A. M. QURESHI vs UNION OF SOVIET SOCIALIST REPUBLICS AND ANOTHER

JUDGMENT '

KARAM ELAHEB CHAUHAN, J.--In May 1966, A. M. Qureshi (the plaintiffs) filed a suit against two defendants viz. (f) Union of Soviet Socialist Republic (defendant No. 1) and (ii) Trade Representation in Pakistan of the Union oI Soviet Socialist Republics (defendant No. 2) for recovery of Rs. 45,19,333, with interest pendente lite and future interest at the rate of 6 % per annum. The split up of this amount was that Rs. 33,17,333 were claimed "on accoun of commission on the jeeps and trucks, sold to the Government of Pakistan" A read R-s. 12,02,000 "on account of damages for breach of contract in respect of jeeps and spare parts agency".

2. The defendants, under protest, on 2.5-8-1966 filed an application under Order VII, rule I 1(d) and sections 86 and 87, C. P. C. (Act V of 1908 read with "General Principles of International Law" which reads follows :- "It is prayed on behalf of the Union of Soviet Socialist Republics and the USSR Trade Representation in Pakistan that this Hon'ble Court be pleased to reject the plaint filed in this case against them and summons ordered to be issued against them be cancelled., as the Union of Soviet Socialist Republics is a foreign sovereign State while the USSR Trade Representation is its organ and alt Integral part of the Embassy of USSR in Pakistan and possess immunity from being sued in Courts of Pakistan under the General International Law, as ,well as, under Order VII, rule 11(d) and sections 86-and 87 of the lCivil Procedure Code of Pakistan.

The present application is submitted under protest and without submitting to the jurisdiction of this Hon'ble Court and only for the purpose of presenting the plea that the Pakistani Courts have no jurisdiction to entertain the suit A certificate from the Ministry of Foreign Affairs, Government of Pakistan dated 17th August 1966, with an attested copy of the agree--ment between the Government of Pakistan and the Union of Soviet Socialist Republics are filed herewith.

An affidavit in support is also filed.

3. The certificate from the Ministry of Foreign Affairs, Islamabad. Dated 17-8-1966, to which reference was made in the -above pleadings is repro--duced below :-- "CERTIFICATE With reference to. a request by _the . Soviet Embassy in the matter of original Civil Suit No. I 15 of 1966, in the High Court of West Pakistan, Karachi Bench (Original Civil Suit Jurisdiction)

Mr. A. M. QureshiPlaintiff versus

(i) The Union of the Soviet Socialist Republics.Respondents

(il) The Trade Representative of the Union of Soviet Socialist Republics in Pakistan I have the honour to certify that the Government of Pakistan recognizes the Government of the Union of the Soviet Socialist Republics de jure and de facto as a foreign sovereign independent State ; that diplomatic relations were established between Pakistan and USSR by exchange of letters on 1st May 1948, that USSR is a member of the United Nations and that the two countries enjoy friendly relations on a basis of equality and mutual respect.

I have the honour further to certify that the Trade Representation of the Soviet Union in Pakistan, by virtue of an agreement dated June 27, 1956, of which a copy is enclosed is an integral part of the Embassy of the Soviet Union in Pakistan and that the Trade Representative of the USSR, Shabrah Iran, Karachi, appears and at all material times has appeared, in the Diplo--matic Lists, as a Diplomatic Officer of the USSR Embassy and that in the understanding of Pakq---':.In Government he enjoys such immunities and privileges as are accorded to Diplomatic agents, by virtue of Principles of Customary International Law and the relevant Conventions to which Pakistan is a party. I further certify that Pakistan is a ratifying party to the Vienna Convention on Diplomatic Relations, 1961, to which the USSR is also a party.

(Sd.)

S. M. YUSUF, S. Pk., C. S. P., Secretary to the Government of-- Pakistan. "

4. Another document filed by the defendants was a letter of the Leader, Pakistan Trade Delegation dated 27-6-1956, which was referred to in the application above-mentioned as "attested copy" of agreement between the Government of Pakistan and USSR but which actually is a copy of a letter confirming such an agreement. It reads as follows MINISTRY OF COMMERCE Karachi Dated 27th June 1966, Dear Mr. Kuzmin, I have received the following letter from you :-- "During the negotiations for the trade agreement between the USSR and Pakistan, it was agreed that the Government of the USSR may establish its Trade Representation in Pakistan located in Karachi. The Trade Representation will consist of (i) a Trade Representative, who, con--sistent with diplomatic conventions, would be designated as Commercial Counsellor and Trade Representative, (ii) two Deputies who would be designated as First Secretaries (Commercial) and Deputy Representa--tive, and (iii) a certain number of other persons dealing with particular branches of trade.

(2) The functions of the Trade Representative will be to promote trade between the USSR and Nistan and to represent the interests of the USSR in Pakistan in matters relating to trade between the two countries.

(3) The Government of Pakistan agrees to treat the USSR Trade Representation in Pakistan as an integral part of the USSR Embassy in Pakistan. Consequently the Trade Representative and his Deputies will be entitled to the usual diplomatic privileges and immunities and the premises in which the office of the Trade Represent--ative is located and which will be specified, will enjoy extra-territoriality.

No other business premises shall be extra-territorial.

No person employed in the Trade Representation other than the Trade Representative and his two Deputies shall enjoy diplomatic or Consular privileges or immunities. It is understood, however, that since these persons not enjoying diplomatic status will be in the employ of the Government of the USSR they will receive consideration as such.

(4) All contracts entered into and signed for or on behalf of the Trade Representation shall be deemed to have been made in Pakistan and the Trade Representation shall he responsible for their due fulfillment; but the Trade Representation shall not be responsible for their fulfilment; but the Trade Representation will not be responsible for any transactions or contracts concluded by other Soviet organizations direct and to which the Trade Representation is not a party or which it has not guaranteed."

Ihave the honour to confirm that your letter mentioned above is in accordance with the understanding reached between us.

Accept, Sir, the assurances of my highest consideration.

Yours sincerely, (Sd.)

M. Karamatullab, Leader, Pakistan Trade Delegation M: R. Kuzmin, Esquire, Leader, USSR Trade Delegation.

ATTESTED (Sd.) S. M. Yusuf, S. Pk., C. S. P., Secretary to the Government of Pakistan 17th August, 1966.

5. A learned Single Judge of the erstwhile High Court of West Pakistan (Karachi Bench in its Original Civil jurisdiction) dismissed the suit by his judgment and order dated 22-1-1968, holding that "The overall conclusion, in my humble opinion therefore, cannot be that a foreign State can sue or be sued as a juristic "person" in terms of rules 1 and ,5 of Order 1, C. P. C.; but that it may sue by virtue of section 84 but cannot be sued as such apart from its Ruler in terms of section 86, C. P. C. This suit is, therefore, not maintainable against defendant No. 1, which is a Foreign State, nor against defendant No. 2, which is an integral part of defendant No. 1 and of its Embassy in Pakistan. Only the Ruler of a Foreign State can be sued, in the name of his State, with the consent of the Central Government.

6. The plaintiff filed an Intra-Court appeal being L. P. A. 57 of 1968 which met the same fate and was dismissed summarily by a learned Division Bench of the same Court on 25-4-1968.

7. The plaintiff has now come up in appeal by special leaver- which was granted on 8-1-1969, to consider the points involved herein which so far as this Court is concerned,. Were of first impression.

Re: The Agreement-Treaty

8. The first thing to be attended to in this case is as to what is the effect of the agreement or to be more precise, the treaty which was entered into by the two States viz. Pakistan and USSR and which has been referred to and relied upon by the defendants themselves in their own' pleadings as reproduced in Para. 4 above and which was pressed for enforcement during the arguments by both sides before us for the purpose of adjudication of the point of jurisdiction in issue. As a matter of fact the learned counsel for the defendants expressly stated that the document aforesaid constituted a Treaty on the subject and was the sheet-anchor of their defence on the subject in hand. However, before proceeding further at this stage a little discussion of the concept of Sovereign Immunity of a Trading State with particular reference to the position of USSR in International Law ink some detail may be relevant. The general and initial Soviet doctrine was, that sovereign immunity attaches to the activities of the Soviet Government abroad, and that in all such situations according to that doctrine, the Soviet State must be sued in Soviet Courts, and recovery of claims against it must be adjudged according to Soviet Laws.. This rule in particular applies to all situations where the. Soviet Union was a party to civil law transactions, in which, through its agents abroad, it buys and sells, contracts loans and obtains credit, and generally engages in activities which are part and parcel of international - commerce. This position was later mitigated somewhat by the fact that foreign trade relations since 1935, have been handled mostly by the special foreign trade associations, which are endowed with separate juristic personality, and are legally not identical with the Soviet State. In respect of their assets, particularly those being abroad, the character of State property is not insisted upon. As such, neither the foreign trade association, nor their property are considered covered by sovereign immunity, and such property is liable to execution. Execution in the Soviet Union is governed by Soviet law, while execution on property abroad is subject to Foreign Law. The real difficulty in connection with the Soviet claim to extend sovereign immunity to state business activities arose in connec--petition with the Soviet practice of appointing a special trade delegation in addi--petition to normal diplomatic representative.

According to the Act on Trade Dele--gation and Commercial Agencies of the Union of the Soviet Socialist Republics of September 13, 1933 (5-Z 1933 No. 59) governmental agencies abroad in charge of the governmental monopoly of foreign trade are responsible for the following functions :.They . . . . Represent the interests of the Soviet Union in the field of foreign trade and promote the development of trade and other economic relations between the Soviet Union and the country where they are accredited; regulate Foreign Trade of the Soviet Union with the country where the commercial delegation is: accredited; handle Foreign Trade of the: Soviet Union with the country where the commercial delegation is accredited.

9. While some of the functions are reminiscent of the usual duties of the commercial attaches or consular officers, the business aspect of the activities of the Soviet Commercial Representations abroad caused a good deal of difficulty. It conflicted with the general rule of International Law that diplomatic privileges are not granted to state agents engaged in trade relations.

10. After some initial difficulties with the German and British Governments the Soviet Union initiated the practice of including in its trade agreements provisions concerning the status of the commercial representations of the Soviet Union accredited in foreign countries.

11. The position of the Commercial Delegation is defined with reference to two principles. They are accorded the status of a diplomatic mission either separate from the diplomatic representation, or as a part of it. As such, they enjoy all the privileges accorded to a diplomatic mission. As to their activity in the field of foreign trade operations, and in particular in connection with contracts concerning sale and purchase of goods to and from foreign firms, they are subject to the jurisdiction of local Courts and to the rule of foreign law. The property of the Soviet State, commodities, sums of money, and claims on other merchants in the receiving country are subject to execution for claims against a Soviet commercial representative. Thus, contrary to the initial insistence of the Soviet Government that Soviet commercial delegations and their Foreign Trade transactions be covered by the diplomatic immunity,' Soviet treaty practice took the opposite course, and such delegations are subject to local jurisdiction and local law (1).

(1) Soviet Public International Law "Doctrines-Diplomatic Practice by Kazimierz Grzybowski (A. W.

Sijthoff Leyden (Rule of Law Press Durham N. C.) 1970 Edition pages 218-223, 290-291, 295-296, 314- 316 and 325 .(herein teed to as Crzybowski).

12. Soviet claims to the extensive interpretation of the doctrine of sovereign immunity were challenged by the growing tendency in the international community at large to restrict its application. The new doctrine of functional immunity was based on the theory which limited the extent of diplomatic and sovereign immunity according to the needs of the function. In this connection, Italian and French Courts began to restrict Soviet claims to immunity, particularly in cases involving Soviet ships in foreign ports. In a number of cases the French Courts rejected Soviet claims to exemption from jurisdiction as the ships were the property of a governmental organization, which was not connected with the official business of the State, and was set up for trade and commercial activities (1) Fisheries' Case (United Kingdom v. Norway). December 18, 1951,

132. (2) Mezhdunarodnoe Pravo (1947, 337-338). The Italian Courts in their turn adopted the line that, although in principle sovereign immunity extended to all acts of State carried out abroad, the fact, however, that its representatives conducted business operations implied a renunication of that privilege. (3) Cf. Tessini and Malvessi v. Torgpredstvo, (1955) A 1 I L 98.

13. To sum up, Soviet scholars maintain that the fact that, in a number of agreements, the Soviet Union has submitted its trade transactions to foreign jurisdiction and the rule of foreign law is only an exception to the general rule. In principle, the Soviet Union, as well as any other State, enjoys jurisdictional immunity, only to the extent of Customary International Law to which we shall separately attend. However, at the same time, the Soviet treaty practice aims at combining the diplomatic status of the trade mission and its personnel (usually three persons only) with the power of local Courts to decide disputes arising from trade operations conducted by Soviet trade missions. These treaties and agreements also give the Soviet trade representations power to agree with their foreign trade partners to change the venue of Courts, and to submit their disputes to the arbitration by courts of another country. Thus, in the matter of foreign trade transac--tions, the position of a Soviet trade delegation is very much the same as that of private merchants.

(Crzybowski)

Re-Examination of the Treaty (Continued)

14. Examining the text of the Treaty in the light of above legal concepts it will be evident that :-

(a) It is divided into two parts. In one part it makes the Trade Representation as an integral part of the USSR Embassy in Pakistan and consequently confirms the usual diplomatic or consular privileges or immunities on the Trade Representative and his two Deputies ;

(b) Its other part prescribes the functions of the Trade Representative viz to promote trade between USSR and Pakistan, and to represent the USSR interests relating to trade between the two countries ;

(c) In that respect it authorises the Trade Representation/Representative to enter into and sign trade agreements ;

(d) It states that all such contracts shall be deemed to have been made in Pakistan.

(e) It further stipulates that the Trade Representation shall be responsible for their due fulfilment ; (f ) But shall not be responsible for any transactions or contracts concluded by other Soviet Organizations direct and to which the Trade Representation is not a party or which it has not guaranteed.

15. From a careful study of the above, it is quite clear that USSR Trade Representation with or through which the plaintiff claims to have entered into the contract involved in this case, is an organ of the USSR and an integral part of its Embassy in Pakistan, and though from that point of view, its Trade Representative and two Deputies have usual diplomatic and consular privileges or immunities, but its functions are of a tradin and commercial nature, and it can represent USSR in transactions o that type and enter into, contracts for that purpose. However, all the contracts entered into by it shall be deemed to have been made in Pakistan. This is a very significant clause of the Treaty. It localizes the seat of the contract, obviously for the purpose of clarifying and expressly stipulating that the proper governing law for such contracts is the law of the country in which the relevant contract has been freely chosen by them to be localized viz Lex Loci Contractus.

We have earlier indicated that the two essential incidents of Soviet Sovereignty are that (i) recovery of claims against it must be adjudged according to Soviet Laws and (ii) in Soviet Courts.

However, by selecting Pakistan as the seat of the contract, or in other words localizing the contract to Pakistan in so express terms, the a USSR in its Treaty agreed to subject itself to the Lex Loci Contractus thus indicating that in such contracts it will be subject to local forums and local laws of Pakistan. In other words, it means, that the USSR in contracts with Pakistan submitted its trade transactions to foreign jurisdiction and foreign law consistent with its Treaty practice which has been referred to earlier. The Treaty in this case thus combines the diplomatic status of the Trade Representation and ixs personnel, with the power of local Courts to decide disputes arising from trade operations conducted by it. From this point of view, it is thus clear that the sovereignty or claim of sovereignty or to be more specific immunity from jurisdiction, in this case, has been replaced by the Treaty above-mentioned, and here the position of the Trade Representation is very much the same as of private merchants and a suit against it or USSR of which it is an integral organ or agent is not barred on that ground and for the aforesaid reasons.

