[HOUSE OF LORDS]

AND

AND

I CONGRESO DEL PARTIDO

Conflict of Laws - Sovereign immunity - Government-owned ship - Commercial transaction for supply of sugar from one state to another - Non-delivery of sugar on government orders following severance of relations between states - Whether writ in rem to be set aside on ground that foreign sovereign being impleaded

Ships' Names - Congreso del Partido - Playa Larga - Marble Islands

In August 1973, pursuant to a contract for the sale of sugar by Cubazucar, a Cuban state enterprise, to the plaintiffs, a Chilean company, cargoes of sugar were dispatched to Chile on the vessels Playa Larga and Marble Islands. The vessels were under voyage charters to Cubazucar from Mambisa another Cuban state enterprise, who were in possession of the vessels as owners in the case of the Playa Larga and as demise charterers in the case of the Marble Islands. On September 11, 1973, following a revolution in Chile, the government of the Republic of Cuba decided to have no further commercial dealings with Chile and diplomatic relations between the two states were severed. At that time the Playa Larga, having discharged part of her cargo, was lying at anchor in a Chilean harbour and the Marble Islands was still at sea. On orders from the Cuban government, expressing concern for her safety, the Playa Larga weighed anchor and met the Marble Islandsat sea. Eventually, the remaining cargo from the Playa Largawas returned to Cuba and the cargo from the Marble Islandswas discharged in Vietnam, the master selling it in purported accordance with the terms of the bills of lading and Cuban law. On September 5, 1975, Mambisa, acting on behalf of the Republic of Cuba, took delivery in Sunderland of a new vessel, the Congreso, which was an ordinary trading vessel registered in the name of the Republic of Cuba. On September 9, 1975, the plaintiffs brought an action in rem against the owners of the Congreso, claiming that Mambisa would be liable to them in an action in personam for inter alia, the return of the cargo shipped in the Marble Islands or its value, and

alleging that Mambisa were beneficial owners of the Congresopursuant to section 3 (4) of the Administration of Justice Act 1956. The Congreso was arrested at Sunderland on September 12, 1975. Following a notice of motion by the Republic of Cuba alleging that the Congreso was its property and invoking sovereign immunity, the plaintiffs commenced a second action in rem against the owners of the Congreso similar to the first action but alleging that the Republic of Cuba would be liable to them in an action in personam. In December 1975 a third action in rem against the owners of the Congreso was started by the plaintiffs in respect of the cargo on board the Playa Larga, alleging a claim in personam against either Mambisa or the Republic of Cuba.

On motions by the Republic of Cuba to set aside the writs and subsequent proceedings in all three actions as impleading a foreign sovereign, Robert Goff J. granted relief on all the motions. The Court of Appeal (Lord Denning M.R. and Waller L.J.) having failed to agree, the plaintiffs' appeals were dismissed.

On appeal by the plaintiffs:-

Held, allowing the appeals, (1) that at the time of the transactions (before the common law was superseded by the State Immunity Act 1978), restrictions were applied to the scope of sovereignty to permit individuals with whom sovereign states had entered into commercial transactions to bring such transactions before the court, but where the act complained of was a sovereign and not a private commercial act it could not be challenged, and in deciding into which category the act fell municipal courts, conforming to accepted international standards, had to consider the whole context (post, pp. 257B-C,262A-B, C-E, 263C-D, 267B-C, 272G-H, 267B, 277G - 278A, E-F 1v).

(2) That, in accordance with those principles, the restrictive doctrine of sovereign immunity applied (a) to the case of the Playa Larga, since in taking her out of Chilean waters for her own safety no governmental authority was invoked, even though the instruction might not have been given had the owners not been the Republic of Cuba (post, pp. 268E - 269C,272G-H, 277G - 278A, 279B), and also (b) (Lord Wilberforce and Lord Edmund-Davies dissenting) to the case of the Marble Islands, since the right asserted by her master to sell the perishable cargo in Vietnam was based by him on the contractual terms of the bills of lading and the law of Cuba (post, pp. 274D-E, 278A-C, 279F-G).

The Philippine Admiral [1977] A.C. 373, P.C. and Trendtex Trading Corporation v. Central Bank of Nigeria [1977] Q.B. 529, C.A. applied.

Decision of the Court of Appeal [1980] 1 Lloyd's Rep. 23 reversed.

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

Bank of the United States v. Planters' Bank of Georgia (1824) 9 Wheat. 904.

Charkieh, The (1873) L.R. 4 A. & E. 59.

Charkow, The (No. 59) (1964-65) IPRspr 196, L. G. Bremen, December 21, 1959.

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

Collision with Foreign Government-Owned Motor Car (Austria) Case (1961) 40 I.L.R. 73.

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

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

Danish State Railways in Germany, In re (1953) 20 I.L.R. 178.

Dunhill (Alfred) of London Inc. v. Republic of Cuba (1976) 425 U.S. 682.

Ohio v. Helvering (1934) 292 U.S. 360.

Parlement Beige, The (1880) 5 P.D. 97, C.A.

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

Porto Alexandre, The [1920] P. 30, C.A.

République Arabe Unie v. Dame X (1960) 86 B.G.E. (Pt. 1) 23.

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

United States of America and Republic of France v. Dollfus Mieg et Cie. S.A. and Bank of England [1952] A.C. 582; [1952] 1 All E.R. 572, H.L.(E.).

Victory Transport Inc. v. Comisaria General de Abastecimientos y Transportes (1964) 336 F. 2d 354.

Ysmael (Juan) & Co. Inc. v. Government of the Republic of Indonesia [1955] A.C. 72; [1954] 3 W.L.R. 531; [1954] 3 All E.R. 236, P.C.

The following additional cases were cited in argument:

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

Behring International Inc. v. Imperial Iranian Air Force (1979) 18 I.L.M. 1370.

Braden Copper Co. v. Le Groupement d' Importation des Metaux (1972) 12 I.L.M. 182.

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

Buttes Gas and Oil Co. v. Hammer [1975] Q.B. 557; [1975] 2 W.L.R. 425; [1975] 2 All E.R. 51, C.A.

Central Bank of Turkey v. Weston Finance Co. (1979) 35 Annuaire Suisse de Droit International 143.

Charente, The [1942] Nytt Juridiskt Arkiv 1, p. 65, Supreme Court of Sweden.

Consorzio Agrario di Tripolitania v. Federazione Italiana Consorzi Agrari December 5, 1966, n. 2830; [1967] 1 Guistizia Civile 972, Corte de Cassazione.

Ditta Campione v. Ditta Peti Nitrogenmuvek, Stato Ungherese (unreported), November 14, 1972, n. 3368, 1st session, Corte de Cassazione.

Jurisdiction Over Yugoslav Military Mission (Germany) Case (1962) 38 I.L.R. 162.

Kawasaki Kisen Kabushiki Kaisha of Kobe v. Brantham Steamship Co. Ltd. [1939] 2 K.B. 544; [1939] 1 All E.R. 819, C.A.

Letelier v. Chile (1980) 19 I.L.M. 409.

Nada (Yousef M.) Establishment v. Central Bank of Nigeria (unreported), August 25, 1976, District Court of Frankfurt.

National American Corporation v. Federal Republic of Nigeria (1978) 448 F.Supp. 622.

Nissan v. Attorney-General [1970] A.C. 179; [1969] 2 W.L.R. 926; [1969] 1 All E.R. 629 H.L.(E.).

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

Schooner Exchange, The v. M'Faddon (1812) 7 Cranch 116.

Secretary of State in Council of India v. Kamachee Boye Sahaba (1859) 13 Moo.P.C.C. 22, P.C.

Spacil v. Crowe (The Imias) (1974) 489 F. 2d 614.

Spain (Government of the Republic of) v. S.S. Arantzazu Mendi [1939] A.C. 256; [1939] All E.R. 701, H.L.(E.).

Thai-Europe Tapioca Service Ltd. v. Government of Pakistan, Directorate of Agricultural Supplies [1975] 1 W.L.R. 1485; [1975] 3 All E.R. 961, C.A.

APPEALS from the Court of Appeal.

These were appeals by the owners of the cargo lately laden on board the ships named Marble Islands and Playa Larga respectively (the plaintiffs in two actions), by leave of the Court of Appeal (Lord Denning M.R. and Waller L.J.), against a judgment and orders of that court given on October 1, 1979. Since the two members of the court disagreed (and it had previously been agreed, on the withdrawal from the court of its other member, Eveleigh L.J., that in such an event there should be no further argument in the Court of Appeal) the court dismissed the present appellants' appeal against the judgment and orders of Robert Goff J. [1978] Q.B. 500 on January 28, 1977, whereby he ordered that the writs of summons and all other proceedings in both the actions be set aside. In both actions the present respondents (the defendants) were the Republic of Cuba, sued as owners of the ship I Congreso del Partido, a sistership of the other two vessels.

The facts are stated in the opinion of Lord Wilberforce.

The contract for the sale of sugar made in February 1970 was between Iansa, a Chilean company, as buyer and Cubazucar, a Cuban state-trading enterprise, as seller. The Playa Larga in which part of the sugar was dispatched to Chile, was owned by Cuba and was chartered by Cubazucar from Mambisa, which operated Cuba's merchant shipping fleet. The bills of lading were signed by the master on behalf of "the owner of the above mentioned ship." The Marble Islands, in which another part of the sugar was shipped, was owned by a Liechtenstein company and was under demise charter to Mambisa. The cargo of the Playa Larga was eventually sold in Cuba, that of the Marble Islands in Vietnam.

The primary issue in this appeal was stated by the trial judge Robert Goff J. [1978] Q.B. 500, 524A-E; [1977] 3 W.L.R. 778; [1978] 1 All E.R. 697. In the Court of Appeal Waller L.J. adopted this as an issue [1980] 1 Lloyd's Rep. 28, 32-33.

Robert Alexander Q.C., Bernard Rix Q.C. and Rosalyn Higgins for the appellants. The issue in this case turns on sovereign immunity. In the case of claims in rem arising in respect of state-owned trading vessels the restrictive doctrine of sovereign immunity permits no immunity to the foreign sovereign. Apart from Cuba's claim to sovereign immunity there is no dispute that the appellants' claims are properly brought as an action in rem under the Admiralty jurisdiction. The claims are

founded on section 1 (1) of the Administration of Justice Act 1956. The ships in question were trading ships not dedicated to public uses, and when states engage in commerce they are liable to be sued in respect of their activities: The Philippine Admiral [1977] A.C. 373.

It is submitted when an action in rem is brought against a trading ship not dedicated to public uses, sovereign immunity cannot be claimed. The arrest of the ship is not an interference with the sovereign. By allowing the ship to trade the sovereign submits himself to the same rules as any private trading ship. The same applies to the case of ships with cargo on board. Where a sovereign enters into an agreement he can be sued for breach of it and cannot claim sovereign immunity by relying on governmental reasons for the breach.

This case is concerned solely with jurisdiction and not with any question as to defences on which Cuba may claim to be entitled to rely. Cuba contends that it does not have to meet the appellants' claims because of sovereign immunity. It is not sought to interfere with the sovereign's freedom to frame his foreign policy. The appellants only focus on the question whether, if he takes certain decisions, he can shelter behind them in relation to trading contracts into which he has entered. A sovereign trafficking must abide by the general rules by which the trade is regulated. If he would otherwise have immunity he has waived it by using the ship for trading.

