne J and Crennan J, determined: “The arrangements and understandings into which the ACCC alleges Garuda entered were dealings of a commercial, trading and business character..... [The ACCC’s proceedings] “concerned” a commercial transaction within the meaning of s11(1) in an immediate sense.”
The decision comes just one month before the ACCC’s main proceedings alleging cartel conduct against Singapore Airlines, Cathay Pacific, Emirates, Air New Zealand and Thai Airways are due to commence in the Federal Court in Sydney.
“In proceedings already finalised before the Federal Court $58 million in penalties have been awarded. The proceedings commenced back in 2008, so the trial in October will be an important milestone in the ACCC’s continuing fight to stop cartel conduct,” Mr Sims said.
Garuda will not be joined to the main proceedings commencing in October, however the ACCC will act to get separate proceedings against Garuda before the Court as soon as possible.