In order for a separate entity distinct from the organs of government to claim immunity from the jurisdiction of the courts under section 14 of the State Immunity Act 1978, it was not enough that the separate entity should have acted on the directions of the state, its acts must possess the character of a governmental act.
The House of Lords (Lord Mustill and Lord Slynn dissenting in part) allowed in part an appeal by Kuwait Airways so that proceedings against Iraqi Airways should proceed in the Commercial Court but Kuwait Airways' proceedings against Iraq should be dismissed.
In August 1990 Iraq invaded Kuwait and proclaimed the integration of Kuwait into Iraq. The Iraqi minister responsible for civil aviation directed Iraqi Airways to fly 10 civil aircraft at Kuwait airport to Iraq. In September Kuwait Airways was dissolved and the aircraft were incorporated into Iraqi Airways' fleet and used for internal flights.
In January 1991 coalition forces launched a successful offensive against Iraqi forces in Kuwait. Four of the aircraft were partially or wholly destroyed in air raids. In January 1991 Kuwait Airways issued a writ against Iraqi Airways and Iraq claiming delivery up of the aircraft or damages. The writ was served on a Mr Isaac at Iraqi Airways' premises in London.
Pursuant to Order 11, rule 7 of the Rules of the Supreme Court documents for service on Iraq were lodged at the Central Office and sent to the Secretary of State for Foreign Affairs for service in accordance with the State Immunity Act 1978. The documents were sent to the Iraqi Embassy in London but were not forwarded to the Ministry of Foreign Affairs in Baghdad as requested.
Iraqi Airways and Iraq issued summonses to set aside service of the writ. Mr Justice Evans dismissed Iraqi Airways' summons but set aside service of the writ on Iraq. The Court of Appeal decided that Iraqi Airways was entitled to immunity under the 1978 Act.
Nicholas Chambers QC, Rosalyn Higgins QC and Joe Smouha (Clyde & Co) for Kuwait Airways; Michael Beloff QC, Richard Plender QC and Stephen Nathan QC (Landau & Scanlon) for Iraqi Airways and Iraq.
Lord Goff said that the first issue was whether the writ was effectively served on Iraqi Airways. Assuming Iraqi Airways was not an overseas company, nevertheless it was effectively served under Order 65, rule 3. In the case of a foreign body corporate carrying on business in this country, an employee of the body who was in this country and in charge of its business here fell within rule 3. The writ was effectively served on Iraqi Airways.
The second issue was whether it was effectively served on Iraq. The delivery of the writ by the Foreign and Commonwealth Office to the Iraqi Embassy was at best a request to the Iraqi Embassy to forward the writ to the Iraqi Ministry of Foreign Affairs. That was not done. It followed that the service of the writ on Iraq was never effective in accordance with section 12(1) of the 1978 Act.
The next issue was whether Iraqi Airways was entitled to immunity under section 14(2). To attract immunity, it was not enough that a separate entity of the state should have acted on the directions of the state. What was done must be something which possessed the character of a governmental act. In the absence of such character, the mere fact that the purpose of the act was to serve the purposes of the state would not be sufficient to enable the separate entity to claim immunity.
Iraqi Airways, in taking the aircraft, was acting in the exercise of sovereign authority. But thereafter it could not be said that its use of the aircraft constituted acts done in the exercise of sovereign authority.
The last issue, whether the issues which were not justiciable in the English courts, should be dealt with by the the commercial court judge when the matter was fully pleaded.
Lord Jauncey and Lord Nicholls agreed.
Lord Mustill and Lord Slynn dissented in part and would have upheld Iraqi Airways' claim to immunity in relation to the whole claim.