The relevant authorities are The Schooner Exchange v. M'Faddon (1812) 7 Cranch 116; Compania Naviera Vascongado v. S.S. Cristina (The Cristina) [1938] A.C. 485, 496-497; The Philippine Admiral [1977] A.C. 373, 391; The Charkieh (1873) L.R. 4 A. 8L E. 59; Trendtex Trading Corporation v. Central Bank of Nigeria [1977] Q.B. 529, 548-549, 552-553, 555-557; Rahimtoola v. Nizam of Hyderabad [1958] A.C. 379, 418 and Kawasaki Kisen Kabushiki Kaisha of Kobe v. Brantham Steamship Co. Ltd. [1939] 2 K.B. 544, 552.

Reliance is placed on the Brussels Convention on the Immunity of State Owned Ships of 1926, particularly articles 1, 2 and 3. It is important because: (1) It is concerned with the immunity of state-owned ships and so is particularly relevant here. (2) It is an early and authoritative statement of international consensus. (3) It has aided and informed the international development of the restrictive doctrine as a whole. It is not the distinction commonly drawn in the context of the restrictive doctrine between acta jure gestionis and acta jure imperii which led to the distinction between trading vessels and other state-owned ships; it is rather a case of the reverse process - the distinction between different categories of ships has led to the development of the more generalised distinction. A similar development can be seen in the fact that the two leading sovereign immunity cases in the United States and England respectively, The Schooner Exchange v. M'Faddon, 7 Cranch 116, and The Parlement Belge (1880) 5 P.D. 97, are both concerned with the distinction between different classes of state-owned ships. (4) The Convention has led directly to the enactment of section 10 of the State Immunity Act 1978.

The convention, the terms of which are clear, represents a generally

accepted statement of international law with which, it is presumed, English legislation is intended to conform. In 1973 international law was the law embodied in the convention. The convention contains a precise definition of the scope and conditions of the doctrine of sovereign immunity through the use of particular words and phrases. See also articles 4 and 5. At the material time the restrictive doctrine expressed in the convention prevailed.

The Charente [1942] Nytt Juridiskt Arkiv 1, p. 69, Supreme Court of Sweden, does not help the respondents. The fact that the ship was being used in relation to the war effort was consistent with its being dedicated to public uses.

The law of the United States supports the appellants' contentions. Its adoption of the restrictive doctrine of sovereign immunity starts with the letter of Jack Tate, the State Department's Acting Legal Adviser, in 1952 relating to a change of policy in the granting of sovereign immunity. The letter was acted on in Victory Transport Inc. v. Comisaria General de Abastecimientos y Transportes (1964) 336 F. 2d 354. Political pressures brought to bear on the Department of State have from time to time led it to request the courts to grant immunity even in the case of ordinary trading ships: see Spacil v. Crowe (The Imias) (1974) 489 F. 2d 614. Such requests have led to severe criticisms; they were criticised in that case. They have caused the discrediting and abandonment of executive interference and have favoured a more judicial approach.

In the United States Sovereign Immunities Act 1976 it is clear from sections 1602-1605 that there was an intention that the restrictive principle should make states responsible for their trading activities. See National American Corporation v. Federal Republic of Nigeria (1978) 448 F.Supp. 622, 626-627, 639-642 and Behring International Inc. v. Imperial Iranian Air Force (1979) 18 I.L.M. 1370. Governmental policy does not give rise to sovereign immunity: Dunhill (Alfred) of London Inc. v. Republic of Cuba (1976) 425 U.S. 682. That case indicates that in the United States the defence of act of state would not succeed and the repudiation of a contract for state reasons would not give rise to sovereign immunity. See also Letelier v. Chile (1980) 19 I.L.M. 409.

As to West German law, Claim against the Empire of Iran Case (1963) 45 I.L.R. 57, 80, supports the appellant's submissions. The transaction to be categorised is the contract, not the purpose of the state's activity. The crucial point is the status of the ship. If the claim is against a trading ship there is no sovereign immunity. See also The Charkow (No. 59) (1964-65) IPRspr 196, L. G. Bremen, December 21, 1959; Jurisdiction Over Yugoslav Military Mission (Germany) Case (1962) 38 I.L.R. 162 and Nada (Yousef M.) Establishment v. Central Bank of Nigeria (unreported), August 25, 1976, District Court of Frankfurt.

The Italian Corte de Cassazione confirms the appellants' submissions that in the case of state-owned ships the relevant distinction to be drawn from the purposes of the restrictive doctrine is by reference to the status of the ship; this process of categorisation amounts to the distinction elsewhere drawn between jure gestionis and jure imperii; the Convention does not contemplate the making of further distinctions based on those concepts:

see Consorzio Agrario di Tripolitania v. Federazione Italiana Consorzi Agrari, December 5, 1966, n. 2830; [1967] 1 Guistizia Civile 972 and Ditta Campione v. Ditta Peti Nitrogenmuvek, Stato Ungherese (unreported), November 14, 1972, n. 3368, 1st session.

As to Swiss law, in Central Bank of Turkey v. Weston Finance Co. (1979) 35 Annuaire Suisse de Droit International 143 it was held that the initial private law relationship of the parties was conclusive. See also République Arabe Unie v. Dame X (1960) 86 B.G.E. (Pt. 1) 23.

The Austrian Supreme Court took the same view; Collision with Foreign Government-Owned Motor-Car (Austria) Case (1961) 40 I.L.R. 73.

The Republic of Cuba having put in affidavits by foreign lawyers, the appellants put in affidavits of Italian, German, French, Swedish, Belgian and Spanish lawyers directed to the fundamental question as to the process of categorisation: is it to the acts of breach alone or to the nature of the transaction or relationship as a whole that attention must be directed? These affidavits are better directed to the facts and the issues than those of the other side. Most of the affidavits agree that it is the nature of the transaction or relationship and not the motives or reasons for the action that are to be categorised as falling on one side or the other of acta jure gestionis and acta jure imperii.

As to the respondents' reliance on act of state. It is doubtful how far the foreign act of state doctrine exists in English law outside its manifestation in Aksionairnoye Obschestvo A.M. Luther v. James Sagor & Co. [1921] 3 K.B. 532: see Buttes Gas and Oil Co. v. Hammer [1975] Q.B. 557, 573-574. Act of state is not to be confused with state immunity. It is a very limited defence and requires strong proof. In Nissan v. Attorney-General [1970] A.C. 179, 226, 237, the British Government were asserting act of state but were not seeking immunity from the jurisdiction.

In Braden Copper Co. v. Le Groupement d'lmportation des Metaux (1972) 12 I.L.M. 182 the Court of Extended Jurisdiction of Paris refused a plea of sovereign immunity by a state-trading company which marketed expropriated copper. As a matter of good faith the Republic of Cuba cannot claim immunity in respect of politically motivated acts of breach and at the same time seek to gain commercial advantage under the commercial relationship it purports to repudiate.

In summary, this is a case of a commercial transaction relating to a ship owned by the Republic of Cuba carrying goods under normal commercial arrangements and any claim arising out of it is one of private law. It is irrelevant that the purpose for which the act giving rise to the claim was committed was the political one of breaking off trading relations with Chile with which Cuba had become unfriendly. Cuba was contractually liable to the cargo owners under the bills of lading signed by the master on behalf of "the owner of the above-mentioned ship." Cuba was also liable to Iansa, or its sub-purchasers, for detinue and conversion of the cargo in refusing to deliver it at Valparaiso or Callao and selling it in Cuba.

Even if Cuba could plead state immunity, its claim should be rejected because its acts were contrary to international law, violated good faith and were penal or discriminatory.

In the case of the Marble Islands in selling the cargo in Vietnam the

master invoked the contractual terms of the bills of lading and the law of Cuba.

Brian Davenport Q.C., Robert Jennings Q.C. and Timothy Salomanfor the respondents. It is not submitted that there is any absolute doctrine of sovereign immunity in English law but there are many cases in which a sovereign can claim it. The question is just what is meant by the restrictions on sovereign immunity. One may also ask; why have sovereign immunity at all? The Cuban claim is founded on the purpose for which it exists. The courts of one state do not sit in judgment on the acts of sovereignty of another state. Here in relation to Chile Cuba was acting as a sovereign.

In England an action in rem when the defendant enters an appearance becomes an action in personam.

The act of Cuba was a classical act of one sovereign state against another to mark detestation of its character and the intense feeling of one state against another. Cuba in effect declared economic war on Chile, the modern way of declaring war. Compare the action of the United States against Iran, that of the Western nations against Russia in regard to Afghanistan and the sanctions against Rhodesia, all of which were acts of sovereignty. It would be improper, undesirable and impermissible for our courts to rule on the acts of a foreign government in a case like the present when Cuba was calling off relations with Chile. There is no suggestion that there was any motive other than hostility to Chile; certainly there was no commercial motive.

In one sense the ships were trading throughout; in another, once they were diverted, they were not trading.

The rule of sovereign immunity comes in where states have only acted within the classical bounds of sovereignty: see The Parlement Belge, 5 P.D. 97. One must not act against a sovereign in his personal capacity.

In the 20th century states began to acquire trading ships. The courts had to consider whether to apply old rules to the new facts. While the principles of international law proceeded on the basis that the courts would not sit in judgment on the acts of a friendly foreign sovereign, some countries came to the conclusion that one could not apply the old principles to the new facts. The United Nations recognised that there was not absolute protection and that the old principles had to be reconsidered in the light of new events.

Article 36 of the European Convention on State Immunity and Additional Protocol 1972 (Cmnd. 5081) was a convention among the states concerned inter se and was not a general statement of public international law, which is not represented either by this convention or by the Brussels Convention. Neither purported to codify existing international law. They are of no value as evidence of a consensus among nations.

Acta jura imperii are an exercise of sovereignty. But international law does not demand absolute immunity any more. though the basic concept remains as it always was: (1) a sovereign state will not sit in judgment on acts of sovereignty of another sovereign state; (2) nor will it do anything to impede another sovereign state in the exercise of its sovereign powers. But now there is the new context of trading outside the area in which absolute immunity is given. Hence the arguments about classifying the

nature of the transaction. If the act is a sovereign act the courts will not adjudicate on it. The defendant must show that the act is truly an act of sovereignty. One must look at the precise act complained of in the context of the motivation. There is no answer which is consistent right across the board. Acts of foreign policy are sovereign acts. Here the relationship between Cuba and Chile was affected by an act of foreign policy. What Cuba did was part of a dispute between two sovereign states. The waging of war is a sovereign act and this was economic war. If an act is done for the purpose of carrying on a war the courts will nat adjudicate on it. In declaring war a state acts in its sovereign capacity.

It is wrong to look at the mere formalities gone through in relation to these cargoes; one must look at the nature of the whole transaction. It has never been doubted that everything done was part of the foreign policy of Cuba against Chile. Once it was decided that all trade should cease that was an act of economic war. In accordance with that decision the ships were directed as they were and ended up where they did. Cuba was motivated by detestation of Chile. No other reason for the diversion of the ships was ever suggested.

One must ask whether the purpose of sovereign immunity would be served by granting or not granting immunity in a particular case. Only where a state is claiming immunity for a classical act of sovereignty will immunity be granted. If that is alleged and the court believes it immunity will be granted. The determining point is the purpose for which sovereign immunity exists. A private individual is not protected. The purpose of sovereign immunity is stated in Rahimtoola v. Nizam of Hyderabad [1958] A.C. 379, 404. But there is a large grey area in considering when sovereign immunity should begin: Thai-Europe Tapioca Service Ltd. v. Government of Pakistan, Directorate of Agricultural Supplies [1975] 1 W.L.R. 1485, 1490-1492, 1493-1495 and Buttes Gas and Oil Co. v. Hammer [1975] Q.B. 557, 573.