Re-Treaty (Continued)

16. The next thing to be taken note of is that the Trade Representation, according to the above Treaty has been made "responsible for the due fulfilment" of their contracts. Now the words "due fulfilment" in our view are very significant. They mean fulfilment of the part of their obligation undertaken by them voluntarily, or by execution through Courts of Lex Loci Contractus i.e. Pakistan.

In this respect the Treaty replaces that aspect of o sovereignty which required that suits and executions against a Soviet State should be filed and undertaken in its own Courts and not in the foreign Courts of Lex Loci Contractus. This is further clear from the fact that the contracts or in other words due fulfilment of contracts, made by or through Trade Representation are in a way guaranteed by it, and it is fully responsible for their fulfilment through execution, to excuse repetition, according to the law of the seat and locality of the contract.

17. Mr. Sharifuddin Pirzada, at this juncture invited our attention to the "Statute Concerning Trade Missions and Trade Agencies of the USSR Abroad, September 13, 1933. Articles 4, 5, 6 and 7 of the Statute read as follows :- Article-4.-The trade missions shall be authorized in their capacity as agencies of the USSR to enjoy in the conduct of business operations in foreign trade all rights necessary thereto and, in particular, may conclude in the name of the USSR all kinds of contracts and legal transactions, may incur liabilities including the execution of bills and notes and the undertaking of suretyship, may make agreements submitting disputes to arbitration, may settle, cases and, in general, may perform all legal acts necessary for the discharge of duties assigned to the trade missions by the laws of the USSR, which duties include appearance in foreign Courts in the capacity of plaintiff ; the trade missions may appear in foreign Courts in the capacity of defendant only in legal disputes arising from commercial transactions of the trade missions in the countries in which they are located, provided they are countries regarding which the Government of the USSR has declared, by means of an international treaty or a unilateral declaration which has been transmitted to the Government of each country, its consent to the submission of the trade missions in such disputes to the local Courts.

Note.-The Government of the USSR may, insert in the credentials issued to the trade representative an authorization to include in contracts made by him the clause providing for submission of disputes arising from such contracts to the local Court.

Article 5 .-The procedure for the signing, by the trade representatives, of contracts, bills and notes and all kinds of financial obligations, as well as powers of attorney for the execution of contracts and for the issuance of bills and notes and financial obligations, shall be determined by a separate resolution of the USSR Central Executive Committee and the Council of People's Commissars.

Article 6.--The Treasury of the USSR shall be. Liable for obligations incurred by the trade missions.

A licence for or ratification of transactions in Foreign Trade made by other organizations or persons (section 3, subsection (c), granted by a trade mission in the exercise of supervisory power, .Shall in no. Way be construed as the undertaking by the trade mission of any liability whatsoever for such transactions.

Article 7.--At the head of a trade mission shall be the trade representative of the USSR, who shall be appointed and recalled by the Council of People's Commissars upon the recommendation of the People's Commissar for Foreign Trade, with the consent of the People's Commissar for Foreign Affairs. The same procedure shall apply to the appointment and recall of the deputies of the trade representatives abroad.

The trade representative shall be given credentials which shall be issued to him by the Council of People's Commissars.

18. If the above provisions are read with the Treaty herein before reproduced, it becomes clear that by consenting to accept the Lex Loci Contractor as the law by which the rights of the parties to the contracts made by them in Pakistan, were to be determined the respondents in that way, consented or agreed to subject themselves to the laws and forums of Pakistan with the contemplation of the Articles quoted above. Needless to point out that under the principle of Lex Voluntatis-(or what is also known as "Party Autonomy)"-parties to an agreement have broad powers prospectively, expressly or impliedly to select their own law and court both prior to and during litigation. By agreeing that contract shall be deemed to have been made in Pakistan the parties also in this way selected Lex For! i.e. The local law of Pakistan where the Court was situated as the proper law of agreement both for jurisdictional and substantive matters arising in the case with reference to the contract between them-and which law as we shall hereinafter show does not grant immunity to a Foreign State in transactions of the mercantile character. The objection to jurisdiction, therefore, looked at from whatever angle, so far as the Treaty is concerned, fails and is hereby repelled. The Treaty instead of favouring the respondents, on this point through and through goes against them.

Re: Certificate

19. When confronted the above situation learned counsel for the defendants/respondents referred to the Certificate reproduced in an earlier part of this judgment which was filed by them along with their "objection application" and submitted, that it was stated therein that USSR was a Sovereign Independent State. He was told that- this fact was not disputed by anybody. He then argued that being an Independent Sovereign State, the USSR and Pakistan as stated in that certificate were bound by the Principles of the Customary International Law, which according to him, does not recognize the principle of suing a Foreign Sovereign State in the Courts of any other State, and m that respect, it rather envisages a complete immunity, and from that point of view, it was submitted that the present suit against it or its organ or agent was not maintainable in Pakistan Courts. Apart from the fact that in the instant case the so-called claim or concept of absolute immunity has been replaced by the Treaty above-mentioned, even otherwise, the position in General or Customary International Law as we shall discuss later in detail is also not in favour of the defendants and there too the immunity against being sued in Courts of a Foreign State, in commercial transactions no longer exists.

20. Learned counsel for the defendants then argued again with reference to the "Certificate" hereinbefore reproduced, that it is stated therein, that the two countries viz. USSR and Pakistan "enjoy friendly relations of the basis of equality and mutual respect". He submitted that from this g point of view also, to maintain equality and comity we should not hold that the Courts of Pakistan can entertain the suit against USSR and is Trade Representation/Representative. Attending to this plea, we asked the learned counsel, as to what was the law in USSR in the matter of accepting claim of immunity of a Foreign State when sued there. He submitted that Foreign States could not be sued there except with the consent of the USSR State, grant of which consent was based on reciprocity in practice, with the possibility of recourse to countermeasures of a retaliatory character. He is supported in this respect by the "Fundamentals of Civil Procedure in the Soviet Union and the Union Republics Act 50 of 1961". This will show that the Soviet Laws there is no absolute immunity which could be claimed as of right in Soviet Courts. At this place to explain the implications of the above position, Mr. Sharifuddin Pirzada, . Learned counsel for the appellant, drew our attention to Harvard Law Review, Vol. 63 (1950) pages 614 to 641 "Sovereign Immunity and Soviet - State Trading", where at page 633 it is stated that "Where treaties do not cover these matters, questions of sovereign immunity are frequently handled on the basis of comity. Hence it might be instructive to examine Soviet views on the immunity of the commercial enterprises of other Sovereign States. In this respect it may be said that the Soviets have no theory of immunity, based on either historical or ideological concepts, that would strongly influence them to grant exemption of the commercial enterprises of other States. For the Soviets there is no jurisdictional immunity, except by treaty. The Soviet Union, in claiming immunity for itself, its property, and its agents, appeals neither to Soviet Law nor to International Law, but to Foreign law. The best that a Foreign State-trader can do is to arrange for immunity by means of diplomatic or contractual negotiations, ". . . And if we may observe, this is the modality which was deployed in the instant case when the defendants as "foreign traders" entered into a Treaty with Pakistan on the basis of which they now want to claim immunity, which Treaty we have examined in detail and have held that unfortunately its terms do not support them. However, confining ourselves to the plea of equality and comity, it is obvious that the Customary International Law so far as. Practised by the USSR is not to accept the plea of absolute immunity in commercial transactions, and in these circumstances it is really doubtful whether it can invoke the same in its own favour on the ground of equality and comity when it has neither adopted nor followed nor practised it in its own Courts for others concerned in that form. The claim to immunity on the basis. Of reciprocity, equality and comity, therefore, fails. Incidentally we may observe that it is probably for this state of affairs or position of its own laws, that in the present Treaty the vendor got inserted that qua the agreements which Trade Representations/Trade Representative will enter into, the proper law applicable to and for them will be the Lex Loci Contractus i.e. Pakistan and it is for that reason that lengthy arguments were raised that Lex Loci Contractus i.e. Pakistan Law itself contains no provision for suing Foreign States, in Pakistan Courts-an aspect with which we shall deal separately. Re: Vienna Convention 1961/1963

21. Another feature of the Certificate which needs attention is that while stating that the Trade Representation Representative "enjoys such immunities and priveileges as are accorded to Diplomatic agents by virtue of the principles of Customary International Law and the relevant Con- -ventions to which Pakistan is a party", the Certifying Officer states that "I further certify that Pakistan is a ratifying party to Vienna Convention on Diplomatic Relations, 1961, to which the USSR is also a party." Cheshire and North in their "Private International Law" (1979-10th Edn.) (Butterworth) at page 106 while dealing with "Diplomatic Immunity before 1964" State that "the law on the subject was ultimately codified in 1.961. By the Vienna Convention on Diplomatic Intercourse and Immunities. Effect has been given to this Convention (in England) by the Diplomatic Privileges Act, 1964, which in respect of the matters dealt with therein, replaces any previous enactment or rule of law." Then speaking about Diplomatic agents, the learned Jurists state that " . . . . By way of exception to the exemption from civil jurisdiction there are three types of action that lie against a diplomatic agent, namely

(a) a real action relating to. Private immovable property in England, unless it is held on behalf of the sending State for the purposes of the mission;

(b) an action relating to succession in which the diplomatic agent is involved as executor, administrator, heir or legatee in his capacity as a private person;

(c) an action relating to any professional or commercial activity pursued by him in the United Kingdom outside his official functions.

"The last exception reverses the previous law, under which a person of diplomatic rank was not liable to be sued in respect of his commercial or private transactions.-Taylor v. Best ((1854) 14 C B 487)."

22. The position in Pakistan in this respect in not dissimilar. We have gone through the various Articles of the Vienna Convention and we note that to diplomatic agents and envoys they do not grant any jurisdictional privileges and immunity in respect of their commercial transactions which really are not part of their official functions as diplomats etc. The provisions of these conventions have been incorporated and statutorily recognized and enforced in Pakistan by Diplomatic and Consular Privileges Ordinance XV of 1972 (gazetted on 4-5-1972) later re-enacted in form and repealed by Diplomatic and Consular Privileges Act IX of 1972, on 12-9-1972. As a matter of fact section 2 of the Act is specifically headed as "Provisions of Conventions to have force of law" and states that "(1) Notwithstanding anything to the contrary contained in any other law for the time being in force, the provisions of the Vienna Convention on Diplomatic Relations, 1961, set out in the First Schedule and the Vienna Convention on Consular Relations, 1963, set out in the Second Schedule shall, subject to the other provisions of this Act, have the force of law in Pakistan". Learned counsel for the defendant was unable to refer to any Article of the aforesaid Convention which may have been helpful to him in advancing his case on the ground of the immunity and privileges hereinbefore mentioned.

Re: Customary/General International Law

23. Learned counsel for the defendants submitted that as an inflexible rule of the Customary International Law or General International Law is absolute immunity to a Foreign State from being sued in the Courts of a domestic state, therefore, on that basis the Pakistan Courts have no jurisdic--petition to proceed with this case. Before proceeding further, it may however, be pointed out, that the law creating processes in the International Law sphere comprise of (i) Treaties, (ii)

Customary International Law, and (iii) the General Principles of Law. The document of Treaty involved in this case has already been dealt with and at the moment we are concerned with the International Customary Law/General International Law, because it is under this law that the defendants now claim absolute immunity.

24. To be a Customary International Law/General International Law, it is obvious, that it must have two constitutive elements viz. (a) -a genera practice of States and (b) the acceptance by the States of this general practice as law. It is not sufficient to show that some States followed habitually a certain line of conduct either in doing or not doing something. To prove the t existence of a rule of International Customary Law or General International Law, it is necessary to establish that States act in this way because the recognize a legal obligation to this effect. A growing body of decisions b tribunals and national Courts, as well as abundant material in diplomatic notes and other evidence of State practice assists all concerned in this arduous task. Some of the rules in this respect may have their origin, initially in treaties, and may have become by continuous standard of conduct so well known, that every state may now be accepting them, and conversely if certain changes for instance have taken place in the forms of old treaties they may well constitute a telling evidence of their transformation into compulsory standards of International Law. Similarly this may well be true of any other type of practice of Customary International Law/General International Law. Lord Sumner of the Privy Council in the Kronprinsessan Margareta-J (1), observed that "Valuable as the opinions of learned and distinguished writers must always be, as aids to a full and exact comprehension of a systematic law of nations. Prize Courts must always attach chief importance to the current of decisions, and the more the field is covered by decided cases the less becomes the authority of commentators and jurists". Keeping this principle in view we shall first examine from the trend of judicial decisions whether the rule of absolute immunity as pleaded by the defendants is an absolute rule of legal obligations, which has continuously been recognized throughout by the Courts so as to apply it always in all cases whenever a suit was brought against a Foreign State. To give our answer straight away, our study has led us to the conclusion that the grant or acceptance' of absolute jurisdictional immunity to a Foreign State has neither been a uniform practice nor a rigid obligatory rule, and there has never been a uniformity of Courts of various countries in this respect, and if at any interval of time in the world it was so considered then it has undergone a tremendous change and has rather entrenched to the contrary. The burden of proving that the; rule of absolute immunity was a rigid inflexible rule, was on the defendants, and we must say that they have failed to discharge the same .As we shall show in the discussion to follow.

25. As regards the "general principles of law" in order to qualify as product of this subsidiary law creating process, a principle of law must fulfill three requirements; (1) it must be a general principle of law as distinct from x legal rule of more limited functional scope; (2) it must be. Recognized by civilized nations as distinct from barbarous or savage communities; (3) it must be shared by a fair number of civilized nations, and it is arguable that these must include at least the principal legal systems of the world. The-fact that a legal principle is recognized in one's own country does not necessarily mean that it has been accepted elsewhere. This is a matter for verification in each individual case. These general rules come into operation only in the absence, of relevant treaty obligations, and of applicable rules of general international/international customary law. Of late certain Courts have shown distinct reluctance to rely on general principles of law recognized by civilized nations, but even so they. Are not without value: Their existence in th background forestalls any arguments that there are gaps in International La which sometime prevent a judicial institution from rendering a judgment on the substance of any dispute coming before it.

26. To start with a survey of the case-law it may be pointed out that there has not been any uniformity of any particular trend in British Cases on the subject. Reference here may be made to Rahimtoola v. Nizam of Hyderabad (1958-L R A C 79(1957) 3 All E R 44), in which Lord Denning explained the situation of the then existing law as follows:-- "And why, I ask, should sovereign immunity depend -on the finer points of our domestic law? . . . . . . . . Such are the difficulties in the existing rules. I can see no satisfactory answer to them. They are so great that I think we should go back and look for the principles which lie behind the doctrine of sovereign immunity. Search as you will among the -accepted sources of International Law and you will search in vain for any set propositions. There is no agreed principle except this that each State ought to have proper respect for the dignity and independence of other States. Beyond that principle there is no common ground. It is left to each State to apply the principle in its own way; and each has applied it differently. Some have adopted a rule of absolute immunity which, if carried to its logical extreme, is in danger of becoming an instrument of injustice. Others have adopted a rule of immunity for public acts but not for private acts which has turned out to be .a most elusive test. There is no uniform practice. There is no uniform rule. There is no help there.

