restrictive immunity international law case of trend tax trading co vs bank of nigeria and philippine admrial case

1. 1.STATE IMMUNITY UNDER COMMON LAW :
2.Restrictive Immunity
3.Overview
At common law the application of the rule of state immunity is now well defined.
Initially, it was the absolute theory, however, through judicial decisions Commonwealth
countries have moved on to adopt a modified version of the concept of state immunity
known as the restrictive theory.
4.Absolute Theory
Absolute state immunity is an established rule of international law. It gives the states and
its agencies total immunity on the condition that they did not have a separate personality
from their governments.The absolute rule was increasingly perceived as anomalous of
government participation in business matters and it was difficult for the courts to move
away from it because of the binding force of earlier decisions of the House of Lords.
The first move by the courts to expand the absolute rule occurred in relation to actions in
rem. This was discussed in the Philippine Admiral case. Later, in Trendtex Trading Co. v
Central Bank of Nigeria the principle was developed a step further. In that case,
Stephenson and Shaw LJJ, were both mindful about the undesirability of extending
immunity too far.
5.Wallem Shipping (Hong Kong) Ltd. and Telfair Shipping Corporation
v. Owners of the Ship “Philippine Admiral” (“The Philippine Admiral”)
[1976] 1 Lloyd’s Rep. 234
The influential case of the ‘PHILIPPINE ADMIRAL’ is useful in placing HUA TIAN
LONG in its shipping and historical context. The case was decided by the Judicial
Committee of the Privy Council on appeal from the Supreme Court of Hong Kong. The
case concerned a ship, the ‘PHILIPPINE ADMIRAL’, which had been granted to the
Liberation Steamship Co. Inc. under a treaty of 1956 where Japan undertook to pay
reparations to the Republic of the Philippines for damage which was done during the
Second World War. The ship was granted as a part of the reparations which were made
up mostly of capital goods and services. To administer the reparations scheme, a
Reparations Commission was established to ensure that the reparations were used to
benefit the Filipino people and to ensure that no goods supplied to private enterprises
would be leased, sold or disposed of in any way other than to Filipino citizens who
would then continue to use the goods for their intended purpose. The Reparations
Commission retained title to the PHILIPPINE ADMIRAL until it had been fully paid
for. Liberation chartered the ship to Telfair in 1972, at this time the ship was being

2. repaired in Hong Kong by Wallem. Liberation and Telfair disagreed over who should
pay for the repairs and Telfair claimed in rem against Liberation for damages for breach
of the charter party. Wallem claimed in rem for the necessary disbursement while the
ship was being repaired.
The Reparation Commission became concerned that its interests were in danger and
passed a resolution to repossession of the PHILIPPINE ADMIRAL. It also applied to set
aside the writs in both actions and presented claims to sovereign immunity on behalf of
the Philippine Government.
It was held that:
i) in relation to a claim for immunity on the ground that a foreign sovereign has been
impleaded, there were no special rules applicable to ships;
ii) to support a claim for immunity in the case of a vessel, there must be such interest
(whether proprietary, possessory or other) that the claimant can fairly claim also the
exercise of dominion over the vessel
iii) on the evidence, the defendants’ right to possession was not illusory
iv) however immunity would not be granted in respect of vessels not destined for public
use
v) the evidence did not support the conclusion that the vessel was destined for public
use; and
vi) were it necessary to decide the point, there was no evidence which would justify an
inference that the defendants had waived any immunity they might have had.
The key points were iv and v and in particular the statement by Higgins J. that ‘the
vessel is a trading vessel and has been used as such for years. It seems to me that
something more was required to justify the claim to immunity than a mere possibility
that she might hereafter be used for public purposes… although she was repossessed for
the protection of the Government’s interests; the overwhelming balance of probability is
that she will be used for trading.
6.Trendtex Trading Corporation v Central Bank of Nigeria [1977] 2
WLR 356
This case involved the Central Bank of Nigeria which had been incorporated in 1958 by
Nigerian Statute as a central bank modeled on the Bank of England. It’s role was to issue
legal tender and to act as banker and financial adviser to the Government of Nigeria. It’s
affairs were under considerable Governmental control.
In 1975, the Central Bank issued an irrevocable letter of credit for over $14,000,000 in
favour of the Plaintiff, a Swiss company, to pay for 240,000 tons of cement which the
plaintiff had sold to an English Company. The cement was to be shipped to Nigeria
where it was meant to be used to build government barracks. The cement was shipped to
Nigeria but there was congestion in the port of discharge and the Central Bank declined
to pay for the price of the cement and demurrage.
The Swiss company claimed against the Central Bank for payments due in respect of the

3. bank’s breaches and repudiation of the latter of credit. The bank made an application to
set aside the writ and stay further proceedings in the action on the ground that the bank
was a department of the State of Nigeria and therefore immune from suit.
It was held, by Lord Denning, that:
i)The bank had been created as a separate legal entity with no clear expression of intent
that it should have governmental status. It was not an ‘emanation, arm, alter ego or
department’ of the State of Nigeria, therefore it was not entitled to immunity from suit.
ii) Even if the bank were part of the Government of Nigeria, by that time International
Law did not recognize immunity from suit for a government department in respect of
ordinary commercial transactions. Immunity from suit would only be recognized for acts
of a governmental nature.
7.Lord Denning judgement : "there is no immunity in respect of commercial
transaction, even for a government department.
The Phillippine Admiral and Trendtex Trading Corporation Ltd v Central Bank of
Nigeria. In the latter case, Lord Denning delivered an important judgement. In that case,
the Court of Appeal stated "restrictive immunity was now firmly established as a rule of
customary international law and it could therefore be incorporated into the common law
without need for Act of Parliament ..