The principle which the courts of all states have consistently observed is to refuse jurisdiction where the defendant is a foreign government and the lis concerns the sovereign public acts of that government. This principle is the foundation of the restrictive doctrine of sovereign immunity. It is reflected in the doctrine of the act of state which must not be confused with that of sovereign immunity. In so far as any analogies can be drawn they support the respondents' case. The doctrine has not been overridden by legislation or treaty. It focuses attention on the nature of the act on which adjudication would be required if jurisdiction were accepted.

The principle for which the respondents contend was enunciated in Trendtex Trading Corporation v. Central Bank of Nigeria [1977] Q.B. 529, 557; Duke of Brunswick v. King of Hanover (1848) 2 H.L.Cas. 1, 16-17 and Secretary of State in Council of India v. Kamachee Boye Sahaba (1859) 13 Moo.P.C.C. 22, 86.

The cases in which, under the restrictive doctrine, jurisdiction has been accepted against a sovereign state turned on a purely private law transaction in no way touching the sovereignty of the state in its traditional sphere of activity, e.g. its relationship with foreign states, and in no way impeding it or embarrassing it in the conduct of its functions within that sphere: see the Victory Transport case 336 F. 2d 354.

There is a difference between a private citizen saying that his act was directed by a sovereign and the case of a sovereign saying: "This is my own act."

Here the matters to be considered are at two levels: (1) redirecting the ships and disposing of the cargoes and (2) the classical acts of foreign policy relations. One must look at both.

International law represents the general consensus of nations: see article 38 of the Statute of the International Court of Justice. It embraces the general principles of law recognised by civilised nations. The fact that a few states have not adhered to it is not of weight. One must distinguish between binding international law and something less, and also between what is international law and what some commentators say that it should be. The respondents have put in affidavits of foreign lawyers to establish the general principles of law recognised by civilised nations. Those principles show that the purpose of sovereign immunity is to ensure that the courts do not sit in judgment on an exercise of sovereignty. On an act of sovereignty immunity arises and the courts will not investigate it.

The State Immunity Act 1978 does not help in the present case. Its detailed provisions are not to be treated as if they were the law before the Act came into force.

It is submitted: (1) An action in rem is not against the res but against its owners. (2) A defendant who enters an appearance or acknowledges service becomes liable as in actions in personam. (3) There is no need to arrest the ship. See The Cristina [1938] A.C. 485, 504-505, and Government of the Republic of Spain v. S.S. Arantzazu Mendi [1939] A.C. 256, 262-263.

Maritime lien is different from a writ in rem. It is concerned with salvage and wages and runs with the ship regardless of its ownership. It exists only in the ship itself and not in sister ships. Section 1 (1) of the Administration of Justice Act 1956 includes such matters as claims to possession or ownership or in respect of a mortgage. Shipbuilding liens are not within it. In English law a foreign sovereign is impleaded by the seizure of his property whether or not he is in possession of it at the time. Section 1 (1) of the Act is not to be confused with other principles of law, in particular sovereign immunity. See also sections 4, 5 and 6. The Philippine Admiral [1977] A.C. 373 is not based on the Admiralty jurisdiction but on the idea that an action in rem is different from an action in personam. A merchant ship can be the subject of an action in rem. But that fact must not be confused with the question of the jurisdiction of an English court. Immunity from jurisdiction is not to be confused with immunity from execution. If an action detracts from the functions of a sovereign it will not be permitted. In this connection an action in rem is no different from an action in personam. The absolute doctrine of sovereign immunity which formerly prevailed made it unnecessary to consider whether there was an exercise of public sovereign power supervening on a private law commercial relationship. In most of the cases the opportunity to consider this never arose because, whatever the ownership of the vessel, the cause of action arose out of a purely commercial occurrence. This explains The Charkieh, L.R. 4 A. & E. 59, 91, 96-98. See also The Porto Alexandre [1920] P. 30. The question of the status of a merchant

ship is only relevant in relation to execution. Both The Philippine Admiral [1977] A.C. 373 and The Charkieh, L.R. 4 A. & E 59, are illogical.

As to the Brussels Convention, Cuba was not a party to it and should not be bound by it. Article 1 is not a statement of international law and the convention is not a part of general international law. See articles 6 and 11. Nor is it part of the law of the United Kingdom, which has not ratified it. Nor have the U.S.A. nor the U.S.S.R.

The cases where, under the restrictive doctrine, jurisdiction has been accepted against a sovereign state did not turn on purely private law transactions which did not touch the state's traditional sphere of activity, such as its relations with foreign states, and did not impede or embarrass it in the conduct of its functions within that sphere: see Claim against the Empire of Iran Case, 45 I.L.R. 57 and In re Danish State Railways in Germany (1953) 20 I.L.R. 178. The authority of Victory Transport, 336 F. 2d 354, is not undermined by the Dunhill case, 425 U.S. 682, which does not affect the contentions of the respondents. The correct principle is firmly established by United States of America and Republic of France v. Dollfus Mieg et Cie. S.A. and Bank of England [1952] A.C. 582. To support a claim for immunity it is enough if the sovereign adduces sufficient material to show that his claim is not illusory: Juan Ysmael & Co. Inc. v. Government of the Republic of Indonesia [1955] A.C. 72.

The absolute doctrine of sovereign immunity has yielded to the restrictive statement of the rule, but the cardinal rules have remained intact, though now not every act done by a sovereign is regarded ipso facto as a sovereign act. The facts of most cases place them fairly clearly on one side of the line or the other. In other cases there may be some features suggestive of ordinary commerce and others suggesting the exercise of functions traditionally regarded as sovereign. In these the court is not bound by the label put on the action but regards the substance. The question is whether the action impleads a sovereign in respect of a sovereign act, thus interfering with or hindering or embarrassing a foreign sovereign in the discharge of his sovereign functions. If so, the action will not be entertained.

Alexander Q.C. in reply. The doctrine of sovereign immunity is a branch of the rules relating to the jurisdiction of our courts. It is a fundamental rule that they have exclusive and absolute jurisdiction over all persons and things within this country, so sovereign immunity is a derogation from that rule of territorial jurisdiction. It is not the jurisdiction which is the exception to the rule of sovereign immunity, but the rule of sovereign immunity which is the exception. The courts grant immunity to foreign sovereigns only because, and in so far as, the law of nations requires: see the case of The Schooner Exchange, 7 Cranch 116, 136, and The Cristina [1938] A.C. 485, 496-497. It used to be thought that international law required absolute immunity for foreign sovereigns and for a long time this doctrine was the rule in England and elsewhere. It derived from a period where the activities of states were confined to those of a truly sovereign nature, the conduct of its armed forces, foreign affairs or the operation of its currency. However, with the emergence of widespread state trading the rule of absolute immunity has come to be regarded as inappropriate and has been replaced by a concept of qualified immunity, restricted to an

immunity from claims arising out of the classic activities of a sovereign, but no others.

The appellants have a straightforward claim in contract and tort in a pleading sense. Their claim is broad on the character of goods in a trading ship. It would be wrong to speculate on the various possible defences for a foreign state acting as Cuba did.

Cuba and Chile were not at war. War is a state and not an action. There is no intermediate state. To speak of "economic war" is just a linguistic device.

If a sovereign enters into a contract which a private person could enter into he cannot say that a breach is an act jure imperii giving rise to sovereign immunity. When a sovereign allows his ship to trade and a claim arises out of its operations he may or may not have a defence but he cannot claim sovereign immunity. The ouster of territorial jurisdiction is a serious inroad into the rights of the citizen. The court should only grant immunity if it is in accordance with the usages of international law. One cannot approach the problem through language which might or might not have justified absolute immunity in the days when it existed. The key question is one of categorisation. The restrictive doctrine propounded in England in 1973 means that one must consider whether the acts done are jure imperii. That depends on classification.

A factor in classification is the evolution of the restrictive doctrine the purpose of which was to restrict sovereign immunity to cases where the sovereign only performed the classic functions of sovereignty and did not trade. The restrictive doctrine restricts immunity to the situation existing before sovereigns traded and entered into contracts. The court should not hold that a state should be in a different position from a private trader on the ground that the reasons for which it withdrew from a commercial relationship were political or governmental: see the Tate letter; The Charkieh, L.R. 4 A & E. 59; The Philippine Admiral [1977] A.C. 373; the Thai-Europe case [1975] 1 W.L.R. 1485; the Trendtex case [1977] Q.B. 529; the Empire of Iran case, 45 I.L.R. 57 and the Victory Transport case, 336 F. 2d 354. The expectation of a trader is that he shall be able to sue, subject to any defences which may be raised. The Cuban Law No. 1256 which recited Cuba's reactions to the recent events in Chile cannot be used to establish immunity although it may found a defence. If the purpose of the principle is that traders should be able to pursue their remedies without obstruction, that is achieved if the classification takes place at the initiation of the contract but not if it takes place at the time for considering the reasons for a breach.

A trading ship carries on the activities of a trading ship and this contract concerns a trading venture. A trading ship is one not destined to public uses, though it can be used for public purposes by a change of user as in the case of The Cristina [1938] A.C. 485. A trading ship is still a trading ship, even though laid up and the Playa Larga was still a trading ship after she was diverted. She could not be reclassified by the breach or by the underlying circumstances of the tort.

Foreign governments should have to meet claims made against them in the same way as domestic governments: see Rahimtoola's case [1958]

A.C. 379, 418 and The Philippine Admiral [1977] A.C. 373, 402. If meeting such claims does not impede the freedom of our government, why should it impede the freedom of foreign governments?

It is unsatisfactory to say that what a sovereign waives he may resume, relying on his former rights. It was the waiver which gave rise to the commercial relationship.

This claim does not embarrass the Cuban government in its functions. It is not said that Cuba cannot break off diplomatic and commercial relations with Chile. The question in this case is whether the legal consequences of what it did afforded a good defence in this case. If that is an embarrassment, it is irrelevant. "Embarrassment" should be regarded in its factual context. "Embarrassment" can be put forward easily in nebulous terms at the stage of claiming sovereign immunity because at that stage a defence does, not have to be formulated.

The question here is whether the political action taken by Cuba afforded a good defence in law to the civil claim. It is not yet known whether the Law No. 1256 will be pleaded as a defence. That cannot be assumed, and its scope and effect is a matter for precise logical analysis. Even in cases where an act of state is pleaded the court looks at the decree to see whether it provides a defence. The fact that Cuba acted out of dislike for Chile does not itself make its act one of foreign relations. How strong does such dislike have to be before it entitles a government to break its contracts? It is nowhere said that there was a policy decision to convert the property of Chilean companies as such. The conversion was not an act of economic warfare.

These trading ships did not cease to be trading ships because they were required to discharge their cargo in another place. That did not destine them to public uses. They were simply trading in breach of their initial obligations. Here there was a conversion of goods on a trading ship.

As to the Marble Islands, the owners should be regarded as the bailees of the cargo, because of the demise clause. From the moment of abrogation of the contract the appellants have arguably a cause of action. When the ship was demised to Cuba the master was operating on behalf of Cuba. There was a bailment following that acquisition.

In respect of the Marble Islands there is a claim in tort for conversion and breach of duty. It is alleged (a) that Cuba acquired the ship and thereby entered into a relationship of bailor and bailee; (b) it converted the goods in the ship and (c) the ship remained in trade throughout.