Search now among the decisions of the English Courts and you will not find them consistent. They seem to have different rules about "property" according to the subject-matter. On -the one band there are the cases about ships and other specific chattel. In these cases, the Courts have tended to apply the rule of absolute immunity. This rule was formed in the days when no action lay against the sovereign in any circumstances. It was thought to offend the dignity of a sovereign and to impinge on his independence if his subjects were allowed to sue him in his own Courts. Likewise if he were sued in the Courts of another country. Proper respect for sovereign power, therefore, required that a sovereign should not be impleaded, directly or indirect--ly, in the Courts -of his own or any other country without his consent. Those cases have received a check lately by Sultan .Of Johore v. Abubakar Tnnku Aris Bendahara (1952) 1 All E R 1261, where the Privy Council rejected the notion that there was any absolute rule about `not impleading a foreign Government'."

27. No doubt in the above case of Rahimtoola the majority Judges gave the immunity but it was, if we can respectfully so observe, on the technical ground, that House of Lords/Court of Appeal could not alter their earlier view or decision which as held by. Us in a recent case Aminullah v. The State (PLD1981SC325), Criminal Review Petitions Nos. 7-R and 8-R/76), decided on 9-1-1980 (F. B.) (para. 9) (in some other context) is not the position of the Supreme Court of Pakistan. Moreover, so far as the present subject is concerned, this Court has not rendered any judgment as yet, and from that point of view, it is free to select such view which it considers is more consistent with justice and fits in with the realities of life. Coming back to the case of Rahimtoola the picture of "no uniform practice" as depicted by Lord Denning in the passage reproduced is sufficient for the point which we want to make viz. Tbat.The law of absolute, immunity is not an undisputed law. Actually as Lord Denning himself put, he bad expressed those views so that it may stir all concerned for doing and re-thinking on the subject. To excuse repeti--petition; as a matter of fact in the case of Sultan of Johore v. Abubakar Tunku Arts Bendahara, the Privy Council had already .Pointed out that "there has not been finally established- in- England any absolute rule that a foreign independent sovereign cannot be impleaded in our Courts in any circum--stances'.'. ,

28. Lord Denning has repeated the same view in a later case reported as Thai Europe Tapioca Science Ltd. v. Government of Pakistan ((1975) 1 All E R 961), where though on the facts as established there, he held, that the case fell within the general rule that the foreign sovereign cannot be personally impleaded in the English Courts and was outside any "commercial exception", since any such exception related only to disputes which "arise properly within the territorial jurisdiction of our courts". Justice Lawton, held that he was precluded by the authority of the Court of Appeal's decision in Campania Mercantill Argentina v.1-United States Shipping Board ((1924) 18 Ll. L R 369=(1924) 131 L T 388), from holding that ,any such exception existed. Justice Scarman held that the suggested commercial exception related to property belonging to, or claimed by, a foreign sovereign when the property was within the jurisdiction and that in the case under consideration the cause of action arose overseas and there was no "res" within the jurisdiction. He also held that it was not open to the Court of Appeal to extend the commercial exception further than it had already been taken by previous decision of the House of Lords and of the Court of Appeal, since the doctrine of Stare Decisis applied to rule of international law which had become incorporated into Municipal Law by decisions of a competent Court.

28-A. -The Privy Council in Owners of the Ship Philippine Admiral v. Wallem Shipping (Hong Kong)

Ltd. And others ((1976) 1 All E R 78), abandoned the absolute theory and accepted the restrictive theory in action in rem.

29. (a) Next comes the case of Trendtex Trading Corporation Ltd v. Central Bank of Nigeria ((1977) 1 All E R 881) (Lord Denning, Mr. Stephenson and Shaw, LJJ.). This is a very instructive judgment. While approaching the subject from various angles Lord Denning, first stated the general practice that "the doctrine of sovereign immunity is based on international Law. It is one of the rules of international law that a sovereign State should not be impleaded in the Courts of another Sovereign State against its will. Like all rules of International Law, this rule is said to arise out of the consensus of the civilized nations of the world. All nations agree on it, so it is part of the law of nations."

(b) After pointing out that this is how theory of absolute immunity is advanced by those who think about it in that manner, Lord Denning then states that:- "To my mind this notion of a consensus is a fiction. The nations are not in the least agreed on the doctrine of sovereign immunity. The Courts of every country differ in their application of it. Some grant absolute immunity. Others grant limited immunity, with each defining the limits differently.

There is no consensus whatever. Yet this does not mean that there is no rule of International Law on the subject. It only means that we differ as to what that rule is. Each country delimits for itself the bounds . Of sovereign immunity. Each creates for itself the exceptions from it. It is, I think, for the Courts of this country to define the rule as best they can, seeking guidance from the decisions of the Courts of other countries, from the jurists who have studied the problem, from treaties and conventions and, above all, defining the rule in terms which are consonant with justice rather than adverse to it. That is what the Privy Council did in Philippine Admiral (Owners) v. Wallen Shipping (Hong Kong) Ltd. And we may properly do the same."

(c) He then makes mention of two theories (i) theory of incorporation and (ii) the theory of transformation and states, that to him theory of incorporation (and not transformation) is correct and gives his reasons as follows:- "As between these two schools of thought, I now believe that the doctrine of incorporation is correct. Otherwise I do not see that our courts could ever recognize a change in the rules of International Law. It is certain that International Law does change. I would use of international law the words which Galileo used of the earth: "But it does move." International Law does change, and the courts have applied the changes without the aid of any Act of Parliament. Thus, when the rules of International Law were changed (by the force of public opinion) so as to condemn slavery, the English courts were justified in applying the modern rules of international law: see the Statement of Opinion expressed in 1876 on the condemnation of slavery by Sir Robert Philimore, Mr. Montague Bernard and Sir Henry Maine. Again, the extent of territorial waters varies from time to time according to the rule of International Law current at the time, and the Courts will apply it accordingly: See R. V. Kent Justice, ex parte Lye (1967) 1 All E R 560(564/574)=(1967) 2 Q B 153. The bounds of sovereign immunity have changed greatly in the last 30 years. The changes have been recognised in many countries, and the courts-of our country and of theirs-have given effect to them, without any legislation for the purpose, notably in the decision of the Privy Council. In Philippine Admiral (Owners) v. Wallem Shipping (Hong Kong) Ltd."

(d) The learned Judge then draws `the conclusion' and states that "Seeing that the rules of International Law have changed-and do change-and that the Courts have given effect to the changes without any Act of Parliament, it follows to my mind inexorably that the rules of International Law, as existing from time to time, do form part of our English Law. It follows, too, that a decision of this Court, as to what was the ruling of International Law 50 or 60 years ago, is not binding on this Court today. International law knows no rule of stare decisis. If this Court today is satisfied that the rule of Interna--tional Law on a subject has changed from what it was 50 or 60 years ago, it can give effect to that change, and apply the change in our English Law, without waiting for the House of Lords to do it."

(e) Stephension, LJ, rested his view solely on the ground that Interna--tional Bank of Nigeria was not an emanation, or, alter ego of Depart--ment of the State of Nigeria;

(f) Shaw, L. J., agreed with Lord Denning and gave some more reasons in support of his view. He held that the narrower principle of restricted immunity was in proper confirmity with contemporary international relationship than the doctrine of absolute immunity and observed that "it seems undenied that it is so."

(g) It may be reiterated that in Rahimtoola v. Nizam of Hyderabad, Lord Denning, ended his speech by saying "I have stirred these points, which wiser heads in time may settle". His effort, as has been seen from the above discussion, has ultimately succeeded in Trendtex Trading Corporation Ltd. v.

Central Bank of Nigeria where his view prevailed as the majority view, and the climax reached, when the British Parlia--ment in year 1977-78 adopted the same by statutorily recognizing the theory of restricted immunity in mercantile and commercial cases by enacting the State Immunity Act, 1978, which now is the law prevalent in that country. This law was promulgated with the intention of ratifying the European Convention on State Immunity 1972.

(h) To the same strain is Hispano Americana Mercantil S. A. v. Central Bank of Nigeria (1979) 2 Ll. L R 277."

30. Coming to America the theory of limited immunity was earlier suggested in the Draft Convention respecting the competence of Courts in regard to foreign States prepared by Harvard Law School in 1932 and the International Law Association at its 45th Conference in Lucerne in 1952, resolved that "the foreign States should not be immune from suit in relation to their acts when engaged in private enterprise." Furthermore was made by Jack B. Tate, Legal Adviser, who on 19-3- 1952 wrote a letter to the Acting Attorney General advising the adoption of restricted theory of immunity. (For full text of that letter see (1952) 26 Department of State Bulleton No. 678 dated 23-6- 1952 at page 984). All this and similar other efforts after passing through the usual stages with which we are concerned ultimately materialized in the decision of Supreme Court of the United States of America in Alfred Dunhill of London Inc. v. Repxblic of Cuba ((1976) 425 U S 682 (698)where White, J., with the concurrence of Burger, C. J. And Powell and Rehnquist, JJ., held that "Although it had other views in years gone by, in 1958, as evidenced by (The Tate letter) the United States abandoned the absolute theory of sovereign immunity and embraced the restrictive vi8w under which immunity in our courts should be granted only with respect to causes of action arising out of a foreign State's public or governmental actions and not with respect to those arising out of its commercial or proprietary actions. This has been the official policy of our Government since that time, as the attached letter of November 25, 1975, confirms : " such adjudications are consistent with International Law on sovereign immunity." To this may be added the European Convention on States Immunity, 1972 which has been signed by most of the European countries. The position in America now has also crystallized by enforcement of the Foreign Sovereign Immunities Act, 1976 enforced with effect from 19-1-1977, which sanctions only restricted immunity in commercial transactions.

32. To make a little further survey, the claim or theory of absolute immunity was rejected first by the Courts of Italy and Belgium in the later part of the nineteenth century (1). This limited, or which is sometimes called "Italo Belgian", rule has been consistently followed in the Mixed Courts of Egypt (2), the Courts of Greece (3), Rumania, (4) Switzerland (5), and onward from 1924 or so the Courts of France which formerly had a tradition of granting absolute immunity, have now adopted the opposite rule (6). Same is the rule in Holland (7), Austria (8), Ireland (9), Canada (10) and West Germany (11).

(1) Rau v. Duruty, Court of Appeal Gand, 14th March, 1879, (1879) 2 Pasicrisie Belge 175, 8 Journal Du Droit International (Clunet) 82 (France 1881) (commercial activity of Peruvian Government held subject to jurisdiction of Belgian Court).

(2) E. G. Egyptian Government v. Palestine State Railway Adm'n, Egyptian Mixed Court of Cassation, 17th June, 1942, (Supp. 1919-42) Annual Digest of Public International Law Cases (Ann. Dig) 146 ; See also Brinton, Suits against Foreign States, (1931) 25 AM. J. Int'

LL 50, 52-57 .

(3) See Russian Trade Delegation Case, Court of Athens, No. 6658, 1930, 59 Clunet 809 (Farnce 1932), (1919-30) Ann. Dig. 312 Note I1I, Soviet Republic (Immunity in Greece) Case, Court of Athens, No. 1681, 1928, (1927-28) Ann. Dig. 172.

(4) Banque roumanie de commerce et de Credit de Prague v. Etat Polonais, Commercial Court II for Rumania, 1920, 19 Revue De Droit International Prive (De Lapradelle) 581 (France 1924).

(5) State immunity case No. 2, Superior Court Zurich, November, 9 1939, 39 Blatter Fur Zurcherische Rechtsprechung 318 (Switzerland 1940), (1941-42) Ann. Dig. 235.

(6) Officina Del Aceite v. Domench (1938-40) Ann. Dig. 240.

(7) Nederlandse Rijbank, Amsterdam v. Muhlig Union, Teplitz-Schonau. (Ann. Dig. 1947, Case No. 27).

(8) Hoffmann v. Dralle (10th May, 1950), 3 Int. Law Q. (1950), (576-579) Dralle v. Republic of Czechoslovakia (1950) Int'l L. Rep. 155) (Supreme Court of Austria).

(9) The Ramava (1941) 75 Irish Law Times 153 ; Annual Digest, 1941-42, Case No. 20 ; Saorstat v.

Continental Steamship Co. v. Rafael de las Morenas, 1945 Ir R. 291.

(10) Zodiac International Products Inc. v. Polish Peoples Republic (1977) 8 D. L. R. (3d) 277).

(11) Claim against the Empire of Iran case (30-4-1963) 45 Int. L. R. 57).

Views and Opinions of Jurists and Expert Writers

33. Coming to the views of the various jurists, writers and commentators there too we notice that these days the preponderance of opinion is in favou of restricted immunity. This aspect of the matter, we are taking note of, because, it is well settled that "cammunis opinio doctorum" is also regard as a source of International law. The theory of absolute immunity was widely held among writers in the nineteenth century. Owing perhaps to the developments which have taken place in the judicial and government practice of States, supporters of the absolute doctrine are now a diminishing minority. Even one of the old writers as Sir Gerald Fitzmaurice said later in 1933, that the opinions of contemporary writers were evenly divided. Older proponents of restrictive immunity include Beffter (1), Gianzana (2), Rolin (3), Laurent (4), de Paepe (5), Dalloz (6), Spee (7), Von Bar (8), Fauchille (9), Fodere (10), Weiss (11), Albert de Lapradelle (12), Audinet. (13) and Fiore (14). It is worthy of notice that a restrictive view of immunity was also adopted by the Institute de Droit International as early 'as 1891(15).

(1) Heffter Droit international moderne, German edition, 1881, p. 118.

(2) Gianzana. L' ciranger dans lc droit civil italian, Turin, 1884-1-81.

(3) Rolin, Principes de droit international prive, 1-212, 213.

(4) Laurent, Le droit civil international, 111-44, 1880 (Bruxelles).

(5) De Paepe, Etudes sur la competence legard des Etats strangers, etc., Clunnet 22 (1895),

(6) Dalloz, Repertoire, Droits civil, No. .29.

(7) Spee, Clunnet 1(1874), p. 32 ; ibid; 3(1876), pp. 329-435, De la competence ate.

(8) Von Bar, Clunnet 12 (1885), 645 ; .Intertmationales Private and Strafrecht, 1862, p. 502 ; Theorie and Pruxis des Internationals Privatrecht, t. II.

(9) Fauchille et Bonfils, Manuel, No. 270.

(10) Praider Fodere, Traite, t. III., No. 1583.

(11) Weiss, Traite de droit International Private, V

(12) Lapradelle, La saisie des fonds russes Berlin, Darras 6(1910), pp. 75 et seq and 779 et seq.

(13) Audinet, La Succession du Due de Brunswick, R. Gen 1895, p. 385.

(14) Pasquale Fiore, Nowvean Droit International Public, t. I, No. 514. See also Demangeat, Rene Pratique 1 (1856), 385, 397 ; ibid, VII (1859), 182-186 ; of Gabba, op. Cit., Clunnet 15 (1888), pp. 110 et seq ; Despagnet et de Boeek, Court de droit international public. No. 257 ; and Merignhac, Traite, t. I, pp. 262 et seq.

(15) Annuaire 1891, p. 436, Art. II ler of the resolution provides "Las seules actions recevables contre un Etat ctrani sort . . . . (3) Les actions qui se rup portent a un establishment de commercial industrial on a un chemin de jar, exploitcs par 1' Etat stranger sule territoire". This appeared to be an appropriate limitation of State immunity at that time.