The purpose of a contract cannot change the nature of the private law of contract whether it is for boots for the army, for a battleship or for wheat. All these contracts create a private law relationship even when the purpose is public. If the respondents were right there would at the stage of breach be a great temptation for an unscrupulous sovereign to allege governmental reasons. Incidentally, examining whether a sovereign's decision was politically motivated would be more embarrassing than considering whether there was a defence. Everything indicates that in the case of contract the courts classify by reference to the nature of the initial transaction.

The House of Lords does not have to decide whether the respondents were bailees for any purpose. If the appellants are right in their broad approach of conversion in a trading ship, that relates to the allegation of breach of duty arising from the relationship of bailor and bailee. The appellants allege breach of duty. Irrespective of the question of bailment there arises a proper claim under the Admiralty jurisdiction in respect of the conversion. The ship was operated by Mambisa subject to control by the Cuban government.

Their Lordships took time for consideration.

July 16. LORD WILBERFORCE. My Lords, these two appeals raise questions of importance as to the scope of the "restrictive" theory of state immunity as it existed in the law of this country in 1973-75 when the relevant events happened. The law in question is the common law before this was superseded by statute (the State Immunity Act 1978): it will continue to form part of the corpus of international law.

The proceedings

There are two separate actions, the common feature of which is that both were brought against the owners of the vessel I Congreso del Partido("I Congreso"), which was constructed, found and arrested in this country. There is no doubt that this vessel was constructed to be used for normal trading purposes. The claims relate not to anything done on or by this ship, but to two sister ships Marble Islands and Playa Larga: they are brought by the owners of cargo formerly laden on them.

As regards Marble Islands

It is interesting to see the basis on which proceedings were first launched. This was that the cargo owners had a claim against a Cuban state enterprise known as Empresa Navegacion Mambisa ("Mambisa") and that Mambisa was the owner of I Congreso. An action was started on this basis on September 9, 1975 (Folio No. 544). However, this was met by the contention, supported by affidavit, that I Congreso was owned not by Mambisa but by the Republic of Cuba. The applicants thereupon started another action (Folio No. 644) on the basis that I Congreso was owned by the Republic of Cuba and that the Republic of Cuba was liable to the applicants in an action in personam as owner or in possession or control of Marble Islands. This immediately gave rise to a claim of state immunity on the part of the Republic of Cuba, which in turn was met by the contention that under the "restrictive" theory, immunity should be denied. This action (Folio No. 644) is the subject of one of the instant appeals.

As regards Playa Larga

The proceedings concerning Playa Larga were commenced on December 12, 1975 (Folio No. 752), when I Congreso was again arrested on the application of the owners of cargo formerly laden on Playa Larga,

now appellants. Their claim was based on an alleged breach of contract by non-delivery of part of the cargo, the contract in question being a bill of lading signed by the master of Playa Larga. There was also a claim in tort (detinue, conversion, or breach of duty). Ultimately, the same issue emerged, whether the Republic of Cuba as owner of I Congresoand of Playa Larga could raise a claim of state immunity or whether the "restrictive" theory applied. This action (Folio No. 752) is the subject of the other of the instant appeals.

Outline of facts

The facts, in outline, are as follows: I shall expand them when the point of decision is reached. In February 1973 a contract for a sale of sugar was made between a Cuban state trading enterprise known as "Cubazucar" as sellers and a Chilean company known as "Iansa" as buyers (the status of Iansa is not material). The contract was for 128,395 tons of sugar to be shipped in eight shipments of 10,000 to 20,000 tons. Cubazucar was to obtain payment by negotiation of documents against a letter of credit to be opened by Iansa. These proceedings are concerned with two of the agreed shipments.

One shipment was of 10,476 tons, carried on Playa Larga: this was a Cuban flag vessel, owned by the Republic of Cuba, and operated by Mambisa.

Mambisa is a state-trading enterprise which manages and operates all Cuban state-owned ships: it is not an "emanation" or department of the Cuban state; it has independent legal existence, and it is not claimed that it would be entitled to state immunity. It is subject however to direction and control by the Cuban government which provides all the funds necessary for its operation. It may be added here that Cubazucar and another concern to be shortly referred to (Alimport) are also Cuban state-trading enterprises of similar status to Mambisa. It has never been claimed that either of these are agencies of, or that they contracted on behalf of the Cuban state. State-controlled enterprises, with legal personality, ability to trade and to enter into contracts of private law, though wholly subject to the control of their state, are a well-known feature of the modern commercial scene. The distinction between them, and their governing state, may appear artificial: but it is an accepted distinction in the law of England and other states: see C. Czarnikow Ltd. v. Centrala Handlu Zagranicznego Rolimpex [1979] A.C. 351. Quite different considerations apply to a state-controlled enterprise acting on government directions on the one hand, and a state, exercising sovereign functions, on the other. This distinction is crucial in relation to these appeals.

Returning to the facts, Playa Larga was chartered for the voyage to Chile by Cubazucar under a normal form of commercial voyage charter: in the charterparty Mambisa was described as owners of the vessel. Bills of lading were issued for the shipment in Mambisa's standard form, signed by the master. They were negotiated to Iansa against payment of the price under commercial letter of credit: Iansa sold the sugar to another Chilean company.

The other shipment was of 10,890 tons carried on Marble Islands.

She was owned by Blue Seas Corporations Co. Ltd., a Liechtenstein corporation, and flew the Somali flag. She was chartered to Mambisa on a demise charter and sub-chartered by Mambisa to Cubazucar for the voyage to Chile. Bills of lading were issued for the shipment and negotiated as for Playa Larga.

The events which occurred in September 1973 are described in lucid detail by Robert Goff J. [1978] Q.B. 500 in his judgment. Briefly, on September 11, 1973, Playa Larga was at Valparaiso, Chile, having commenced discharge of the cargo. Marble Islands was at sea nearing her destination. On that day a coup d'état took place in Chile; the government of President Allende (friendly to Cuba) was replaced by a government under President Pinochet of which the government of Cuba strongly disapproved. There was some military action in Santiago: diplomatic relations between Chile and Cuba were terminated. There seems to have been no violence at Valparaiso, and nothing occurred to prevent Playa Larga from continuing to discharge: however, she was ordered by Mambisa, which had itself been so instructed by the Cuban government, to leave Valparaiso and join Marble Islands. Consequently, she left Valparaiso without port clearance, taking with her 7,907 tons of her sugar cargo: there was some attempt to stop her leaving but she was able to proceed.

Playa Larga met Marble Islands at sea, and, on instructions, both vessels proceeded to Callao in Peru. It appears that the Chilean authorities, through their embassy, requested discharge at that port, which would have been practicable, but both masters refused to discharge. On September 20, 1973, Playa Larga left Callao and returned to Cuba, where she discharged the balance cargo on October 5, and where it was later sold by Mambisa. These events seem to establish a prima facie case of tortious action and (see below for further discussion) possibly of breach of contract by the owner of Playa Larga, to which there may or may not be available defences. We are, of course, not concerned with these: the only question is whether, since the owner of Playa Larga is the Republic of Cuba, a plea of state immunity can be raised so as to deny jurisdiction. Whether an action could be maintained against Mambisa, is irrelevant, since Mambisa is not the owner of the sister ship I Congreso.

Marble Islands left Callao on September 27, 1973, intending also to return to Cuba, but she was arrested at the Panama Canal on the application of Iansa. She broke arrest and sailed west for North Vietnam. In the course of her voyage her ownership and flag were transferred to the Republic of Cuba. After arrival at Haiphong, her cargo, having been discharged, was sold by the master to another Cuban state enterprise ("Alimport") and by it donated to the people of North Vietnam in part fulfilment of Cuba's programme of donations to that people. In this case too, it would appear that, subject to defences, a prima facie cause of action by the cargo owners could be raised against Mambisa. The involvement (if any) of the Republic of Cuba is another matter which will have to be examined. It can be observed at this stage, however, that, by contrast with the case of Playa Larga, no claim in contract is made or appears to lie against the Republic of Cuba.

The law

I must now attempt to ascertain the state of English law as to state immunity as existing in 1973-75. Certain points can be cleared away.

1. If these matters had arisen as at the present date, they would be governed by the State Immunity Act 1978. The Act, which came into force on November 22, 1978, introduced, by statute, a "restrictive" theory of state immunity into English law by means of a number of detailed exceptions to a general rule of state immunity. It was not retrospective. However, the appellants made use of it in the following way. There is a presumption, they said, that English legislation is intended to be in conformity with international law; therefore the Act may be used as evidence of what international law at its date was. I cannot accept this contention: to argue from the terms of a statute to establish what international law provides is to stand the accepted argument on its head. In the particular case, it is clear that international law, in a general way, in 1978, gave support to a "restrictive" theory of state immunity, we do not need the statute to make this good. On the other hand, the precise limits of the doctrine were, as the voluminous material placed at our disposal well shows, still in course of development and in many respects uncertain. If one state chooses to lay down by enactment certain limits, that is by itself no evidence that those limits are generally accepted by states. And particularly enacted limits may be (or presumed to be) not inconsistent with general international law - the latter being in a state of uncertainty - without affording evidence what that law is. I shall make no further reference to this English statute, nor for similar reasons to the analogous United States statute passed in 1976.

2. The appellants invoked at considerable length the 1926 Brussels Convention on the Immunity of State Owned Ships both generally and in respect of particular articles in it - especially articles 1, 2 and 3. This convention was only ratified by the United Kingdom in 1979 and has never been accepted by the Republic of Cuba. The number of states bound by it has always been limited and has not included states important in maritime commerce. Yet it is invoked, as I understood the argument, as a statement of generally accepted international law. Now there may be cases in which a multilateral convention may become part of general international law so as to bind states not parties (a proposition not uncontroversial) but at the least the convention must bear a legislative aspect and there must be a wide general acceptance of it as law-making, over a period, before this condition is satisfied. The Brussels Convention does not nearly meet these requirements: it was a limited agreement between a limited number of states. At the very most it may, together with its progressive, though not numerous, ratifications and accessions, be evidence of the gradual seepage into international law of a doctrine of restrictive immunity. For that purpose we do not need it. What the appellants need, and what they seek to extract from it, is precise definition of the scope and conditions of the doctrine, through the use of particular words and phrases. This is clearly impermissible and, I may add, not supported by international publicists of authority. I shall make no further

reference to this convention, nor (a fortiori) to the European Convention on State Immunity of 1972.

I can now try to state the English law: this can be done without complication up to a certain point. Until 1975 it would have been true to say that England, almost alone of influential trading nations (the United States of America having changed its position under the Tate letter^* in 1952) continued to adhere to a pure, absolute, doctrine of state immunity in all cases. The classic formulation of this was that of Lord Atkin in the Compania Naviera Vascongado v. S.S. Cristina (The Cristina) [1938] A.C. 485, which is too well known to require citation, and as regards trading vessels, The Porto Alexandre [1920] P. 30 purportedly applying The Parlement Belge (1880) 5 P.D. 97. In 1977 there were reported two landmark cases - The Philippine Admiral [1977] A.C. 373 and Trendtex Trading Corporation Ltd. v. Central Bank of Nigeria [1977] Q.B. 529. In The Philippine Admiral the Judicial Committee of the Privy Council, in an appeal from Hong Kong, declined to follow The Porto Alexandre [1920] P. 30 and decided to apply the "restrictive" doctrine to an action in rem against a state-owned trading vessel. In the comprehensive judgment which was delivered on behalf of the Board, it was said that to do so was more consonant with justice. It was further commented that it was open to the House of Lords to move away from the absolute rule of immunity in actions in personam. Sitting in this House I would unhesitatingly affirm as part of English law the advance made by The Philippine Admiral [1977] A.C. 373 with the reservation that the decision was perhaps unnecessarily restrictive in, apparently, confining the departure made to actions in rem. In truth an action in rem as regards a ship, if it proceeds beyond the initial stages, is itself in addition an action in personam - viz. the owner of the ship (see The Cristina [1938] A.C. 485, 492 per Lord Atkin, p. 504 per Lord Wright), the description in rem denoting the procedural advantages available as regards service, arrest and enforcement. It should be borne in mind that no distinction between actions in rem and actions in personam is generally recognised elsewhere so that it would in any event be desirable to liberate English law from an anomaly if that existed. In fact there is no anomaly and no distinction. The effect of The Philippine Admiral [1977] A.C. 373 if accepted, as I would accept it, is that as regards state-owned trading vessels, actions, whether commenced in rem or not, are to be decided according to the "restrictive" theory.

The other landmark authority (Trendtex [1977] Q.B. 529), a decision of the Court of Appeal, establishes that, as a matter of contemporary international law, the "restrictive" theory should be generally applied. In that case what was involved was not a claim relating to a trading ship, but one based on a commercial letter of credit arising out of a purchase of cement. The case was not appealed to this House, and since there may be appeals in analogous cases it is perhaps right to avoid commitment to more of the admired judgment of Lord Denning M.R. than is

* A letter relating to a change of policy of the United States of America in the granting of sovereign immunity to foreign governments from Jack Tate, the State Department's Acting Legal Adviser, to Philip Pearlman, Acting Attorney-General.

necessary. Its value in the present case lies in the reasoning that if the act in question is of a commercial nature, the fact that it was done for governmental or political reasons does not attract sovereign immunity.

On the basis of these cases I have no doubt that the "restrictive" doctrine should be applied to the present case, though the relevant events chronologically preceded both The Philippine Admiral [1977] A.C. 373 and Trendtex [1977] Q.B. 529. Indeed this was not disputed by either side in these appeals. The issue is as to the limits of the doctrine: merely to state that the "restrictive" doctrine applies is to say little more than that a state has no absolute immunity as regards commercial or trading transactions, but where immunity begins and ends has yet to be determined.

It is necessary to start from first principle. The basis upon which one state is considered to be immune from the territorial jurisdiction of the courts of another state is that of "par in parem" which effectively means that the sovereign or governmental acts of one state are not matters upon which the courts of other states will adjudicate.

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

When therefore a claim is brought against a state (I include in this expression, and shall not repeat, direct and indirect claims - cf. United States of America and Republic of France v. Dollfus Mieg et Cie. S.A. and Bank of England [1952] A.C. 582) and state immunity is claimed, it is necessary to consider what is the relevant act which forms the basis of the claim: is this, under the old terminology, an act "jure gestionis" or is it an act "jure imperii": is it (to adopt the translation of these catchwords used in the "Tate letter") a "private act" or is it a "sovereign or public act," a private act meaning in this context an act of a private law character such as a private citizen might have entered into? It is upon this point that the arguments in these appeals is focussed.

The appellants contend that we have here (I take the case of Playa Larga for the present so as to avoid complication of statement) a commercial transaction, viz., a trading vessel, owned by the Republic of Cuba, carrying goods under normal commercial arrangements. Any claim arising out of this situation is, they assert, a claim of private law, and it is irrelevant that the purpose, for which the act giving rise to the claim was committed, may have been of a political character (sc. briefly, to break off trading relations with a state, Chile, with which Cuba was not friendly). The appellants were able to cite a good deal of authority to support the proposition that it is the character of the relevant

act that is decisive not its purpose. I may mention a decision of the Swiss Federal Court of February 10, 1960 (République Arabe Unie v. Dame X (1960) 86 B.G.E. (Pt. 1) 23), of the Austrian Supreme Court of February 10, 1961, Collision with Foreign Government-Owned Motor Car (Austria) Case (1961) 40 I.L.R. 73, and of the German Federal Constitutional Court - Claim against the Empire of Iran Case (1963) 45 I.L.R. 57, 80 (passage quoted below).

In my opinion this argument, though in itself generally acceptable, burkes, or begs, the essential question, which is "what is the relevant act?" It assumes that this is the initial entry into a commercial transaction and that this entry irrevocably confers upon later acts a commercial, or private law, character. Essentially it amounts to an assertion "once a trader always a trader." But this may be an over-simplification.

If a trader is always a trader, a state remains a state and is capable at any time of acts of sovereignty. The question arises, therefore, what is the position where the act upon which the claim is founded is quite outside the commercial, or private law, activity in which the state has engaged, and has the character of an act done jure imperii. The "restrictive" theory does not and could not deny capability of a state to resort to sovereign or governmental action: it merely asserts that acts done within the trading or commercial activity are not immune. The inquiry still has to be made whether they were within or outside that activity.

In many cases the process of deciding upon the character of the relevant act presents no difficulty. In The Philippine Admiral [1977] A.C. 373, once it was accepted that the contract for goods, the obligation to repay disbursements, and the charterparty, were of a trading or commercial character, the breach of these obligations was clearly within the same area, none the less because committed by a state. Other reported shipping cases are of the same character - The Charkieh (1873) L.R. 4 A. & E. 59 (collision) - The Porto Alexandre [1920] P.30 (salvage - the case should have been decided the other way). In Trendtex [1977] Q.B. 529, similarly, and the same is true of the acts in issue in other countries relating to the Nigerian cement purchases, the relevant act was simply a breach of a commercial contract and was treated as such, none the less though committed by a state or department of state for reasons of government. The purpose for which the breach was committed could not alter its clear character. Of cases in other jurisdictions one of great clarity is the leading case of the Claim against the Empire of Iran Case, 45 I.L.R. 57 decided by the Federal Constitutional Court of the German Federal Republic in 1963. This was a claim for the cost of repairs to the heating system of the Iranian Embassy. The judgment contains the following passage, at p. 80:

"As a means for determining the distinction between acts jure imperii and jure gestionis one should rather refer to the nature of the state transaction or the resulting legal relationships, and not to the motive or purpose of the state activity. It thus depends upon whether the foreign state has acted in exercise of its sovereign

authority, that is in public law, or like a private person, that is in private law."

And later, at p. 81:

"This court has therefore examined the argument that the conclusion of the contract for repair is to be regarded as a non-sovereign function of the foreign state, and has accepted this proposition as correct. It is obvious that the conclusion of a contract of this kind does not fall within the essential sphere of state authority. It does not depend ... on whether the conclusion of the contract was necessary for the regular transaction of the embassy's affairs and therefore stood in a recognisable relationship with the sovereign functions of the sending state. Whether a state is entitled to immunity does not depend on the purpose of the function which the foreign state is thereby pursuing."

Clearly a breach of a contract of that character was within the area of private law. Similar cases in tort are In re Danish State Railways in Germany (1953) 20 I.L.R. 178 and The Charkow (No. 59) (1964-65) IPRspr 196, L.G. Bremen, December 21, 1959. These are cases which present no difficulty. The problems with which they were concerned were simply (i) whether it could be said that the relevant contract was concluded for governmental purposes, and (ii) whether it was relevant that governmental motives were advanced for breaching the contract.

In other situations it may not be easy to decide whether the act complained of is within the area of non-immune activity or is an act of sovereignty wholly outside it. The activities of states cannot always be compartmentalised into trading or governmental activities; and what is one to make of a case where a state has, and in the relevant circumstances, clearly displayed, both a commercial interest and a sovereign or governmental interest? To which is the critical action to be attributed? Such questions are the more difficult since they arise at an initial stage in the proceedings and, in all probability, upon affidavit evidence. This difficulty is inherent in the nature of the "restrictive" doctrine, introducing as it does an exception, based upon a certain state of facts, to a plain rule. But as was said in the Empire of Iran case, 45 I.L.R. 57, 79-80:

"The fact that it is difficult to draw the line between sovereign and non-sovereign state activities is no reason for abandoning the distinction. International law knows of other similar difficulties ... The distinction between sovereign and non-sovereign state activities cannot be drawn according to the purpose of the state transaction and whether it stands in a recognizable relation to the sovereign duties of the state. For, ultimately, activities of state, if not wholly then to the widest degree, serve sovereign purposes and duties, and stand in a still recognizable relationship to them. Neither should the distinction depend on whether the state has acted commercially. Commercial activities of states are not different in their nature from other non-sovereign state activities."

Even cases based upon the plain absolute rule might involve similar problems: cf. Juan Ysmael & Co. Inc. v. Government of the Republic of Indonesia [1955] A.C. 72, United States of America and Republic of France v. Dollfus Mieg et Cie. S.A. and Bank of England [1952] A.C. 582. Under the "restrictive" theory the court has first to characterise the activity into which the defendant state has entered. Having done this, and (assumedly) found it to be of a commercial, or private law, character, it may take the view that contractual breaches, or torts, prima facie fall within the same sphere of activity. It should then be for the defendant state to make a case (cf. Juan Ysmael) that the act complained of is outside that sphere, and within that of sovereign action.

I have so far discussed this matter upon such English decisions as are relevant, and upon principle. But since, in this area, English courts are applying, or at least acting so far as possible in accordance with, international law, it is necessary to see what assistance can be gained. If the determination of the character of the relevant act has to be made by municipal courts, they should do so, so far as possible, in conformity with accepted international standards. For this purpose we are entitled to consider judgments of foreign courts of authority, and writings of reputed publicists. We have been invited also to consider affidavits of a number of eminent professors, filed on either side. As to these I must strike a note of caution. In so far as they express opinions as to how the present case should or would be decided in the courts of their country, the reservation must be made that these opinions are based upon a statement of facts which is controversial and in some respect incomplete. They had not the benefit of the much more detailed and complete examination made by the trial judge, upon which our decision must be based. Leaving this aside, I have, myself, derived much assistance from the reasoning and learning contained in these affidavits and for the explanations which their deponents give of decisions of their courts, direct resort to which may be hazardous.

As regards the United States, I have already mentioned the Tate letter which in 1952, after reviewing the contemporary state of international law, announced the movement of the State Department towards, and encouraged the courts to adoption of, the "restrictive" theory of state immunity. Two subsequent cases are of importance. In Victory Transport Inc. v. Comisaria General de Abastecimientos y Transportes (1964) 336 F. 2d 354 the Second Circuit Court of Appeals was concerned with an in personam action against a department of the Spanish government under a charterparty. The court held that the chartering of the ship for the supply of wheat to the people of Spain was not a strictly public or political act: it partook far more of the character of a private commercial act. The judgment drew attention at p. 360 to the difficulty of differentiating between a sovereign's private and public acts, whether according to the nature, or to the purpose of the transaction.

"The conceptual difficulties involved in formulating a satisfactory method of differentiating between acts jure imperii and acts jure gestionis have led many commentators to declare that the distinction is unworkable ... The purpose of the restrictive theory of sovereign

immunity is to try to accommodate the interest of individuals doing business with foreign governments in having their legal rights determined by the courts, with the interest of foreign governments in being free to perform certain political acts without undergoing the embarrassment or hindrance of defending the propriety of such acts before foreign courts."

The judgment then listed certain criteria which I do not reproduce because they are stated (in conformity with United States constitutional doctrine) to be subject to directions given by the State Department. This formula is not suitable for use by our courts.