To this list may be added the names of H. F. Van Panhuys (1), Sompong Sucharitkul (2.), Friedmann (3), Clive M Scmitthoff (4), Ross Masud (5), Dicey and Morris (6), Cheshire and North (7). An overgrowing majority of recent writers-assuming the complexion of the general consensus of opinion have subscribed to the restrictive doctrine of immunity. Prominent among these subscribers are E. W. Allen (8), R. D. Watkins (9), P. Shepard (10),

(1) The International & Comparative Law Quarterly, Vol. 13 (1964) pages 1193 to 1213, Article "In the Borderline Between the Act of State Doctrine and questions of Jurisdictional Immunity" the learned jurist observed at pages 1195-1196 that "Even though in a few countries the rule of so-called `absolute immunity' is still prevailing, it would be hazardous to maintain, in the light of State practice and of decisions of many municipal Courts, that the exercise of jurisdiction with regard to foreign States in respect of acts jure gestionis would amount to a violation of the law of nations".

(2) State Immunity and Trading Activities in International Law (1959) Edition Chapter 6 "Opinions of writers on absolute and restrictive immunity ; Chapter 7 opinion of writers on Immunities of Govern- -ment Agencies, engaging in Trade.

(3) The Changing Structure of International Law (1964), Chapter 21 State Control over economic activities and the universality of International Law, pages 341 to 346.

(4) International and Comparative Law Quarterly Vol. 13 (1964) "the claim of Sovereign Immunity in the law of International Trade.

(5) PLD 1981 (Journal) (May part) pages 56 to 64 "Immunity of Foreign States from the jurisdiction of Courts with special reference to American and English legal systems."

(6) The Conflict of Laws, 9th Edition (1973) page 141, where they observed that "it may well be that English Courts have extended the doctrine of sovereign immunity considerably further than international practice strictly requires. The results have proved unfortunate and have led to widespread dissatisfaction."

(7) Private International Law, 10th Edition (1979) Butterworth, at pages 101, 102, where it is stated that "until very recently, the position at common law was that a foreign State was immune even with regard to its purely commercial activities. However, this wide immunity was rejected by the Privy Council with regard to actions in rem against ships and then a majority in the Court of Appeal, obiter, held that there should be no immunity in the case of actions in personam with regard to a State's commercial activities. These common law developments are now, in substance embodied in the 1978 Act. "Commercial transaction" is defined to include not only contracts for the supply of goods or services but also the provision of finance through loans and the like, and any guarantee or indemnity in respect of such transactions. Even more widely it exte as t6 "any other transaction or activity (whether of a commercial, industrial, financial, professional or other similar character) into which a State enters or in which it engages otherwise than in the exercise of sovereign authority."

(8) Allen, The position of Foreign States before National Courts, 1933.

(9) Watkins, The State as Party Litigent (1927) pp. 189-191.

(10) Shepard, Sovereignty and State-owned Commercial Entities, 1951.

J. Y. Brinton (1), J. W. Garner (2), J. G. Hervey (3), G. G. Phillimore (4), B. Fensterwald (5), C. Fairman (6), W. T. R. F. (7), N. Wolfman (8), C. Carabiber (9), M. R. Hennebieq (10), B. Trachtenberg (11), Carles de Vissch er (12), W. W. Bishop (13), J. P. Niboyet (14), C. C. Hyde (15), W. Friedmann (16), J. E. S. Fawcett (17), E. Loawenfeld (18), E. Lemonon (19),

(1) Brinton, "Suits against Foreign States." (1931) 25 A J I L 50.

(2) Garner, "Immunities of State owned Ships Employed in Commerce," (1925)6RYIL128.

(3) Hervey, "The Immunity of Foreign States, when Engaged in Commercial Enterprises : a Proposed Solution" Michigan (1929) 27 L R 751.

(4) Phillimore, "Immunite des Etats au point de vue de la jurisdiction et de L'execution forcee, "Hague Recued, (1925-III), 461.

(5)Fe nsterwald, "Sovereign Immunity and Soviet State Trading", (19 49-50) 63 H L R pp. 614-642.

(6) Fairman, ."Some Disputed Applications of the Principle of State Immunity," (1928) 22 A J I L 560- 589 ; compare Hayes (1924-25) 38 H L R 599-621.

(7) E.x, "Competence of Courts in regard to "Non-Sovereign" Acts of Foreign States, (1941) 35 A J I L 632-636-640."

(8) Wolfman, "Sovereigns a Defendants" (1910) 4 A J I L 373.

(9) Carabiber, a note in (1952), 79 Clunnet 440 et seq.

(10) Hennebieq, a note in (1952) 79 Clunnet 244-266.

(11) Trachtenberg, a note in (1931) 36 Baras 757-761.

(12) De Vissch er "Government etrangers en justice," R. D. I. L. G. 3rd Series, pp. 149, 179 and 300-335.

(13) Bishop, a note in (1953), 47 A J I L 93-105.

(14) Niboyet Traite (1949) Nos. 1759-1771 ; R. Gen. 43 (1936), pp. 525 et. Seq ; (1950), pp. 139 et seq.

(15) Hyde, International Law., Vol. II, especially at p. 849 ; of Fenster--wald, op. Cit., at p. 620, Beinton op. At 61 Hayes op. Cit,- at p. 613.

(16) Friedmann, "The Growth of State Control etc." (1938) 19 B. Y. I. L. PP. 118, 123, 130.

(17) Fawcett, "Legal, Aspects State Trading", (1948), 25 B. Y.

1. L. Pp. 34-38.

(18) Loewenfeld, "Some Legal Aspects of the Immunity of State Property," Grotius Society Treaty pp 111-126, "The Doctrine of Sovereign Immunity," 44th Report of 1950, A. J. I. L. Pp. 204, 217, and 45th Report, ibid. 1952 at. p. 215.

(19) Lemonon, "Projet Definin de Resolution de Planstitut", Annuaire 1952, pp. 1 et. Seq.

See also the observations of writers in connection with the proposed resolution.

J. F. Lalive (1), P. B. Carter (2) and Judge Lauterpacht (3).

(1)1. F. Lalive, "L'immunite de jurisdiction des- Etats et des Organi--zations internationales," Hague Recueil, 84 (1953-111), 209.

(2)Carter, "Sovereign immunity : Substantiation of Claim", I. C. L, Q~ Vol. IV., part 3, 1955, p. 469 ; and ibid. Vol. 1, 1953, p. 543: (3)Lauterpacht", The Problem of Jurisdictional Immunities of Foreign States," (1967) 28 H T I L 220- 224.

34. Mr. Sharifuddin Pirzada also brought to our notice that the Advocates of restricted immunity have taken up the matter in the U. N. O. Where it is passing through the usual stages. He referred to the "Report of the International Law Commission", on the work of its thirty-second session, 5th May- 25th July, 1980. Supplement No. 10 (A/35/10). Similar information is available from the Article of Ross Masud. This shows that under the preponderance of views both judicial and juristic, in favour of restricted immunity, move is afoot to get it through from the highest body above--named. He also provided us (i) "Applicable Law in International Commercial Arbitration", by Julian D. M. Lew (1978)

Ocena Transnational Services, by Kenneth R. Simmonds, (ii) Law in Eastern Europe, edited by F. J. M.

Felderbugge (No. 23), (iii) The Soviet Codes of Law edited by William B. Simons, (iv) The Civil Code of the RSFSR, by A. K. R. Kiralfy, (v) Netherlands Yearbook of International Law, Volume X, (1979) where at page 11 it is stated that" . . . . This example shows that although the Soviet Union and other Socialist countries formally stick to a broad concept of State immunity, in particular because Foreign trade is a state monopoly, they are in practice willing to restrict such immunity. The main reason why the socialist countries have also restricted their claims to sovereign immunity in practice stems from the fact that without such restriction their opportunities for foreign trade would be considerably reduced. The foregoing observations, taken together with the information provided by the national reports contained in this volume, justify the conclusion that restrictive immunity from jurisdic--petition is at present widely supported by States in practice" ; (vi)

International Law : Cases and material (Hentin Pugh, Schachter and Smith) (1980 Edition) where at page 498 it is stated that "Although the Soviet view is that, inasmuch as the carrying on of foreign trade is a sovereign activity of the Soviet Union, trade delegations and their property enjoy immunities in foreign countries derived directly from the sovereignty of the Soviet State itself, the Soviet Union has concluded a large number of bilateral treaties which contain provisions subjecting its trade delegations to the local jurisdiction in respect of their commercial activities."

(vii) Waver of Immunity by E. J. Cohn, pages 260 to 273. (viii) Dominion Law Reports p. 656, for the case of Zodiak International Products Inc. v. Polish People Republics, (ix) State and Diplomatic Immunity by Charles Lewis (1980) page 7 of Introduction of Bank I and" page 20, and (x) Islam and International Law, a paper_read b Mi. Sharifuddin Pirzada in the Islamic Conference in London in year 1977, in which he stated that equal status and rights without discrimination are the theme of Islam. The purpose of referring to this Article, Mr. Sharifuddin Pirzada submitted was to show that this has been his independent view are long and he was not advancing any new arguments in the case before us, but was actually reiterat--ing a proposition which he even otherwise/felt to be correct. (xi) Sucharitkul at page 333 picks up a similar theme and states under the head "Justice and the Rule of Law" that ". . . But even by the national standard of justice, it is required in the interest of justice that all parties including individuals, corporations, public entities and governments, whether foreign or domestic, should be equal before the law. Equality before the law implies equal rights and obligations with regard to access to the Courts and the availability of legal remedies. This "principle de legalite", "principle de justice" "de securite jurisque," according to which, as Jean-Flavien Lalive appropriately described, "L'Etat est soumis a la reglc de droit" would certainly require similar subjection of foreign States to the local jurisdiction in as far, at any rate, as they have acted as trading entities." "It is for these reasons that the abolition of the doctrine of state immunity proposed by Lauterpacht has the greatest merits,"

35. Learned counsel for the defendants/respondents submitted that even in the domain of restrictive immunity, the criterion for deciding whether a domestic Court has jurisdiction to entertain suits against a foreign State is to see whether the act or transaction in dispute is part of the sovereign function or non-sovereign functions of the foreign State i.e. Acta jure imperil or acta jure gestionis and if it turns out to be the later only then the said Courts restrict the immunity but not otherwise. He submitted that the tests applied for this purpose are two. First the subjective test which bases immunity -on the capacity, personality and the status in which foreign State may act, and second the objective test based on forms nature and substance of the transaction in question.- Looked from whatever angle, he submitted, the transaction under examination here is a sovereign act i. e. Acta imperil and, therefore, is beyond the jurisdiction of municipal courts of Pakistan. Apart from the fact that no such plea is contained in the objection application of the defendants reproduced above in detail, even otherwise as have no intention to enter into the niceties of jure imperil and jura gestionis on which there is again a great cleaving of opinion as is evident from the nature of the two tests themselves as mentioned above. But we may here point out that e there is also a third test which has developed as a formidable entrenchment of International Law and which is conspicuous by its own nomenclature viz. "trading/commercial activities" and which is a test or a category or class by itself. J. E. Fawcett in his "Legal Aspects of State Trading" B. Y.

1. L. (XXV) (1948) states that "the various distinctions between acts jury imperil and acta jure gestionis (quaere jure private) . . . . . . . . . .Are not adequate for classifying State trading contracts, for the lines of demaration between the political and economic activities of the State have become blurred and it is in this borderland that State trading flourishes. These simple and symmetrical destinctions do not take account of a number of difficulties. First imperium denotes legal capacity, under constitutional or International Law, to perform an act of State or conclude an international agreement ; but the performance of a non sovereign act, jure gestionis, may also be in the exercise of a public function." Sucharitkul on page 273 observes that the "Experience appears to have proved the truth and accuracy of the above observation. The attention of recent authorities has been diverted from attempts to draw broad distinctions between different categories of State acts, such as sovereign and non-sovereign, to the more urgent problem of State trading." In this view of the matter which we have taken, the cases like Kahan v. Pakistan Federa--petition ((1951) 2 K H 1003), Sultan of Johore v. Abubakar, Tunku Aris Bendahara and others ((1952) 1 All B R 1261), Rahimtoola v. H. E. H. The Nizam of Hyderabad and others ((1957) 3 All E R 441 1), Thai-Europe Tapioca Service Ltd. v. Government of Pakistan, Ministry of Food and Agriculture, Directorate of Agricultural Supplies Imports and Shipping ((1975) 3 All E R 961), The Uganda Co. (Holdings) Ltd. v. The Government of Uganda ((1979) 1 Lloyd's L R 481), Hispano Americana Mercantil S. A. v. Central Bank of Nigeria ((1979) 2 Lloyd's Law Rep. 277) and other old and earlier cases of various Courts referred to by the learned counsel for the defendants/respondents (for historical purpose as he said)-call for no further or separate analysis or discussion, and rather the cases, where the plea of immunity put forward by the USSR was not accepted on the ground that the transaction in question being of a commercial and trading nature the jurisdiction of the Courts concerned was not ousted, are more in point. See Societe le Gostrog of Union des Republigues Socialistes Sovietiques v. Association France Export (Ann. Inter. L C (1925- 26) C No. 125), The National Navigation Company of Enypt v. Tavoularldis (Ann. Int. L C (1927-28) C No. 110), Russian Trade Delegation v. S. A. Des Entreprises Gere and Banque Commercial Poor L'

Europe Du Nord (Ann. Int. L C (1929-3G) C No. 8), Russian Trade Delegution in Italy v. Castro (Ann.

Inter. L C (1933-34)).

The sum total of the above discussion is that even under the Customary International Law or Generaj International Law a suit of the present kind Is not barred. We hold accordingly, adding, that if reference is made to European Convention of State Immunity of May 1972 which come into for on 11-6-1976, and various other conventions like convention of (i) State owned Vessels (10-4-26) ; (ii)

Carriage by Air (12-10-29) ; (iii) Aircrafts (1933) ; (iv) Civil Aviation (1944) ; (v) High Seas (27-4-58) ,

(vi) Territorial Sea (284-58) , (via) Viena (1961, 1963, 1975), and (viii) Special Missions New York (1969), it will appear, that they also constitute, if not conclusive, a least a prima facie evidence of development of restrictive immunity.

Law in Pakistan

36. This now brings us to the Pakistan Law on the subject as contained in the various Codes of Civil Procedure which have remained in operation I this country from time to time. In the table below, we have reproduced the relevant sections of the Code of Civil Procedure (Act V of 1908) (which is the present day law), the Code of Civil Procedure (Act XIV of 1882), Code of Civil Procedure (Act X of 1877), and the Code of Civil Procedure (Act VIII of 1859).

C. P. C. Of 1908 Section 84. When foreign States may sue.--A foreign State may sue in any Court, of British India: Provided that such State has been recognized by His Majesty or by the Governor-General-in- Council: Provided, also, that the object of the suit is to enforce a private right nested in the head of such State or in any officer of such State in his public capacity;

(2) Every Court shall take judicial notice of the fact that a foreign State has or has not been recognized by His Majesty or by the Governor --General-in-Council.

Section 85. Persons specially appointed by Government to prosecute or defend for Princes or Chiefs.-(1) Persons speci--ally appointed by order of the Government at the request of any Sovereign Prince or Ruling Chief, whether in subordinate alliance with the 'British Government or otherwise, and whether residing within or without British India, or at the request of any person competent in the opinion of the Government, to act on behalf of such Prince or Chief to prosecute or defend any suit on his behalf, shall be deemed to be the recognized agents by whom appearances acts and applications under this Code may be made or done on behalf of such Prince or Chief.