The second case is that of Alfred Dunhill of London Inc. v. Republic of Cuba (1976) 425 U.S. 682, a case on the United States doctrine of act of state.

The majority of the Supreme Court (five Justices) held that no act of state had occurred. Within this majority four justices in a separate part of the opinion at pp. 698-699 expressed the opinion that the concept of act of state should not be extended to include the repudiation of a purely commercial obligation owed by a foreign sovereign:

"Repudiation of a commercial debt cannot, consistent with this restrictive approach to sovereign immunity, be treated as an act of state; for if it were, foreign governments, by merely repudiating the debt before or after its adjudication, would enjoy an immunity which our government would not extend them under prevailing sovereign immunity principles in this country. This would undermine the policy supporting the restrictive view of immunity, which is to asssure those engaging in commercial transactions with foreign sovereignties that their rights will be determined in the courts whenever possible."

The scope of this pronouncement may be seen from references made to previous Supreme Court decisions. In Bank of the United States v. Planters' Bank of Georgia (1824) 9 Wheat. 904, 907 Marshall C.J. said:

"It is, we think, a sound principle, that when a government becomes a partner in any trading company, it divests itself, so far as concerns the transactions of that company, of its sovereign character, and takes that of a private citizen."

And in Ohio v. Helvering (1934) 292 U.S. 360, 369 the court said:

"When a state enters the market place seeking customers it divests itself of its quasi sovereignty pro tanto, and takes on the character of a trader" (my emphasis in each case).

We are entitled to be impressed by this reasoning, which, while denying immunity to breaches of commercial agreements, even though for governmental reasons, seems to recognise the legitimacy of inquiring whether the act in question is within the area of commercial activity into which the state has descended.

As regards other countries, in particular the Federal Republic of Germany and Italy, both of which accept the "restrictive" theory, I

need not comment on individual cases. I have already referred to The Empire of Iran case, 45 I.L.R. 57, the judgment of which contains an instructive review of the law of state immunity over a wide area. I accept that there is support in them for the proposition that the existence of a governmental purpose or motive will not convert what would otherwise be an act jure gestionis, or an act of private law, into one done jure imperii, but beyond this proposition (which is not decisive here) they do not give direct guidance upon the questions we have to consider.

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

Application to the facts

(a) Playa Larga. She was at all material times owned by the Republic of Cuba, operated by Mambisa, and chartered by Mambisa to Cubazucar under a charter probably governed by Cuban law. The appellants claim that the Republic of Cuba was contractually liable to the cargo owners under the bills of lading, signed by the master on behalf of "the owner of the above-mentioned ship." I venture the opinion that this is far from clear. The bills of lading appear to be governed by the law of Cuba, and in view of the presence of a similar provision in the bills of lading issued from Marble Islands, in which the word "owner" seems certainly to refer to Mambisa, I cannot regard this as more than an assertion yet to be proved. The appellants also claim that the Republic of Cuba, as owner of Playa Larga, is liable to Iansa (or its sub-purchasers) for detinue or conversion of the sugar, first by refusing to deliver it at Valparaiso, secondly, by refusing to deliver it at Callao, and thirdly, by selling it in Cuba. There are no doubt possible defences to each of these claims. but these will have to be adjudicated upon if the action proceeds. At the present stage it is sufficient that there is a basis for a claim in personam against the Republic of Cuba.

Whether the Republic of Cuba can claim immunity depends, if I am right as to the law, upon an examination of those acts in respect of which the claim is asserted. The appellants are certainly able to show, as a starting point, that this vessel was engaged in trade with the consent, if not with the active participation, of the Republic of Cuba. They were "doing business with a foreign government," to use the Victory Transport, 336 F. 2d 354, 360 formulation. The question is whether the acts which gave rise to an alleged cause of action were done in the context of the trading relationship, or were done by the government of the Republic of Cuba acting wholly outside the trading relationship and in exercise of the power of the state. That this is not an easy question to answer is shown by the difference of judicial view, Robert Goff J.

and Waller L.J. holding that Cuba's acts were governmental, Lord Denning M.R. that they were not. In my opinion it must be answered on a broad view of the facts as a whole and not upon narrow issues as to Cuba's possible contractual liability. I do not think that there is any doubt that the decision not to complete unloading at Valparaiso, or to discharge at Callao, was a political decision taken by the government of the Republic of Cuba for political and non-commercial reasons. I need not restate the history of events between September 11-20, 1973, which is very fully and clearly given by the learned judge. The change of government in Chile, and the events at Santiago in which the Cuban Embassy was involved, provoked a determination on the part of the government of Cuba to break off and discontinue trading relations with Chile. There may also have been concern for the safety of Playa Largaat Valparaiso. I do not think that, for present purposes, the judge's finding can be improved upon [1978] Q.B. 500, 509:

"The Ministry of Merchant Marine and Ports became concerned about the safety of the Playa Larga, which was then discharging her cargo at Valparaiso; a decision was taken that for her safety she should leave Chilean waters, and this decision was communicated to Mambisa. There was no evidence of any prior communication with the vessel about the state of affairs at Valparaiso or at all, before this decision was taken. The ship's log, which was verified by the master on affidavit, recorded that at 16.30 hours [September 11, 1973] the ship received a cable from Mambisa ordering the ship to proceed with her exit from Valparaiso."

Does this call for characterisation of the act of the Republic of Cuba in withdrawing Playa Larga and denying the cargo to its purchasers as done "jure imperii"? In my opinion it does not. Everything done by the Republic of Cuba in relation to Playa Larga could have been done, and, so far as evidence goes, was done, as owners of the ship: it had not exercised, and had no need to exercise, sovereign powers. It acted, as any owner of the ship would act, through Mambisa, the managing operators. It invoked no governmental authority. I have not overlooked Law No. 1256 which recited in vivid terms the (no doubt governmental) reaction of Cuba to the events in Chile - a law enacted on September 27, 1973, (and so subsequent to the decisive acts concerning the Playa Larga) though retrospective to September 11, 1973. But it seems to me clear that it was not this law - mainly a "freezing" or "blocking" enactment - which brought about, or had any effect upon action taken by Playa Larga prior to the ultimate sale of the cargo: that action was caused by instructions issued by the Cuban government as owner to Mambisa as operator of the vessel.

It may well be that those instructions would not have been issued, as they were, if the owner of Playa Larga had been anyone but a state: it is almost certainly the case that there was no commercial reason for the decision. But these consequences follow inevitably from the entry of states into the trading field. If immunity were to be granted the moment that any decision taken by the trading state were shown to be not commercially,

but politically, inspired, the "restrictive" theory would almost cease to have any content and trading relations as to state-owned ships would become impossible. It is precisely to protect private traders against politically inspired breaches, or wrongs, that the restrictive theory allows states to be brought before a municipal court. It may be too stark to say of a state "once a trader always a trader": but, in order to withdraw its action from the sphere of acts done jure gestionis, a state must be able to point to some act clearly done jure imperii. Though, with much hesitation, I feel obliged to differ on this issue from the conclusion of the learned judge, I respectfully think that he well put this ultimate test [1978] Q.B. 500, 528:

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

As to the Playa Larga, therefore, I find myself in agreement with Lord Denning M.R. and would allow the appeal.

(b) Marble Islands. The facts regarding this ship are more complicated. Initially, and until after her departure from Callao, where her master refused to discharge the cargo, she was owned by Blue Seas Shipping Co. Ltd., a Liechtenstein corporation, and flew the Somali flag. She was chartered on a demise charter to Mambisa, and Mambisa had sub-chartered her to another Cuban state enterprise on behalf of Cubazucar. Bills of lading were issued in respect of the shipment of sugar signed by the master. These contained the provision:

"This contract of carriage is entered into between the shipper designated above and the owner of the above-named ship. The carrying vessel and her owner are referred to in this bill of lading as the carrier."

Since Mambisa was in possession of the ship as demise charterer it is, as the judge found, highly unlikely that the master had the authority of the Liechtenstein owners to sign the bills of lading on their behalf so that the contract probably took effect as a contract with Mambisa as disponent owners. At all events, the Republic of Cuba had no concern with, interest in, or responsibility for the cargo or for the operation of the ship or for the actions of the master or the crew. It was, of course, in a position to control the acts of Mambisa, but the commercial venture was exclusively that of Mambisa. The cargo owners did not do any business with a sovereign state.

After Marble Islands had left Balbao, Panama, for North Vietnam she was purchased on October 13, 1973, by the Republic of Cuba. There is no evidence as to the reason for this: it may have had to do with the desirability of entering North Vietnam with a Cuban flag. There is equally no evidence as to the subsistence, after the sale, or otherwise, of the demise charter. Mr. Davenport Q.C., for the Republic of Cuba, did not seek to rely upon its continuance in existence. However, I can find no basis on which it can be said that the cargo owners entered into any business relationship with the Republic of Cuba. There can he no

doubt, as subsequent events showed, that Marble Islands continued to be operated by Mambisa, and though the ownership of Marble Islands by the Republic of Cuba is a factor to be considered, what is decisive on the question of immunity is what the Republic of Cuba did as regards the cargo when the ship arrived at Haiphong. There is a good deal of evidence as to this.

1. (a) Dr. Carlos Amat Fores, a high official in the Ministry of External Relations of the Republic of Cuba states, on oath, that the donation and delivery for the people of North Vietnam of 10,800 tons of sugar discharged in Haiphong by Marble Islands was carried out in accordance with the express instructions issued in this matter by the government of Cuba in compliance with Law No. 1256. [As I have stated above, this law was enacted on September 27, 1973, and provided for the freezing and blocking of Chilean assets.]

(b) Dr. Balmaseda Remedios, in September 1973 senior legal adviser of the Cuban Ministry of Merchant Marine, refers to the enactment of Law No. 1256, which made it illegal for Marble Islands to deliver the cargo to Chile. Orders were therefore given to Mambisa to proceed first to Balbao (Panama) and later to Haiphong.

"The decision was taken at a very high level in the government of Cuba that her cargo should be given to the people of Vietnam ... and I was directed to proceed to Haiphong to supervise this operation."

He went to Haiphong early in November 1973. The cargo was then discharged and deposited in a warehouse of Agroexport (a Vietnamese undertaking) - the discharge and deposit being presumbly acts of Mambisa. By a sale contract dated November 22, 1973, the master of Marble Islands, on behalf of Mambisa, sold the cargo to Alimport, a Cuban state undertaking concerned with food importing. Alimport lodged the proceeds of sale with the National Bank of Cuba under Law No. 1256. "Upon completion of these formalities the sugar itself was given to the people of Vietnam by Alimport."

2. As regards Mambisa.

(a) On November 6, 1973, the captain of Marble Islands requested the port commander to unload the cargo of sugar and deposit it with "Agro-export" (see above). He confirmed that this deposit was made by him as representative of the transporting company and under clauses 2 and 8 of the bills of lading.

(b) Also on November 6, 1973, the captain signed an "act of protest" at Haiphong. This narrated the course of the voyage of Marble Islandsfrom Cuba, via Callao, and Balbao, to Haiphong. It stated his intention, for the good of the cargo, to deposit it and subsequently to sell it at Haiphong and his entitlement to do so under the bills of lading and the Commercial Code. It then reserved his claim for expenses due to his shipowner.

(c) On November 2, 1973, the captain "acting in the name and in representation of his shipowner, Empresa Navegacion Mambisa, operator in the name of the Cuban state of [ Marble Islands ]" and on behalf of

whoever might prove to be the legitimate owners of the sugar by a sales contract sold the deposited sugar to Alimport. In clause 5 he confirmed that he was making the sale in the name of whoever should prove to be the legitimate owner of the said goods in his capacity of legal representative of the transporting company, Mambisa, in accordance with the provisions of the Cuban Commercial Code, and clauses 2 and 8 of the bill of lading.

These are all the material documents. The result of them, and of the evidence of the Cuban officials is clear. All the operations of carriage, deposit and sale of the cargo were made by Mambisa. These, as the references to the bills of lading and to the Commercial Code make clear, were carried out (legally or illegally) as trading operations governed by contract and by private law.

The Republic of Cuba never entered into these operations. The captain did not purport to act on its behalf (references to his shipowner are clearly references to Mambisa). It was never in trading relations with the cargo owners. Its actions were confined to directing transfer of the sugar to North Vietnam, and to the enactment of Law No. 1256. All of this was done in a governmental capacity: any attack upon its actions must call in question its acts as a sovereign state.

Lord Denning M.R. dealt with the case of Marble Islands briefly in these words [1980] 1 Lloyd's Rep. 23, 31:

"In the case of Marble Islands the origin of all that happened was a simple commercial transaction by which one of the state organisations of Cuba agreed to carry sugar to Chile and deliver it to the Chilean importers. The Cuban government induced its state organisation to repudiate that contract and ordered it to carry the sugar to North Vietnam."

However, the commercial transaction was not that of the Cuban state, but of an independent state organisation. The status of these organisations is familiar in our courts, and it has never been held that the relevant state is in law answerable for their actions. He continues, at p. 31:

"The Cuban government then bought the vessel and, by its conduct, adopted the repudiation as its own. It continued the repudiative act and went on to carry the sugar to North Vietnam and handed it to the people there. The nature of the transaction was again the repudiation of a purely commercial obligation. Its purpose was two-fold - to show its hostility to Chile and to help the people of Vietnam. But the purpose does not matter. The act by its very nature was an act of repudiating a binding commercial obligation. Such an act does not give rise to sovereign immunity."

I regret that I cannot accompany this reasoning. Assuming that the actions of Mambisa amounted to a repudiation of contract, the action of the state - ex hypothesi, and in fact, not involved in any trading relationship - in ordering that repudiation cannot, with respect, amount to a repudiation by the state, or the distinction between jure imperii and jure gestionis would simply disappear. I cannot agree that there was ever any purely commercial obligation upon the Republic of Cuba or any binding commercial obligation: the republic never assumed any such obligation;

it never entered the trading area; the cargo owners never entered into a commercial relation with it. I agree that the purpose, above, is not decisive but it may throw some light upon the nature of what was done. The acts of the Republic of Cuba were and remained in their nature purely governmental. The fact is, that if any wrong (contractually or delictually) was done as regards the cargo it was done by Mambisa. Indeed (see above) the initial proceedings (1975 Folio No. 544) were started on this basis. Unfortunately, Mambisa turned out not to be the owners of I Congreso, so a fresh action (1975 Folio No. 644) had to be brought against the Republic of Cuba, who were the owners of that ship. But in my opinion, in agreement with the learned judge, the acts complained of as regards the Republic of Cuba were acts jure imperii and so covered by immunity. I would dismiss the Marble Islands appeal.

There are two other points which require some brief attention.

1. It may be a question in some cases where it is claimed that a "restrictive" doctrine of immunity should be applied - i.e. that jurisdiction should be asserted against a sovereign state - whether it is necessary to show some territorial connection of the claim with the state of the forum. In my opinion this does not arise in this case since (i) I Congreso is within the jurisdiction (or was until released), (ii) the claim is in respect of Playa Larga and Marble Islands, an Admiralty claim as to which territoriality is not a requirement for jurisdiction, (iii) in view of section 3 (8) of the Administration of Justice Act 1956. However, if any case of a different character should arise, and which is not covered by the State Immunity Act 1978, I should wish to regard this point as open.

2. It was argued by the respondents that even if the Republic of Cuba might appear to be entitled to plead the state immunity, it should be denied that right on various grounds: that its acts were contrary to international law, or to good faith, or were discriminatory, or penal. On the view which your Lordships take these arguments do not arise, but I would wish to express my agreement with the judge and with Waller L.J. as to their invalidity. The whole purpose of the doctrine of state immunity is to prevent such issues being canvassed in the courts of one state as to the acts of another.

LORD DIPLOCK. My Lords, the practical importance of these appeals as respects commercial transactions entered into by governments or departments of governments of foreign states is much diminished by the coming into force of the State Immunity Act 1978, after the occurrence of the events on which the appellants ("Iansa") base their claims against the government of Cuba. Since I agree with my noble and learned friend Lord Wilberforce that at the relevant time when I Congreso was arrested in 1975 the United Kingdom should be regarded as having ceased to be odd-man-out among nations by continuing to adhere to the theory of "absolute" state immunity, and since I agree broadly with his analysis of the "restrictive" theory that replaced it until the Act of 1978 came into force, I can be, perhaps uncharacteristically, brief even though I have the misfortune to differ from him upon the consequences of the application of the restrictive theory to the case of the Marble Islands.

The facts of the two cases are set out in considerable detail in the judgment of Robert Goff J. To Lord Wilberforce's summary of them, which I gratefully adopt, I would make five additions.

1. The charterparties between Mambisa and Cubazucar as charterers under which the cargoes were shipped on Playa Larga and Marble Islandseach contained a cesser clause: the charterers' liability except as regards charter rate freight, deadfreight and demurrage, was to cease on the master's signing bills of lading. So a direct contractual relationship was created between the "owner" of the vessel on whose behalf the master signed and Iansa as consignee.

2. In the charterparty relating to the voyage of Playa Larga, although Mambisa was described as "owner," the evidence discloses that Mambisa was not in Cuban law the owner of the Playa Larga but fulfilled the role of managing operator of the ship on behalf of the true owner, the Cuban government itself - a type of arrangement that is by no means unknown in ordinary non-governmental maritime trade. So once the bills of lading had been signed by the master and negotiated to Iansa, there came into existence as respects the cargo laden on Playa Larga an ordinary commercial contract for the carriage of goods by sea between the government of Cuba as carrier and Iansa as consignee.

3. At the time the charterparty for Marble Islands was entered into between Mambisa and Cubazucar, the owner of the vessel was a Liechtenstein company but Mambisa as demise charterers had possession and control of it. We know nothing about the terms of the demise charter but in the voyage charter of the vessel to Cubazucar Mambisa was described as "disponent owner." Accordingly in signing bills of lading the master of Marble Islands would do so on behalf of Mambisa and not on behalf of either the Liechtenstein company or the Government of Cuba, which at that time had no interest in the vessel. So there was no contractual relationship between Iansa and the Government of Cuba covering the carriage of the consignment of sugar in Marble Islands.

4. The evidence about the purchase of Marble Islands from the Liechtenstein company by the Cuban government on October 13, 1973, and her transfer from the Somali to the Cuban register is scanty. It seems however to be incompatible with the general evidence filed by the respondents about the relationship both in fact and in Cuban law between Mambisa and the Cuban government that the demise charter should have survived the change in ownership. So the position which I think must be accepted by your Lordships at this stage of the proceedings is that upon October 13, 1973, while Marble Islands was on the high seas the Cuban government acquired the ownership and (through their agent Mambisa) possession and control of a trading vessel that was carrying a cargo of sugar which was still the subject of an existing contract between Mambisa and Iansa for Mambisa to carry it to Valparaiso. But any civil liability to Iansa of the Cuban government itself must be based upon events occurring after that date. So Iansa cannot rely, as it can in the case of Playa Larga, upon the refusal by Mambisa to discharge the cargo on Marble Islands at Callao on September 15, 1973 - a refusal which it claims to have been wrongful

under the terms of the contract evidenced by the bills of lading in respect of the consignments on each vessel.

5. Lastly, I attach considerable significance to the elaborate legal machinery that was adopted to discharge and dispose of the cargo of Marble Islands at Haiphong. Permission to discharge the sugar at Haiphong was apparently required from the port commander. It was applied for on November 6, 1973, by the master as representative not of the owners of the cargo but of the carriers, Mambisa, and was expressed to be in exercise of the carriers' contractual rights under clauses 2 and 8 of the bills of lading. On the same date the master executed an act of protest in which he asserted that Marble Islands had been prevented from performing the contract voyage to Valparaiso because of danger at Chilean ports. He went on to state that the cargo had been damaged by sea-water and was in danger of deteriorating if it remained on board and that in these circumstances he intended to deposit it in Haiphong and sell it there. Paragraph 6 read as follows:

"That these deposit and sales procedures will be undertaken within the framework of the facilities which he holds, shown in the bills of lading covering the said merchandise, particularly in its second and eighth clauses as well as in accordance with the provisions of the Commercial Code in force in Cuba, with none of which the legal provisions in force in the Democratic Republic of Vietnam are in conflict."

The right asserted by the master to discharge and sell the perishable cargo in Haiphong is thus fairly and squarely based on private law (jus gestionis), the contractual terms contained in the bills of lading and the Commercial Code in force in Cuba. There is no suggestion that the cargo had been requisitioned by the Cuban government jure imperii nor is there any mention of the Law No. 1256 of September 27, 1973 ("the freezing law") which froze all property and assets "located in Cuban territory" belonging to juridical persons such as Iansa in which the Chilean state owned an interest. Since the cargo on Marble Islands was then located not in Cuban territory but in the territory of Vietnam the words of the freezing law that I have quoted may account for the fact that no reliance was placed at that time upon any jus imperii.

The discharge of the cargo at Haiphong was followed on November 22, 1973, by its sale by the master (describing himself as acting on behalf of Mambisa) to another Cuban enterprise Alimport at a price stated to be the spot price in Cuban currency according to world market quotation. The agreement provided that the price was to be paid in Havana, Cuba to an account at the National Bank of Cuba in favour of "Iansa or whoever should prove to be the legitimate owner of the said sugar." Once credited to that account the sale price would, no doubt, be blocked under the freezing law; but the actual contract of sale contained no reference to the freezing law. It was stated to be made by the master in his capacity as legal representative of the transporting company, Mambisa, "in accordance with the provisions of the Commercial Code in force in Cuba and the second and eighth clauses of the bill of lading covering this consignment." So all that was done in Haiphong in November to Iansa's sugar laden on

Marble Islands was done upon the instructions of the Cuban government in purported reliance upon Mambisa's rights in private law (jus gestionis) and not upon any jus imperii of the Cuban state itself. It was only after the property in the sugar had been purportedly transferred to Alimport under the terms of the sale contract by delivery of the warehouse warrants that the sugar was then handed over by Alimport as a gift by the state of Cuba to the government of Vietnam.

My Lords, counsel for the Cuban government has invited your Lordships to treat the form that these transactions took as devoid of legal significance and to regard them as mere "formalities" recorded for internal accounting purposes of the government. For my part I see no basis in the evidence for doing this or for treating them as a mere charade - a word which counsel hesitated to use. I think that your Lordships are justified in holding that this evidence is sufficient to sustain an arguable case that Mambisa, at any rate, was treating the contract of carriage evidenced by the bill of lading as still subsisting between October 13 and November 22, 1973, and was relying upon that contract as authorising the deviation to Haiphong and the discharge and sale of the cargo there. Your Lordships at this stage of the proceedings are in no way concerned whether or not such reliance was justified under whatever may turn out to be the proper law of the contract of carriage.