(2) An appointment under this section maybe made for the purpose of a specified suit or of several specified suits, or for the purpose of all such suits as it may from time to time be necessary to prosecute or defend on behalf of the Prince or Chief.

(3) A person appointed under .This section may authorise or appoint persons to make appearances and applications and do acts in any such suit or suits as if he were himself a party thereto.

Section 86. Suits against Princes, Chiefs, Ambassadors an Envoys.-(1) Any such Prince or Chief, and any Ambassad--or Envoy of a foreign State, may, with the consent of the Governor-General-in- Council certified by the signature of a Secretary to the Government of India, but' not without such consent, be sued in any competent Court.

(2) Such consent may be given with respect to a specified suit or to several specified suits, or with respect to all suits of any-specified class or classes and may specify, inthe case of any, suitor class of suits, the Court in, which the Prince, Chief, Ambassador or Envoy may be sued ; but it shall not be given unless it appears to the Government that the Prince, Chief, Ambas--sador or Envoy---

(a) has instituted a suit in the Court against the person desiring to sue him, or

(b) by himself or another trades within the local limits of the jurisdiction of the Court, or

(c) is in possession of im--movable property situate within those limits and is to be sued with reference to such property or for money charg--ed thereon.

(3) No such Prince, Chief, Ambassador or Envoy shall be arrested under this Code, and, except with the consent of the Governor-General-in Council certified as aforesaid, no decree shall be executed against the property of any such Prince, Chief. Ambassa--dor or Envoy.

(4) The Governor-General---in-Council may, by notifica--petition in the Gazette of India, authorize a Local Government and any Secretary to that Government to exercise with respect to any Prince, Chief, Ambassador or Envoy named in the notification, the func--tions assigned by the forego--ing subsections to the Governor-General-in-Council and a Secretary to the Government of India, respec--tively.

(5) A person may, as a tenant of immovable pro--perty, sue, without such con--sent as is mentioned in this section, a Prince, Chief, ,Ambassador or Envoy from whom beholds or claims to hold the property.

Section 87. Style of Princes and Chiefs as parties to suits.-A Sovereign Prince or Ruling Chief may sue, and shall be sued, in the name of State;- Provided that in giving the consent referred to in the foregoing section the Governor-General-in Council or the Local Government, as the case may be, may direct that any such Prince or Chief shall be sued in the name of. An agent or in any other name.

C. P. C. Of 1882 Section 431. When foreign State may sue.-A foreign State may sue in the Courts of British India, provided that-

(a) it has been recognized by Her Majesty or the Governor --General-in-Council, (and)

(b) the object of the suit is to enforce the private rights of the head (or of the subjects) of the foreign State. The Court shall take judicial notice of the fact that foreign State has not been recognized by Her Majesty or by the Governor-General-in-Council.

Section 432. Persons speci--ally appointed by Government to prosecute or defend for Princes or Chiefs.-Persons specially appointed by order of Government at the request of any Sovereign Prince or ruling Chief, whether in sub--ordinate alliance with the British Government or other--wise, and whether residing within or without British India or at the request of any person competent in the opinion of the Government to act on behalf of such Prince Or Chief, to prosecute or defend any suit on his behalf shall be deemed to be the recognized agents by whom appearances, acts and applications under this Code may be made or done on behalf ofsuch Prince orChief.

An appointment under this section may be made for the purpose of a specified suit or of several specified suits, or for the purpose of all such suits as it may from time to time be necessary to prosecute or defend on behalf of the Prince or Chief--- A person appointed under this section may authorise or appoint persons to make and do appearances, applications and acts in any such suit or suits as if he were himself a party to the suit or suits.

Section, 433. Suits against Princes, Chiefs, Ambassadors and Envoys.-Any such Prince or Chief, and any Ambassa--dor or Envoy of a foreign State, may, with the consent of the Governor-General-in-- Council, certified by the signature of one of the Secretaries to the Government of India (but not without such consent), be sued in any competent Court.

(2) Such consent may be given with respect to a speci--fied suit or to several specified suits, or with respect to all suits of any specified class or classes, and may specify in the case of any suit or class of suits, the Court in which the Prince, Chief, Ambassador .Or Envoy may be sued but it shall riot be given unless the Chief, Ambassador or Envoy.

(a) has instituted a suit .n the Court against the person desiring to sue him, or

(b) by himself or another trades within the local limits of the jurisdiction of the Court, or

(c) is in possession of immovable . Property situate within those limits and is to be sued with reference to a such possession or for money charged on that property.

(3) No such Prince, Chief, Ambassador or Envoy shall be arrested under this Code, and, except with the consent of the Governor-General-in- Council certified as aforesaid, no decree shall be executed against the property of any such Prince, Chief, Ambassa--dor or Envoy.

(4) The Governor-General---in-Council may, by notifica--petition in 'the Gazette of India, authorize a Local: Govern--ment and any Secretary to that Government to exercise, with respect to any Prince, Chief, Ambassador or Envoy named in the notification the functions assigned by the foregoing 'subsections to the Governor-General-in-Council and a Secretary to the Government of India, respectively:

(5) A person may, as a tenant of immovable pro--perty, sue, without such consent as is mentioned in this section, a Prince, Chief, Ambassador or Envoy from whom he holds or claims to hold the property.

Section 434. Style of Princes and Chiefs as parties to suits.-A Sovereign Prince or ruling Chief may sue, and shall be sued, in the name of his State; Provided that in giving the consent referred to in the (last) foregoing section, - the Governor- General-in-Council or Local Government, as the case may be, may direct that any such Prince or Chief shall be sued in the name of an agent or in any. Outer name.

C. P. C. Of 1877 Section 431.--A for--eign State may sue in the Courts of British India, provided that--

(a) it has been recog--nized by Her Majesty or the Governor --General-in-Council, and

(b) the object of the suit is to enforce the private rights of the head or of the subjects of the foreign State. The Court shall take judicial notice of the fact that a foreign State has not been recog--nized by Her Majesty or by the Governor-General-in-Council.

Section 432.-Person specially appointed by order of Government at the request of any Sovereign Prince or rul--ing Chief, whether in subordinate alliance with the British Government or other--wise, and whether residing within or with--out, British India, to prosecute or defend any suit on his behalf, shall be deemed to be the recognized agents by whom appearances, acts and applications under this Code may be made or done on behalf of such Prince or Chief.

Section 433. - Any such Prince or Chief and any Ambassador or envoy of a foreign State may, with the consent of Government certified by the signature of one of its Secretaries (but not without such consent) be sued in any 'com--petent Court not sub-- ordinate to a District Court ; Such consent shall not be given unless-

(a) the Prince, Chief, Ambassador or envoy has instituted a suit in such Court against the person desiring to sue him, or (b) the Prince, Chief, ambassador or Envoy by himself or another trader within the local limits of the jurisdic--petition of such Court ; or

(c) the subject-matter of the suit is immov--able property situate within the said local limits and in the possession of the Prince, Chief, Ambassa--dor or envoy. No such Prince, Chief, ambassdor or Envoy shall be arrested under this Code ; and no decree shall be executed against the property of any such Prince, Chief Ambassador or envoy unless with consent of Government certified as aforesaid.

C. P. C. Of 1859 Section 16. Parties may appear in person or by recog--nized agent or by pleader.-All app--lications to any civil Court, and all appearances of parties in any civil Court, except when otherwise specially provided by this Act, shall be made by the party in person, or by his recogniz--ed agent, or by a pleader duly ap--pointed to act on his behalf.

Section 17. Recog--nized Agents, The recognized agents of parties by whom such applications and appearances may be made are--1st Persons holding powers of attorney from absent per--sons, Ist.-Persons holding general powers of attorney from parties not within the jurisdic--petition of the Court, authorizing them to make such ap--plications and appearances on behalf of such parties.

2ndly. - Persons carrying on trade or business for absent persons----Persons carrying on trade or busi--ness for and in the name of parties not within the jurisdiction of the Court in matters connected with such trade or business only, where no other agent is expressly authorized to make such applica--tions or appear--ances.

3rdly. Persons authorized to act for Government- .--Persons being ex officio or otherwise authorized to act for Government in respect of any suit or judicial proceeding.

4thly. - Persons specially appointed to prosecute a suit for any Sovereign Prince. Persons specially appointed by order of Government, at the request of any Sovereign Prince or Independent Chief, whether residing within or without the British Territories, to pro--secute or defend a suit on his behalf.

Acts required to be done by a party to a suit in person may be done by his recognized agent.- Whenever the personal appearance of a party to a suit is required by this Act, such appear--ance may be made by his recognized agent, unless the Court shall other--wise direct ; and anything which by this Act is required or permitted to be done by his recog--nized agent.

Notices given to a suit shall be as effectual for all purposes in rela--petition to the suit as if the same had been given to or served on the party in person, unless the Court shall otherwise direct ; and all the provi--sions of this Act relative to the service of notices or processes on a party to a suit shall be applicable to the service of notices and pro--cesses on such re--cognized agent.

37. In the C. P. C. (Act VIII) of 1859 of relevant section was section 5 which was headed as "Jurisdiction of civil Court" and stated that "Subject to such pecuniary or other limitations as are or shall be prescribed by any law for the time being in force, the Civil Courts of each grade shall, receive, try, and determine all suits hereby declared to be cognizable by those Courts, if in the case of suits for land or other immovable property such land or property shall be situated within the limits to which their respective jurisdictions may extend, and in all other cases if the cause of action shall have arisen, or the defendant at the time of the commencement of the suit shall dwell, or per- -sonally work for gain, within such limits." This section came up for conside--ration before a Full Bench of five Judges in Jwala Pershad and another v. His Highness the Rana of Dholepore (S. D. A.)

(N. W. F. P. 1863) p. 579wherein it was held that it con--tained no provision specially exempting an independent Native Chief from the jurisdiction of our courts though immunity was granted to them on the ground of International Law as practised under British Laws which applied here and whereunder a suit even for recovery of private debt was barred and this view was consistent with the Instructions which were addressed by the late Court of Directors (of the East Indian Company) to the Government of India in their letter dated 27th May, 1825, on which the defendant had based his plea of exemption. And here we may add that subsection (4) of section 17 of that Act reproduced above in the chart of comparative laws rather supported the fact that sovereign Prince or Independent Chief could be sued and that he could get appointed for himself a recognized agent to defend him, by an order of the Government.

38. Then comes the C. P. C. (Act X) of 1877. Section 37 to 40 of this Code dealt with recognized agents and service of process and authorised parties to appoint their recognized agents in the form and manner mentioned therein. Section 431 provided that a foreign State may sue in the Courts of British India, provided that--(a) it has been recognized by Her Majesty or the Governor- General-in-Council, and (b) the object of the suit is to enforce the private right of the head or of the subjects of the foreign State. Section 432 dealt with the appointment of a recognized agent of a Sovereign Prince or a Ruling Chief to prosecute or defend the case or cases against them. Section 433 authorised suits against a Sovereign Prince, or Chief or any Ambassador or Envoy of a foreign State and laid down that they may be sued with consent of government which could be given only in the cases and the situation mentioned therein. It will be appreciated that in this Code also there was no express prohibition for filing a suit against a foreign State as such.

39. In the C. P. C.) (Act XIV) of 1.882 the position of law remained the same, with a modification that subsection (5) of section 433 was a new addition which stated that "A person may, ab a tenant of immovable pro--perty, sue, without such consent as is mentioned in this section, a Prince, Chief, Ambassador or Envoy from whom he holds or claims to hold the property...

40. In the C. P. C. (Act V) of 1908 which is in operation these days; the old section 431 underwent a change in new section 84 and the language of the proviso was modified so as to make it clear that the object of the suit by a foreign State must be to enforce a private right (as .Distinguished from its political rights) vested, either in the head of the State or its officer as such. The phrase "of the subjects" occurring in the old section was liable to be misconstrued as conferring upon the head of a foreign State a general power to sue in respect of the private rights of his subjects, therefore, the aforesaid words were replaced as above reproduced. Another thing to be noticed is that this Code also does not contain any express prohibition or limitation in the matter of filing a suit against a foreign State as such. There were certain amendments and modifications etc. Which were introduced later in the form of adaptation of law for Pakistan but as they are not relevant so far as the subject under discussion is concerned we need not go into the same, and the reader if interested can refer to a later edition of C. P. C. To note the same. Sections 86-87 of the C. P. C. Were then repealed and replaced by the State Immunity Ordinance VI of 1981 with effect from 11th March 1981.

41. When confronted with this situation learned counsel for the defendants/respondents submitted that the word "foreign State", is synonymous with "Prince, or Chief or Ruler, as used in section 86 (which according to him will cover a head of a foreign State) therefore, just, as for suing them a permission of the relevant government is necessary, similarly, a suit against a foreign State too cannot be brought without the aforesaid sanction, which according to him in the instant case was lacking and was fatal to the maintain--ability of the present suit. - He further submitted that a "foreign state" is not a "person" by itself and certainly not a separate entity from the head of State (as used in section 84) (or Ruler in section 86) and in these circumstances there was no justification to consider it as a separate entity which could be sued without the requisite sanction.

42. The contention has no merit. The C. P. C. Has maintained a clear distinction between :-

(1) A foreign State.

(2) Head of a foreign State.

(3) Any officer of a foreign State acting his public capacity.

(4) Ambassador of a foreign State.

(5) Envoy of a foreign State.

(6) Sovereign Prince, and

(7) A Ruling Chief/Ruler.

And to start with the further discussion, at this place it may be appreciated, that the Civil Procedure Code by enabling a "foreign State" to sue, recognized it as a juristic person capable of suing. This is consistent with the overall scheme of the Code. Reference here may be made to Order I, rule 1 of the Code which is headed as "Who may be joined as plaintiffs' and states that " All persons may be joined in one suit as plaintiffs in whom any right to relief in respect of or arising out of the same act or transaction or series of act or transactions is alleged to exist, whether, jointly, severally or in the alternative where, if such person brought separate suits, any .Common question of law or fact would arise." This may be read with ~ Order.. I, rule 3 which is headed as "Who may be joined as defendants," and lays down that "All persons may be joined as defendants against whom any right to relief in respect of or arising out of the same act or transaction or series of acts or transactions is alleged to exist, whether jointly, severally or in the alternative, where, if separate suits were brought against such persons, any common question of law or fact would arise." Reading these provisions along with section 84, it becomes clear, that a "foreign State" is being considered as a juristic "person' capable of suing," and we may add also .For being sued. However, to its right of suing the Legislature has laid down two restrictions and they are that (i) the State should be such which has been recognized by the Federal Government and (ii) the object of the suit is to enforce a private right, vested in the head of such State or in any officer of such State in his public capacity. The words "private right" seem to have been used here in contradistinction to "political rights", because, for the vindication of the later, the remedy lies in international forums or political means and measures and not in civil suits in the municipal Courts of another State.

43. In "The Oxford Companion to Law" by David M,. Walker, (Clarendon) (Press, Oxford) 1980, it is stated at page 1176 that "a state or political society is an association of persons, living in a determinate part of the Earth's surface, legally organized and associated for their own government.

The term "the State" is applied to the community legally organized and per--sonified and deemed a corporation ; the State may own property, run indus--tries engage in commercial enterprises, provide services, prosecute offenders, and so on. Thus, in some countries prosecutions proceed at the instance of "the State", the "Common Wealth", or "the people". In international law independent sovereign States are the subjects of the law, in which legal rights vest and which are subject to legal duties and responsibilities. In its own system of municipal law "a state is normally a legal person or entity, frequently with rights, privileges, and immunities more extensive than enjoyed by any other legal person."

44. In Roll, Elsenbahnrechtliche Entscheidungen ((1907) 2 G I U N F 122it was stated that "the State as entrepreneur is a juridical person within the realm of private law and can. Therefore, be sued in the ordinary Courts in all matters concerning private law . . . . . . . . . . . This applies undoubtedly to the home State, but there is no reason to depart from this principle in the case of a foreign State. This does not constitute an infringe--ment of territorial sovereignty any more than does the act of suing a foreign national in a municipal court . . . . . ." This case was cited with approval in Dral(e v. Republic of Czechoslovakia ((1950) 17 I L R 34 No. 41In 8 Corpus Juris (Secundum)--"State"-at page 81 (Definition-Political Status and Relations", it is stated that the State has sometime been referred to as a person and has been held to be included within the meaning of a person. In Miss Asma Jilani v. Government of the Punjab and another (PLD 1972 S G 139), Hamoodur Rahman, C. J.,while commenting upon the attempt of Kelsen to justify the principle of effectiveness from the stand- point of international law observed that "it cannot be justified because it assumes the primacy of international law over national law and in doing so Kelson has overlooked that for the purposes of international law the legal person is the State and not the community and that in international law there is no `legal order' .As such". In the General Clauses Act (X of 1897), in section 3(39) it is stated that "person shall include any company or body of persons whether incorporated or not". Thus examining the position of a foreign State in the light of the: text hereinbefore quoted, we feel no hesitation in holding that a foreign State is a person falling within the provisions of the C. P. C.

Quoted above. Taking the subject further it will now be clear that all the seven persons mentioned in paragraph 42 above are distinct entities and persons, and a head of a State or a ruler is not synonymous with the State. We are at this stage tempted to reproduce a very instructive discussion of this matter as contained in Satow's Guide to Diplomatic Practice", edited by Lord Gore-Booth (Longman London and New York) (Fifth Edition), in Chapter 2, which deals with "privileges and immunities of the head of a foreign State and proceeds to state that "A clear distinction is drawn in the law of many States, and implied in that of others, between the foreign State as a legal entity and the head of such a State as an individual to whom a very high degree of privilege and immunity remains due." It is further stated in paras. 2.2, 2.3 and 2.4 that "The Personal status of a head of a foreign State therefore continues to be regulated by long-established rules of customary international law which can be stated in simple term. He is entitled to immunity probably without exception-from criminal and civil jurisdiction. His residence, person and movable property are invoilable. He is entitled to exemption from customs duty and from search of goods he brings with him. His wife and other close members of his family travelling with him and possibly all the members of the suite-are also entitled to the same degree of privilege and immunity. He must of course disclose his position in order to claim privilege or immunity, but it is irrelevant that he may originally have entered the jurisdiction of another sovereign incognito. He has no legal power to exercise criminal or civil jurisdiction over members of his suite.

2.3. In the nature of things there are few opportunities for clarifying whether any exceptions now exist to the immunity of a foreign sovereign. Cases which come to court nearly always concern not the personal status or the personal property of the head of State but the status or property of the State as a legal entity. A head of State, whether a hereditary ruler or an elected president, does .Not enter the territory of another State in his official capacity without the clearest assurances being expressed or implied that full immunity and full ceremonial honours will be accorded. Although heads of State visit other States not only on formal visits but also on private visits, any disregard by them of their obligations of the laws and regulations of the State they are visiting is almost unheard of. However, certain exceptions to full immunities may be said to be inherently justifiable, even if it cannot be said that they are fully supported by extensive practice. For instance if the foreign sovereign himself institutes civil proceedings, he makes himself liable to a related counter-claim- as is the case with a diplomatic agent. If the foreign sovereign owns real property in a personal capacity, his immunity cannot prevent the hearing of an action to establish the title or the right to possession of that property, since otherwise no forum would exist competent to bear such an action. If the foreign sovereign engages in a trading venture or in speculative investment, it may be justifiable to subject him to civil suit or to deny him tax exemption on his profits. But state practice in regard to the taxation of the personal investments of foreign heads of State is in fact very varied.

2.4. A head of State who has been deposed or replaced or has abdicated or resigned is of course no longer entitled to privileges or immunities as a head of State. He will be entitled to continuing immunity in regard to acts which he performed while head of State, provided that the acts were performed in his official capacity and in this his position is not different from that of any agent of the State. He cannot claim to be entitled to privileges as of right, although he may continue to enjoy certain privileges in other States on a basis of courtesy."

45. The conclusion of the above discussion is that we are now in a position to safely hold that the seven entities or persons hereinbefore mentioned in paragraph 42 above are distinct and separate and though in their various actions or transactions they may sometimes be representing the state or be its agents, but, they are not the State themselves. Whenever, therefore, a suit is brought against a Sovereign Prince or a Ruling Chief or a bead of the State, and though the suit has to be brought in the name of the State, but as such a suit, as is contemplated in section 86 of C. P. C. Of 1908, is to be filed after obtaining a prior sanction of the Government, therefore, while granting the requisite sanction the Government has been authorised to direct that "any such prince or chief shall be sued in the name of any specified agent or in any other name." By this neither the agent nor any other pseudo name becomes the principal viz. The bead of State, the sovereign Prince or the Ruling Chief himself, and the aforesaid "names" (or name holders) are not synonymous with the Sovereign Prince or a Ruling Chief etc.

46. If the case is examined from the point of view whether suit under the C. P. C. Of 1908 is barred or restricted in any manner against a Foreign State we find no such express provision in this respect, and the position from that point of view remains the same as it was in the C. P. C. Of 1859. The mere fact that in later C. P. C. Suits against (a) Sovereign Prince (b) Ruling Chief (Ruler), and (c) any Ambassador or Envoy of a Foreign State, are to be brought only with consent of the Government and the scope of that consent is also limited, it does not mean that from that we should construe that a suit against a Foreign State itself is prohibited or could entertained or is dependent upon similar consent. If the intention had been to bar foreclose suits against a Foreign State then the Legislature could have similarly provided something in the same manner with regard to its own liability to be sued. If the Legislature in its wisdom had not chosen to do so, a Court should not itself read anything in the Code.

47. That there is a clear distinction between a State on the one hand and a bead or ruler of a State on the other hand, is further clear from the fact that sometimes in this International field, a Foreign State is recognized but its ruler is not. This shows that both namely (i) the Foreign State an (ii) its head or ruler are not synonymous,. Because, had that been so then tire recognition of a Foreign State would ipso facto and automatically amount to recognition of its head or ruler, but in practical international field, we have varied examples to -the contrary. This also points to the inescapable conclusion that both cannot be synonymous. State is A juristic person while head of a State is a human being. 1t was suggested that if such distinction of entity is maintained in the C. P. C. Then it will mean that bead of a State and its Ruler etc. Has more immunity and privilege than the State itself which they represent, because, for filing a suit against a ruler o a State sanction of the Central Government is required whereas in the case of a Foreign State, as we are interpreting the Code, no such sanction would be called for. It was submitted how it can be so ?. The situation need not disturb us, because, immunity in section 86 is of the type of personal immunity, and where a personal immunity is granted. To a representative o another then that does not mean that the position of that other is dwindle or degraded in any manner ; and rather it shows that the principal is capable of and will answer all claims against it but its agents should on their own part remain protected, so that they feel no fear in the discharge of the duty and function. This situation is not peculiar only in International Law but is in vogue in the Constitution of the various countries internally as well.

48. As mentioned earlier in Pakistan, the State Immunity Ordinance VI of 1981, has been promulgated. It -came into force on '11-3-1981.

Section 5 of the Ordinance is relevant for the purpose of our case and read as follows :- "Section 5. Commercial transactions and contracts to be performed in Pakistan.-(I) A State is not immune as respects proceedings relating to-

(a) a commercial transaction entered into by the State ; or

(b) an obligation of the State which by virtue of a contract, which may or may not be a commercial transaction, falls to be performed wholly or partly in Pakistan.

(2) Subsection (1) does not apply to a contract of employment between a State and an individual or if the parties to the dispute are States or have otherwise agreed in writing ; and clause (b) of that subsection does not apply if the contract, not being a commercial transaction, was made in the territory of the State concerned and the obligation in question is governed by its administrative law.

(3) In this section "commercial transaction" means------

(a) any contract for the supply of goods or services ;

(b) any loan or other` transaction for the provision of finance and arty guarantee or indemnity in respect of any such transaction or of any other financial obligation ; and

(c) any other transaction or activity, whether of a commercial, industrial, financial, professional or other similar character, into which a State enters or in which it engages otherwise than in the exercise of its sovereign authority."

49. If the present case is examined in the light of the above provision it will be clear that it is fully cognizable by municipal Court of Pakistan inasmuch as it pertains to a commercial contract and transaction which was to be performed in Pakistan. However, when confronted with this situation Mr. Khalid Farooq, learned counsel for the defendants/respondents submitted that the Ordinance is not retrospective and therefore, it will not apply to agreements which have been executed prior to its enforcement. He submitted that subsection (2) of section 5 of the Ordinance does not grant immunity to such agreements where the parties may have provided otherwise in writing i.e. they may have provided that no suit shall lie against the State concern. This right or contingency to provide otherwise, was, to use his words, granted, introduced or contemplated for the first time only by the Ordinance itself, and therefore, as earlier there was no such law in force, it was no use searching for such a clause in old agreements or cases which from that point of view will not be amenable to the provisions of new law but should be decided with reference to the old law as contained in the C. P. C. Which according to him barred such suits. We have already expressed our vie with reference to the C. P. C. Against the defendants, and now attending t the present or the rest of the argument hereinbefore mentioned, apparently it appears to be attractive, but in our opinion, it is against the intention of _ the statute. As we read the above provisions, we feel that the Legislate was aware of various types of agreements which may be floating in a country or may be under execution, or performance by the parties, as though it is not our intention to make n exhaustive list of the same but on thing is clear, that from among all such agreements, where a provision barring a suit duly existed in writing, only in those cases the immunity from being sued was to be available as laid down in the Ordinance,. The point can be understood better by putting a converse proposition. Take a case where a person against whom a suit is pending, during the pendency of that suit becomes a Ruler or Head of the State against whom, no suit could be instituted with regard to transactions of the kind mentioned in section 86, C. P. C. Without the requisite sanction of the appropriate authority. In such a situation, the law is, that the right to sue does not mean simple institution of a suit but the right also to continue the suit to its logical and viz. Final judgment one way or the other. If during the pendency of the suit the defendant has become a Ruler or a Head of a State, and the suit is of the kind with regard to which there existed a bar of the above type, then the bar would equally apply even after he becomes the Ruler after the institution of suit, because his liability to be sued-or continuation of his liability to be cued-has been abrupted by his becoming a Ruler or Head of a State. This was so laid down in Maharaj Bahadur of Bewa v. Siva Saran Lal (AIR 1921 Pat. 23The actual passage in that case at page 24 which is relevant for our purpose reads as follows;-- "The material portion of section 86 runs as follows :- `Any such Prince or Chief . . . . May, with the consent of the Governor-General-in-Council, certified by the signature of a Secretary to the Government of India, but not without such consent, be sued in any competent Court.'

Now, I have no doubt whatever that the words, `to sue' means some--thing more than `to institute a suit" that it in fact includes the- entire procedure from the issue of summons up to recovery of judgment. In my view, the petitioner, on attaining the rank of a Ruling Prince, could properly object to being sued until the consent of the Governor----General-in-Council was procured giving the plaintiff liberty to carry on the suit to its termination.

The determination of the point, however, does not decide the case. It will be noticed that there is no inherent want of jurisdiction in the Court to try the subject-matter of the suit as against petitioner.

That jurisdiction exists and may be properly exercised if a certain procedure is complied with. The section confers a privilege on the Ruling Chief which, like all privileges, is capable of being waived by the Ruling Chief. What I desire to make clear is that there is nor bar at all on the Court itself from trying the suit as against a Ruling Chief ;the bar is on the party suing conferring an advantage on the party sued. And there can be no doubt whatever that if the party suing ignores the bar and persists in the suit, and the party sued acquiesces in the procedure and proceeds to judgment, the judgment cannot afterwards be questioned on the ground that the bar was not removed before the suit was proceeded with."

If this is true of the situation above-mentioned, the converse will also have to be held as true, and as such, if earlier the agreement was such con which no suit could be filed without sanction, then under the new legal order on the subject, the agreements of the kind in hand having been exempted from sanction barrier, a suit qua them would now be maintainable without the aforesaid sanction.

50. There is another approach also. In the above passage it bias bee held that section 86 does not effect the jurisdiction of the Court, and provision for obtaining a sanction etc. Is and a procedural matter. If thisis so then the procedural laws are generally retrospective and from that point of view will effect even the pending cases like the one in band. That the matter is procedural is evident from another provision of the law as contained in section 9 of the C. P. C. Of 1908 which is headed as "Court to try all civil suits unless barred,-and lays down that "The Courts shall (subject to the provisions herein contained) have jurisdiction to try all suits of a civil nature excepting suits of which their cognizance is either expressly or impliedly barred.

Explanation. -A suit in which the right to property or to an office is contested is a suit of a civil nature, notwithstanding that such right may depend entirely on the decision of questions as to religious rites or ceremonies." It is not disputed that the suit in hand is of a civil nature, and examining from jurisdictional point of view its cognizance by civil Courts of Pakistan, is neither expressly nor impliedly barred, and the provisions of sanction or certificate as contained in section 86 being of procedural character would stand replaced by the Ordinance, and the bar if any in the way of the plaintiffin favour of the defendants will become extinct. The general principle of law which is applicable in such or similar situations was laid down by this Court in some other context in Commissioner of Sales Tax (West), Karachi v. Messrs Kruddsons Ltd. (PLD1974SC180The relevant passage in the report is at pages 183-184 which read as follows:- "Basing himself on the wording of the above provision, learned counsel for the Department urged that the Legislature, in its wisdom having given the amending statute retrospective operation, it will govern the instant appeal also. In support of his argument learned counsel referred to monograph 284 at page 580 of the "Statutory Construction" by Crawford, 1940 Edition which reads: "While pending litigation may be exempted from the operation of curative statutes, in many instances it is not. But, in either case, however, a number of problems arise. Moreover, there is also considerable confusion in the decisions pertaining to their solutions. For instance, where pending litigation is not exempt, some Courts have held that the curative act will apply even after the case has been appealed, and others that it will not apply to any case wherein judgment has been rendered in the lower Court. Perhaps the best rule is that a final judgment cannot be affected. Or stated conversely, until the judgment is final, it is subject to the power of the Legislature to enact curative legislation'."

The above statement of law is based on a series of precedents from the Amercian jurisdiction, noticed at the foot of the page. This principle was also followed by this Court in Saeedur Rehman v.

Chief Election Commissioner, Dacca and others (PLD1965SC137The facts of that case were remarkable. The appellant in that case was elected as a Member of the Provincial Assembly.