So the legal position of the Cuban government after October 13, 1973, was that it had then acquired the ownership of a trading vessel Marble Islands then in mid-Pacific engaged in carrying cargo belonging to Iansa upon a voyage which the master claimed was authorised by a power to deviate contained in the bill of lading under which the cargo had been shipped. Mambisa from being demise charterer of Marble Islands had become managing operator of the vessel on behalf of the Cuban government, and legal possession of the cargo laden on her passed from Mambisa as former disponent owner to the Cuban government itself which in terms of English law became the "bailee" of Iansa's sugar. Thereafter, as the evidence discloses, everything that was done by the master was done on the express directions of the Cuban government; the Director and Senior Legal Adviser of the Ministry of Merchant Marine and Ports being sent to Haiphong in November to supervise what the master did there and the legal form and nature of the steps he took.

My Lords, the events principally complained of in relation to the cargo laden on Marble Islands after she passed into the ownership of the Cuban government took place in Haiphong. There is no evidence before this House as to the law of delict or civil wrongs in Vietnam, so your Lordships for present purposes must proceed on the assumption that it is the same as the English law of tort - an assumption that may be less improbable in relation to the international carriage of goods by sea than in some other fields of private law.

Unless the master's assertions in the documents that the discharge and sale of the cargo was authorised by the bills of lading was right in law, the facts to which I have particularly referred would disclose in English law a prima facie case of conversion of the cargo by the Cuban government as bailee when the master sold and delivered it to Alimport on the instructions

of the government in purported exercise of rights under private law. The relevant transaction, viz. the discharge and sale of the cargo to Alimport at Haiphong was, as it seems to me, deliberately treated by the Cuban government as being effected under private and not in the exercise of any sovereign powers.

For these reasons I for my part would allow the appeal in the case of the Marble Islands as well as in the case of the Playa Larga

LORD EDMUND-DAVIES. My Lords, your Lordships are at one that the appeal brought by the owners of the Playa Larga sugar cargo should be allowed and I propose to say nothing more about that appeal than that I respectfully concur. But your Lordships are unhappily divided as to the proper outcome of the appeal brought by the owners of the cargo carried by the vessel Marble Islands. Having studied with great advantage drafts of the speeches prepared by my noble and learned friends, Lord Wilberforce and Lord Diplock, I propose to indicate briefly why I have respectfully concluded that the former is correct in the reasoning which has led him to hold that the appeal in the case of Marble Islands should be dismissed.

I approach the application of the restricted doctrine of state immunity upon the following basic principles:

I. That enunciated in Victory Transport, 336 F. 2d 354, 360 that: "Sovereign immunity is a derogation from the normal exercise of jurisdiction by the courts and should be accorded only in clear cases."

II. That propounded in the Empire of Iran case, 45 I.L.R. 57, 80 that: "As a means for determining the distinction between acts jure imperii and jure gestionis one should rather refer to the nature of the state transaction or the resulting legal relationships, and not to the motive or purpose of the state activity. It thus depends on whether the foreign state has acted in exercise of its sovereign authority, that is in public law, or like a private person, that is in private law."

III. That, as was said in Ohio v. Helvering, 292 U.S. 360, 369: "When a state enters the market place seeking customers, it divests itself of its quasi sovereignty pro tanto, and takes on the character of a trader."

IV. That, while it is common ground that, even before the State Immunity Act 1978, the doctrine of state immunity had become restricted, it emphatically has not been rendered obsolete. Any such idea as, "once a trader, always a trader" can lead into error, for, to quote my noble and learned friend, Lord Wilberforce, ante p. 263C-D: "If a trader is always a trader, a state nevertheless remains a state and is capable at any time of acts of sovereignty ... The 'restrictive' theory does not ... deny [this] capability."

My Lords, I can see no scope for the "trader" theory in relation to the Marble Islands claim (1975 Folio 644), the factual basis of which others of your Lordships have set out. It was brought by the owners of the sugar cargo aboard Marble Islands, and was originally instituted against Mambisa on the basis that they owned the I Congreso del Partido,and secondly (when the error was exposed) against the Republic of Cuba when it was discovered that they owned the vessel. The plaintiffs'

claim was "in respect of a consignment of sugar carried on board the 'Marble Islands' ... and is for the return of the said consignment or its value and damages for its detention, alternatively damages for the wrongful conversion thereof, and/or for damages for breach of duty with respect thereto." When the Marble Islands cargo left Cuba for Valparaiso, Chile, that vessel was owned by a Liechtenstein corporation, held by Mambisa under a demise charter and sub-chartered to Cubazucar. Following the Chilean coup d'état of September 11, 1973, the Republic of Cuba took it upon itself to order its master not to proceed to Valparaiso, Chile, its designated destination, but to change course northwards and link up with the Playa Larga. This was done, and both vessels reached Callao, Peru, on September 15. There the Cuban Ambassador ordered both vessels not to discharge their cargoes, and this against the request for discharge made by the Chilean Ambassador, whose government had already bought and paid for both cargoes. On September 20, Playa Larga left Callao and returned to Cuba, and on September 27 (the day when Cuban Law No. 1256, with its retrospective provision to September 11, was enacted), Marble Islands set out for Haiphong, North Vietnam. It was only during that voyage that on October 13 the Republic of Cuba acquired ownership of Marble Islands. It reached Haiphong on or about November 6, where its cargo was unloaded at the master's request and was subsequently sold to Alimport (a Cuban state enterprise) which in its turn seemingly donated the sugar to the North Vietnamese people.

In the words of Lord Denning M.R. [1980] 1 Lloyd's Rep. 23, 28, "The Cuban government ... clearly converted the sugar when she reached Haiphong on November 6, 1973. They unloaded it and presented it to the people of Haiphong as a gift." Hence the claim instituted by the cargo owners, a claim which (unlike that advanced by the owners of the Playa Larga cargo) did not sound in contract at all. This was clearly right, for there never was any contractual relationship between the parties to the action. The question that arises is: was there between those parties at any time any commercial relationship falling within the ambit of the restricted doctrine of sovereign immunity and now preventing the Republic of Cuba from relying on it?

My Lords, if in these circumstances it be held that the Republic of Cuba cannot rely on state immunity, I find it impossible to imagine circumstances where the doctrine can operate. Whether or not I find the conclusion palatable is neither here nor there, but in my judgment the plea is clearly one which should be upheld. I therefore concur with my noble and learned friend, Lord Wilberforce, in holding that the Marble Islands appeal should be dismissed.

LORD KEITH OF KINKEL. My Lords, I have had the benefit of reading in draft the speeches of my noble and learned friends, Lord Wilberforce and Lord Diplock. I find myself in full agreement with the opinion expressed by my noble and learned friend, Lord Wilberforce, regarding the principles which at the material time represented the law of England in the field of sovereign immunity. I am also in agreement

with him as to the result which must follow from the proper application of these principles to the actions of the Cuban government in relation to the cargo laden aboard the Playa Larga.

As regards the cargo laden aboard the Marble Islands, on the other hand, I agree with the analysis made by my noble and learned friend, Lord Diplock, of the relationship which existed between Iansa and the Cuban government following the latter's acquisition of the vessel on October 13, 1973. I also agree that, for the reasons which he gives, the actions of the master of the Marble Islands in connection with the discharge and sale of the cargo at Haiphong, carried out on the instructions of the Cuban government and under the supervision of its representatives, are properly to be regarded as having been done under private law and not as an exercise of sovereign powers. The Cuban government did not profess to be exercising any such powers. The transactions which it instructed were presented as being authorised by the terms of the bills of lading and the Cuban Commercial Code. It follows that I would repel the plea of sovereign immunity in respect of the Marble Islands cargo.

My Lords, I would accordingly allow the appeal in both cases.

LORD BRIDGE OF HARWICH. My Lords, this is the first time the courts of this country have had to decide, applying the "restrictive" doctrine of sovereign immunity, how the boundary is to be drawn in international law between the acts of a sovereign state that are still entitled to immunity and those that are not. Happily it is probably also the last, since the matter is now governed by the State Immunity Act 1978. The restrictive doctrine itself is a novelty in English law, having been so recently accepted as supplanting absolute immunity. But it is not only on account of its novelty that the problem of attempting to delimit the scope of the doctrine presents such difficulty for English judges. This difficulty has been very generally felt by the judges of many countries and nowhere satisfactorily resolved.

I would not possibly hope to emulate, let alone improve upon, the penetrating analysis of the relevant principles, derived from the welter of material put before us, which is set out in the speech of my noble and learned friend, Lord Wilberforce, and with which I broadly agree. But I venture, with diffidence, to add a footnote to it. It does seem to me that two propositions can be derived from the relevant authorities which may often, and do in this case, provide a useful guide in deciding whether or not a claim to sovereign immunity can be sustained. First, if a sovereign state voluntarily assumes a purely private law obligation, it cannot, when that obligation is sought to be enforced against it, claim sovereign immunity on the ground that the reason for assuming the obligation was of a sovereign or governmental character. Example: State A orders uniforms for its army from a supplier in State B; when sued for the price in the courts of State B, State A cannot claim immunity on the ground that the maintenance of its army is a sovereign function. This is really elementary. But it leads on logically to the second proposition that, having assumed a purely private law obligation, a sovereign state cannot justify a breach of the obligation on the ground

that the reason for the breach was of a sovereign or governmental character. Example: State A, having ordered uniforms for its army from a supplier in State B, repudiates the contract; when sued in the courts of State B for damages, State A cannot claim immunity on the ground that, since the placing of the contract, a government of a new political complexion has made a sovereign decision, pursuant to a policy of total disarmament, to disband its army.

Since your Lordships are all agreed that the appeal in the case of the Playa Larga should be allowed, I need do no more than record my assent to that view.

With regard to the appeal in the case of the Marble Islands, I have had the advantage of reading all your Lordships' speeches in advance. Your Lordships appear to be radically divided rather upon the interpretation of the evidence and the significance of the particular facts than upon any question of legal principle. This is the more unfortunate since a decision has to be reached at this stage when the evidence, all by affidavit, is manifestly incomplete. My own view of the facts and their significance accords with that expressed in the speech of my noble and learned friend, Lord Diplock. In my opinion, two considerations are decisive. First, when the Republic of Cuba acquired ownership of the Marble Islands in mid-Pacific, it not being suggested that the demise charter continued, the evidence in the affidavits filed on behalf of the respondents justifies the inference that the relationship between the republic and its creature Mambisa, in respect of all state-owned ships, was such that the republic took legal possession of the Marble Islandsthrough Mambisa as its agent. There is no suggestion that the acquisition of the Marble Islands was itself a sovereign act. Taking possession of the vessel, the republic also took possession of the cargo which the vessel was carrying, thereby, in English law, assuming towards the cargo owners the obligations of bailee to bailor. Bailment may be a concept peculiar to English law. But I cannot suppose that any civilised system of law would not recognise that an international carrier of goods acquiring a laden vessel in mid-voyage from another incurs private law obligations to the cargo owners. Secondly, as Lord Diplock has demonstrated in detail, all the contemporary documents relating to the disposal of the cargo at Haiphong show that it was effected in purported exercise of private law rights. It follows from these two considerations, in my view, that, assuming a conversion of the cargo by the Republic of Cuba (an assumption necessarily to be made at this stage), this was a breach of a private law obligation previously assumed when the Marble Islandswas acquired. Hence, immunity cannot be claimed in respect of it on the ground that the reasons for the disposal of the cargo were of a sovereign and governmental character.

Accordingly, I would allow the appeals in both cases.

Solicitors: Bischoff & Co.; Coward Chance.

F. C.