His election was set aside by the Election Tribunal on the ground that being a Government contractor at the relevant time be was disqulaified under section 116 of the Representation of People Act, 1957 (Act XXXI of 1957), from contesting election to a Legislative Assembly. A writ petition directed against the Tribunal's order under Article 98 of the 1962 Constitution was dismissed by the High Court of East Pakistan. The judgment of the High Court proceeded on an earlier decision of this Court in the case of Badrul Haque v. The Election Tribunal, Dacca and others (PLD 1963 SC 704Dissatisfied with the judgment of the High Court the appellant in that case moved a petition for special leave to appeal against the order of the High Court. During the pendency of the petition section 116 of the 1957 Act was repealed by section 2 of the Representation of People (Repeal) Act, 1963, which read as follows:--

2. Repeal etc.--(1) The Representation of the People Act, 1957 (XXXI of 1957), is-hereby repealed, and shall be deemed to have been repealed on the twenty-third day of March, 1962.

(2) No person shall be deemed to be or to have ever been disqualified from being elected as, or from being a member of the National Assembly, or a Provincial Assembly under or by reason of any provision of the said Act, and no election or any person to such Assembly shall be called in question in or before any Court, tribunal or other authority on the ground that such person was so disqualified under the said Act at the time when he was so elected."

It is important to point out that in the precedent case on the day when the appellant filed in this Court his petition for special leave by virtue of the law earlier laid down by this Court in Badrul Hague Khan's case, which was correctly applied by the High Court, the appellant in that case stood disqualified to contest the election and having been elected, to retain his seat in the Provincial Assembly. Nevertheless, because of the repealing Act which was given retrospective operation, the appellant was held to be entitled to take advantage of the removal of the bar, relieved of his disability ex post facto and declared to have been validly elected. It was observed in that case that there could be no doubt that it applied to the proceedings pending at the time when the Act came into force and this Court had no hesitation to grant the appellant's interest in accordance with law as it existed at the time of the hearing of the appeal, without discussing the law as it existed at the time when the High Court had seizing of the case. It was further observed that once the appeal had been admitted against the order of the High Court, the matter became sub judice again and thereafter this Court had the seizing of the whole case. On this view of the matter, therefore, this Court took into account and gave effect to the repealing Act, notwithstanding the fact that the judgment' of the High Court was unassailable according to law as it then stood. In taking the above view this Court relied upon its own two previous judgments viz. The Province of East Pakistan v.

Muhammad Mehdi All Khan and others (PLD1959SC387and Election Commissioner v. Sajjad A.I Khan (PLD1960SC235), and also upon the Privy Council case in Mukarji v. Ram Narain (1963 1 A 47In the Privy Council case, effect was given to an Act passed during the pendency of the appeal which deprived the appellant of the right which he had sought to enforce by filing an appeal and the Judicial Committee found no difficulty in dismissing the appeal because of the change in law.

The respondent did not appear to contest appeal. Nevertheless, in the course of argument in the appeal, reference was also made to Works Corpora--petition Housing Society, v. Karachi Development Authority (PLD 1969 SC 430as a possible support for the converse proposition: The facts of that case, however, were materially different. In that case the precise question that fell for determina--petition was whether a notification issued by the Provincial Government could impair the right which had accrued to the petitioner, in consequence of an earlier judgment of this Court between the same parties in Works Corpora--petition v. Karachi Development Authority (PLD 1969SC391It is well-settled proposition that a notification by the Provincial Government cannot operate retrospectively to impair an existing right or to nullify the effect of a final judgment of a competent Court even if the notification be. Expressly so designed.

The effect of "final determination" of the rights of parties to a litigation was considered by the Privy Council in John Lemn v. Thomas Alexender Mitchell (1912AC400and the principle laid down was that the effect of the judgment which in the "absence of appeal (operates as) as a final determination of the rights of the parties" rests on the general principle that a man is not to be vexed twice for the same cause of action unless, it is_ "excluded by the Legislature in explicit and unamistakable terms." !n the instant case, the pendency of the certificated appeal in this Court had destroyed the finality of the High Court's order dated 11-10-1966, and therefore, it was hit by the new dispensation in section 30-A of the Act.

Accordingly, we accept the appeal and set aside the order of the High Court. We, however, make no order as to costs."

51. To the similar strain is Empson v. Smith ((1966) 1 Q R D 426), where it was held by Diplock, L J, that "Statutes relating to diplomatic immunity from civil suit are procedural statutes, and the Diplomatic Privileges Act, 1964", was applicable to suits brought after the date on which it came into force in respect of acts done before that date . . . . . . The removal of the procedural bar from any other cause will have the same effect." Also see "Immunities of Foreign States Before National Authorities" by Sucharitkul (Extract from the "Recueil des Cours", Volume 1-1976, where at page 121 while analysing classification of State Immunities, it is stated that "As has been observed, State Immunities are procedural in nature."

52. The upshot of the above discussion is that examined from whatever angle the conclusion is inescapable that Pakistan Courts have the jurisdiction to entertain and decide the present suit, and the immunity claimed by the respondents herein is not available to them. We hold accordingly.

53. It may be pointed out that as will have been noticed by now that the real argumentative judgment which was impugned in this appeal before us was by a learned Single Judge which is A.

M. Qureshi v. Union of Soviet Socialist Republics through Trade Representative in Pakistan and another (PLD 1968 Kar. 443). A learned Division Bench of the said Court in the Letters Patent Appeal in a five-lines order simply agreed with and endorsed the view of the learned Single Judge and summarily dismissed the appeal without itself making any independent detailed discussion on the subject. However, it so happened that another Division Bench of the same High Court in another case The Secretary of State of the United States of America v. Messrs Gammon-- Layton, Karachi PLD 1971 Kar. 314), (Dorab Patel, J. And Muhammad Haleem, J)-(now Acting Chief Justice of this Court) overruled the judgment of the learned Single Judge, but as the present parties were not parties in that case, therefore, they presented their own arguments before us and we thus examined the matter in detail and have pointed out the correct legal position on the subject.

54. In the end we must place on record our deep appreciation of the labour and industry put in by Mr. Sharifuddin Pirzada and a very fair representation of the case from angles and aspects. He was kind to provide us the material and the list of the relevant material, with reference to which we were able to analyse a very difficult legal subject of International Law and also to lay dawn the correct construction of the ?Municipal Law of Pakistan.

55. The ultimate result is that we accept the appeal with costs through--out and set aside the order of the learned Letters Patent Bench and of the learned Single Judge dated 25-4-1968 and 22- 1-1968, respectively and holding that the High Court has the jurisdiction to take cognizance of and try the suit, send the case back to it for its further trial in accordance with law.

MUHAMMAD HALEEM, Actg. C. J.-I agree with the judgment propose to be delivered by my brother Karam Elahi Chauhan, J. I further gratefull acknowledge having upheld the opinion I held in The Secretary of State o the United States of America v. Messrs Gammon-Layton, Karachi (PLD 1971 Kar. 314 1 hav said so because the conclusion reached in this judgment was the mainstay of the submissions of the learned counsel for the appellant alongwith the additional reasons which further were the subject-matter of the controversy between the parties. This judgment upheld the opinion of the learned Single Judge, Kadir Nawaz Awan, J., rendered on the original side of the High Court but it was disregarded by the learned Single Judge in this case as he felt different to accept his view much against the consistent judicial practice that if he felt so he should have referred the question to a larger Bench. In effect Kadir Nawaz Awan, J., in his opinion recognized the Customary International Law of partial immunity relating to commercial activities and further held that the suit was not barred as it was not hit by any of the provisions of the Civil Procedure Code. The learned Single Judge while disowning this opinion held that he was bound by the practice of English Courts based on common law which was an erroneous view in the context of the later development in this field. I may here state that Mr. Sharifuddin Pirzada, learned counsel for the appellant, stated at the Bar that the opinion held by Kadir Nawaz Awan, J., and as upheld by me as one of the Member of the Division Bench in the Secretary of State of the United States o America v. Messrs Gammon- Lyton, Karachi bad received recognition in England and America as a salutary advancement in this field and ultimate resulted in the codification of law, both in America and England and her as well.

MUHAMMAD AFZAL ZULLAH, J.-I am in respectful agreement with the views and the judgment proposed to be delivered by my learned brother Karam Elahee Chauhan, J., and with the views expressed by my learned brother Nasim Hassan Shah, J., on the questions relating to customary international law and the law in Pakistan on State immunity as also on rule of law in Pakistan when vacuum exists in statutory field.However, I would make some observations on the question raised by Mr. Sharifuddin Pirzada with regard to the application of Islamic Law and juridical norms, in cases like the present one. He contended that precedents and rules are not lacking in that system of law to resolve similar controversies. In this behalf he also cited and relied on my judgment in Hajf Nizam Khan's case (PLD 1976 Lah. 930) ; wherein, inter alia, it was held thatit is no more good law to interpret expresses "justice, equity and good conscience" to mean the rules of English law, as in any way applicable in Pakistan. Instead, accepted and fundamental principles and juridical norms of Islam, its philosophy,, jurisprudence and its common law shall govern the application of the rules of justice and equity as also would control the discretion of the Judges when their questions of good conscience and fairplay are involved. . , 'It has already been held that this residual power of the Courts exists and continues only till the Legislature acts and fills the gap itself and further that this power is not available to 'modify' the `existing law' for the time being, subject to their vires. The 'residuary' law in Pakistan vis-a-vis the written Constitution and written law, is Islamic law, justice and equity. Wherever, while interpreting the statute law, more than one interpretations are possible, the one consistent with Islamic principles and jurisprudence would be adopted. General maxims and rules of natural law and justice which are read as part of statutes (unless specifically excluded) would be subordinated to, and modified so as to be in accord with, basic principles of Islam and its values. Out of two otherwise equal interpretations, one of which advances the principles of policy and Islamic provisions in the Constitution and the other does not, the former, unless prohibited by "written"

Constitution and the written law, would be adopted.'

The above subject was considered in several headings two of which are of particular relevance in this case. After determining the scope of Article 2 of the 1973 Constitution in that : it is impossible to agree with the view that this Article visualizes the making of a mere theocratic system. The State not being an ordinary person having spiritual perceptions, cannot have any religion in ordinary (English) sense. Article 2, therefore, deals with the tangible aspects of State-craft including realm of political science, jurisprudence, laws and affairs of State properly so called another delicate subject in the foregoing context regarding the 'choice between Islamic or Western philosophy and moral-cum-juridical norms' was also dealt with thus : No apology is needed for the sake of the Western legal thinkers in adopting the above course in order to implement the mandates of our own Constitution which, it has to be emphasized, is the Constitution of a State and nation which rightly claims to be ideological. I need not quote examples of other ideological States where, instead of being apologetic, a legitimate pride is genuinely felt by their functionaries in enforcing the ideology whether it is on the part of the Executive, Legislature or the Judiciary. It is to be stated here that even in the systems, which do not claim to be ideological and are so-called secular, the recourse by Law Courts to prevalent religious and spiritual standards, in interpreting- and enforcing laws, is not uncommon. Only one well-known case, which has been widely commented upon in legal circles, needs to be cited as a representative one. It is Shaw v. Director of Public Prosecutions ((1961) 2 All E L R 446It was a case of a vacuum in, or a field un occupied by, Common Law, described by Dias in his work on jurisprudence-p. 144, Edn. 3rd, as 'gap'. The learned jurist thought that Viscount Simonds, while filling this 'gap'. "forcibly re-asserted the judicial task of preserving moral standards": He also referred to the following observations in that case by Lord Simonds :-- "When Lord Mansfield, speaking long after the Star Chamber had been abolished, said that the Court of King's Bench was the custodes morum of the people and had the superintendence of offences contra bonos mores, he was asserting, as I now assert, that there is in that Court a residual power, where no statute has yet intervened to supersede the common law, to superintend those offences which are prejudicial to the public welfare. But gaps remain will always remain since no one can foresee every way in which the wickedness of man may disrupt the order of society ...Must we wait until Parliament finds time to deal with such conduct? I say, My Lords, that if the common law is powerless in such an event, then we should no longer do her reverence. But I say that her hand is still powerful and that it is for Her Majesty's Judges to play the part which Lord Mansfield pointed out to them: ' . . . (Lord Hodson) : "The juridical precedents which have been cited show conclusively to my mind that the Courts have never abandoned their function as custodes morum by surrendering to the Legislature the right and duty to apply established principles to new combinations of circumstances. The words of Parke, J., in Mirehouse v. Rennell, (1833) 1 Cl. Fin. At p.

546 read by my noble and learned friend, Lord Tucker, are not outdated and, in my opinion, are applicable to this case."

And lastly, on the same page :- "Even if Christianity be not part of the law of England, yet the common law hots its roots in Christianity and has always regarded the institution of marriage as worthy to be supported as an essential part of the structure of the society to which we belong. I do not see any reason why a conspiracy to encourage fornication and adultery should be regarded as outside the ambit of a conspiracy to corrupt public morals. It is suggested, as I understand it, that this throws the not too wide, and in some way it is desirable to show a tenderness towards prostitu--petition as a recognised and necessary evil. I do not accept this approach."

The thoughts of the eminent English Judges in the House of Lords quoted above relating to : (a)

Christianity as religion being the basis of Common Law ; (b) their duty not to ignore the public morals in interpreting the laws ; and (c) further to fill in the gaps in the laws by moral, and no other considerations, are too obvious to be further commented upon. Why mutatis mutandis these rules should not apply to the approach by Pakistani Judges in the fulfilment of their own oath of office, is incomprehensible the necessary changes being : 'Islam' for 'Christianity' ; 'Islamic moral values' for 'public morals'; and Muslim way of life' for 'moral consideration' as understood in the West.'

While dealing with the question whether basic philosophy and juridical norms are capable of practical application in modern times it was observed that : In some quarters, it is an impression- though wrong-that Islamic concepts of law or, at least, some of them are not of practical content and value and cannot cope with the modern theories of law and jurisprudence ; therefore, it would be, if not impracticable, at least difficult to adopt them in this age and at the same time to claim modernisation of or modernism in our judicial system. One straight comment is that some branches of Muslim Law have already been codified and the Pakistani Courts are successfully coping with the entire number of situations which arise in entire with those laws. And the decisions in that behalf cannot at all be criticised on the bar of either quality vis-a-vis the real norms of justice or even of modernism. This is not only in Pakistan. Contemporary phenomenon has developed also in most of the Muslim countries. In Egypt since 1949, Civil Codes have been pro-- mulgated wherein, according to N. J. Coulson, the previous practice of indiscriminate adoption of European laws has been departed from. It is very interesting to _ note that in the Egyptian Code, Article I provided that in matters not specifically regulated by the Code, the Courts should follow customary law, the principles of Islamic law, or the principles of natural justice. This again, according to Coulson "obviously opens the door to a wider reference to Shari'a law" (see page 153, Islamic Surveys 2, a History of Islamic Laws). Even though the Ottoman Mejella was superseded in Turkey, the same is the basis of several laws and principles of general law in Iraq and Jordan.

Pakistani superior Courts have also started dwelling on it. It would here suffice to quote, again, the views of Coulson (in the same work, at page 224/225) "generally speaking, the Qur'anic precepts are in the nature of ethical norms-broad enough to support modern legal structures and capable of varying interpretations to meet the particular needs of time and place. And on this basis it would seem that Islamic jurisprudence could implement, in practical and modernist terms, its fundamental and unique ideal of a way of life based on the Command of God. Freed from the notion of a religious law expressed in totalitarian and uncompromising terms, juris--prudence would approach the problem of law and society in a different light. Instead of asking itself, as it has done since the tenth century and still generally does today, what concessions must be wrested from the law by the needs of society, its new terms of reference would be precisely the opposite to determine what limitations religious principle set upon society."

There is no denying the fact that in every branch of law in Islam, there are available innumerable works of great value not only by Muslim juris but also by others particularly the Western jurists. The subject of Interna--tional law is no exception. Recourse to Islamic law and principles in this field can fill the gap and vacuum felt (at times) during the last three decades. As I share some of the views (on major issues) contained in a research stud on the Nature, Origin and Source of Islamic Law of Nations by the Pakistan Islamic Research Institute, it will save repetition if the outstanding an relevant features of this study are reproduced here; "ISLAMIC LAW OF NATIONS If the Soviet Union and Latin American nations can stridently assert the existence of their respective systems of Intsmational Law, the case of Islamic Law of Nations, the most ancient of its kind regulating the relations of various communities and individuals and codified some eight centuries before the European-or the modern Law of Nations-is entitled to unqnestioned recognition. In addition to being the fundamental principle of legislation in most Islamic countries, it has in the past twelve centuries served as a useful guide to the Caliphate to conduct its external relations with other peoples. Unlike the modern Law of Nations which is essentially a law regulating the relations of States. Islamic Law is applicable to individuals, States and Communities (1). In this respect it could be said to have merged in its corpus the public as well as the private law.

Majid Khadduri has particularly emphasized this aspect of difference between the modern and Islamic laws on the ground that all primitive and ancient systems were essentially personal (2) rather than territorial in character although he concedes that the leading Manafi School did recognize the enemy jurisdiction during the hostilities. But certain modern writers such a Kelsen have rejected the traditional view that the rules of International Law regulate the relations of State and not of individuals on the ground that in the ul--timate analysis all law is the regulation of human behaviour (3). International Law, he asserts, could obligate., and authorize the individual as well. Oppenheim concedes that though the rules of International Law are primarily meant for the States sometimes they create rights and obligations for the individuals and international organizations (4). Islamic law creates rights and obligations for both the States and the individual and groups composing that State. The Public and Private Laws of Islam are. Complementary to each other, and amanate from a common source. It thus rejects the dualistic view according to which Municipal Law and International Law have different sources and are maintained by different sanc--tions (5). Instead, there is no dischotomy in Islam between the Municipal and International legal systems since they both derive their validity from a superior norm-the Divine Law (6).

SOURCE OF LAW (7)

Qur'an, the very word of God as revealed to Prophet Muhammad, is the ultimate source of all law.

Since it embodies eternal truth, all other laws derive their authority from it. It differs from the positive law such as statute and legislation in that these are the creation of human will (8), while Qur'anic Injunctions are the expression of God's Will. There exists a hierarchy d1i norms: the positive law should conform to the higher law. This is not to say that the Qur'an is a legal code. It, however, lays down principles of ,haw which are contained in several Surahs or Chapters and serve as a basis for legislation (9). Supplementing the Qur'an is the Sunnah of

(1) Kelson, The Communist Theory of Law op. Cit., pp. 156-57, Krylov says that it is possible to distinguish "various layers of international law of more or less democratic shade- See. Ibid., p. 187.

(2) Khadduri, Translator's Introduction, op. Cit., p. 6.

(3) Ibid., p. 11.

(4)Kelsen, The G61ieral Theory of Law, translated by Anders Wedberg (Cambridge: Harvard University Press, 1949), p. 342.

(5)) Oppenheim, op. Cit. Vol. I, pp. 5-6.

(6) Ibid.,h. 37.

(7) In so far as both the branches of law are part of a single system, Islamic legal theory can be said to be based on Monoistic Doctrine.

(8) Kelson, The General Theory of Law, op. Cit. p. 9.

(9) Iqbal rejects to static view of Islam on the ground that Qur'an asserts that change is the greatest sign of God. See. Lqbal "The Reconstruction of Religious Thought in Islam." (Lahore: Muhammad Ashraf, 1965), p.

148. Dr. Santillana, the eminent Italian jurist also a observes that Islamic law is as progressive as any other modern system since it has socialutility as its object.

They De. Santillaua. Law and Society." The Legacy of Islam ed. Sir Thomas Annold and Alfred 1st edition, (Oxford University Press 1931), p. 305. the Prophet, another important source of law. The Sunnah or the Hadith has been defined as the utterances or the acts of the Prophet or the acts and sayings of other; approved by him. A bulk of the rules of law have been drawn from the corpus of hadith and Sunnah which consists of the traditions and practice of the Prophet including the treaties made by him and the Charters and decrees promulgated by him from time to time and instructions issued to the Commanders on the battlefied.

LAW OF NATURE A study of the sources of Islamic Law destroys the myth that it is rigid and immutable like the laws of Medes and Persians. On the contrary, it reveals its inherent elasticity and adaptability to the needs and aspirations of every age. The principle of consensus-or Ijma has a great bearing on the development of law in Islamic society. The term has been defined as "the consensus of the Muhammadan Mujtahids of any period concerning the Shariah value." The dependability of consensus as a law-making source is emphasized by the well-known tradition of the Prophet asserting that his community would never agree on an error. The spirit of ijma is democratic since it makes common consent as the basis of legislation. It was a common practice among the companions of the Prophet that whenever any question of law or fact arose calling for immediate answer, they would get together and deliberate on the matter and finally, when they arrived at some consensus, their opinion was regarded as conclusive .... The Muslim jurisconsults thus, developed the new legal science known as Siyar or Inter--national Law, which was part of the fiqh and laid down elaborate rules of war, peace, treaty and neutrality governing the relationship of Muslim and non-Muslim States some eight centuries before Grotius and others wrote their treaties on the Modern Law of Nations.

Abu Hanifa gave the name of Siyar to his lectures on Islamic laws of War and Peace. Later these lectures were incorporated by his disciple, Muhammad al-Shaibaniy into Kitab al-Saghir and Kitab al-Siyar al-Kabir, the first systematic works on the subject.

The works of the classical Muslim jurists who codified the Siyar or the Islamic Law of Nations is an authentic manual of the rules of war and peace. These jurists differ in their method and treatment of the subject, but all of them made significant contribution to the development of law.

The compendium of later jurists such as Fatawa-i-Alamgiri (1) and Hedayat which contain judicial decisions, rulings and comment--aries on important points of law are an authentic source material of Islamic Law. It must be recalled that Article 30 of the Statute of International Court of Justice mentions the writings of the highly qualified publicists of other nations as that the subsidiary source of law. So far only the treatises of the European jurists have been referred to as evidence of law. It is hoped that with increasing cooperation among the Muslim States and their insistence on the adoption of Islamic laws and judicial system will call for occasional

(1) Hamidullah, The Muslim Conduct of State op. Cit., p. 26. reference to or reliance on the works of Islamic jurisprudence. A recognition of the merits of Islamic law becomes all the more imperative, now that the Western Powers no longer enjoy para mountcy in most Muslim countries, who, now freed from alien domination, are rediscovering their cultural heritage. The statute also attaches due importance to judicial decisions of international tribunals and even of municipal Courts of various countries as evidence of the rules of International Law."-(Islamic Studies, Vol. 10-1971)."

It will also be of advantage here to reproduce relevant parts of the Study, `Islam and International Law', contributed at International Islamic Conference held in 1977-(PLD 1976 Journal p. 191) referred to by my learned brothers Karam Elahee Chauhan and Nasim Hasan Shah, JJ.

"International Law provides a system of rules governing the conduct of inter-State relations. In dealing with the history of modern Inter--national Law, Oppenheim and a number of western scholars treat the Dutch Jurist, Hugo Grotius, as father of International Law and question the concept of a gap of over a thousand years between Roman period and the publication of Hugo crotius's Treatise--De jure balli ac pacis (The Law of War and Peace) in 1625. Such scholars did not refer at all to Islamic contribution to International Law . . . . The earlier European writers on International Law, such as Pierre Bello, Ayala. Vittoria, Centitlis and others, hailed from Spain or Italy, and owed much to the renaissance provoked by the impact of Islam. Grotius and other early writers draw heavily on Arabic works. In fact they provide the missing link between the Roman and the modern period and serve to give a clue to the far-reaching changes brought by Islam in the concept of Inter--national Law (Afzal Iqbal, Diplomacy in Islam, p. Xxi.). Grotius mentions in Chapter X (Article 3) of his book that Postlimininum was known to Muslim Law. Postliminiwn is the return of things captured by the enemy. If any thing possessed by the Muslims is captured by the enemy and is again taken back by the Muslims it has to be handed over to the original owner before the distribution of Ghaninurt. Of course. I. T. Walker (T. A. Walker, A History of the Law of Nations, p. 89.) and Prof. Nys (Nys Original Priot International, p. 216.) of Belgium recognise the influence of Islam on modern. International Law.

The conduct of the ruler, not only in time of war but also in peace, was referred to by the term Serial as early as the Holy Prophet Muhammad. Codes or Compendia of Law seem to have come into existence in Islam in the very first century or Hijrah. In any case (or the Corpus Juris) attributed to Zaid ibn Aly (d. 122 H.) has come down to Is and contains chapters on International Law. Abu Hanifa is known so far to be the first to designate the term Siyar to the set of special lectures he delivered on the Muslim Laws of the War and Peace. So also the Muwatta of Malik (d. 189 H.) has special chapters on this subject. The lectures of Abu Hanifah were edited by his disciple al-Shaibany (d. 189 H.) into the first. Systematic study of the subject of International Law called-Kitb al-Saghir and Kitab al-Siyar al-Kabir (Hamidullah, The Muslim Conduct of State, p. 8.). This was in the 8th century of the Christian era. It is therefore obvious that International Law was a subject matter of Islamic writings under various titles-Jihad, Chanimah, Aman, Maghazis, Ridda, and Siyar almost three centuries before the first codification of Western Law of War, if we were to apply this pompous term to the Clause XXIII of the Second Part of the Decretum by Gratien (Muhammad Talaat, Al Ghunaimi, The Muslim Conception of International Law and the Western Approach, p. 83).

Itmay be remarked that Muslim International Law was not a complete innovation in the domain of legal studies and International relations. Nevertheless, Muslim International Law according to its classical interpretation, was a great advance on both the Greek and the Roman systems of International Law. First, Muslim International Law attaches much more importance to ethical values because, though the study of International Law evolved into an independent branch of law, yet it continued to be subservient to the religion. Second, in Muslim International Law we find, for the first time in recorded history, a full-fledged notion of recognised rights for the enemy, in peace as much as in war. Moreover, as noted earlier Muslim jurists were the first to develop the science of International Law as an independent branch of law in general and distinct from political science in particular. Islam provides for the first time the idea of a universal state based on the equality of man. Prof. J. N. D. Anderson has acknowledged. "The traditional doctrine of Islamic law in regard to International relations is well known. The Sharia includes many excellent provisions about declarations of war, treaties of peace, armistices, diplomatic envoys, negotiations and guarantees of Safe Conduct" (A1 Ghuanaim, op. Cit. Foreward, p. (vii).).

PACTA SUNT SERVANDA Certain theorists e.g. the Italian Jurist Anzilotti later Judge of the Permanent Court of International Justice have rested the binding of treaties on the Latin Maxim pacta sunt servanda. In other words states are bound to carry out in good faith the obligations they have assumed by treaty. In the Vienna Convention, the Preamble recites that good faith and Pacta Sunt Servanda are universally recognised. Its article 26 provides that all treaties are binding on the parties thereof and must be performed by them in good faith. Long before the Vienna Convention that principle was laid down by the Qur'an and is in fact inherent in the conception of Aqd and is recognised by all the authorities (Majid Khadduri, op. Cit., p. 204. .). Allah, in the Islamic theory, considers Himself a third party in every treaty the Muslims conclude. Any breach of a treaty is an unforgivable sin since it is also a renouncement of an obligation towards Allah (A1 Ghunami, p. 212.)."

My learned brother Karam Elahee Chauhan, J., has after a detailed analysis held that the Pakistan Code of Civil Procedure does not bar the suit of the appellant against the respondent. Section 9 of the Code permits the institution of this suit unless it is barred exressly or impliedly. There is no express bar in the Code or any other law. Mr. Khalid Farobq Qureghi, the learned counsel for the respondents tried to spell out an implied bar from the customary International Law but as shown by my learned brothers Karam Elahee Chauhan and Nasim Hasan Shah, JJ., in an elaborate treatment of the subject, the effort has not succeeded. On my, part even if any such implied bar would have been discoverable in what is called the customary International Law and that too on the basis otherthan that of 'justice'. I would have, consistently with the view taken in Haji Nizam Khan's case (particularly when there is no dissent thereto, so far,1 rather it is being endorsed and relied upon), applied the Islamic Inter--national Law. And, as this need has not arisen in this case on account of the field being occupied by the Code of Civil Procedure, the treaty between Pakistan and USSR and the State Immunity Ordinance, 1981 as held by my learned brother Chauhan, J., with whom I agree on all the relatable questions, therefore, it has not been found necessary to spell out the details of the Islamic Law on the question of Immunity. In this behalf, I have also kept in view the position of `no contest' adopted by Mr. Khalid Farooq Qureshi, learned counsel for the respondents, to the plea of Islamic Law raised by Mr. Sharifuddin Pirzada, the learned counsel for the appellant.

However, for reference sake, it may be mentioned that in the treatise "The Muslim Conduct of State" by Mr. Muhammad Hamidullah, the subject has been dealt in a concise form in nearly 650 articles under about 50 headings including `jurisdiction' and `Equality of States'. Some of the subjects which are not covered even by other works of repute on Modern International Law are also included therein. It is interesting to note that the learned jurist has based his treatise on over three hundred works in more than six languages including those in European languages.

As the decision on the main controversies raised in this appeal is against the respondents, I agree with the proposed judgments of my learned brothers Karam Elahee Chauhan and Nasim Hasan Shah, JJ., that this appeal be allowed in terms as contained in the leading judgment.

NASIM HASAN SHAH, J.-Before I could finalize my judgment in this highly interesting case, which raises the oft-debated question whether a foreign State enjoys immunity from being sued before the territorial Courts of the State where it has entered into a commercial transaction, I have received the text of the proposed judgment which my Lord Mr. JusticeK. E. Chauhan proposes to deliver in this case. The judgment has dealt with all the questions arising in the case with great erudition, thoroughness and clarity and I agree with the conclusions arrived at by him.

However, in view of the importance of the issues involved I am tempted to make some observations on the question of the extent of immunity enjoyed by Foreign States to be sued before the Courts of Pakistan in respect of their commercial dealings.

As has been pointed out by my Lord Justice Chauhan section 86 of the Civil Procedure Code does not constitute a bar to a suit against a Foreign State in our country. The question then is whether such a suit is barred by any principle of Customary International? The law of Pakistan is that;-- "every statute is to be so interpreted and applied, as far as its language admits, as not to be inconsistent with the comity of nations, or with the established rules of international law". The Hanover Fire Insurance Co. v. Messrs Muralidhar Banechand (PLD 1958 SC (Pak.) 138and under section 9 of the C. P. C. a suit in respect of any right of civil nature is competent unless its cognisance is either expressly or impliedly barred by any other law. Hence the necessity to discover whether the principles of International Law either expressly or impliedly bar such a suit.

A study of the law of sovereign immunity reveals the development o two conflicting concepts, each of which has been widely held and firmly established at one period or another.

' According to the classical or absolute theory of sovereign immunity, a sovereign cannot, without his consent, be made a respondent in the Court of another sovereign. This doctrine is embodied in the maxim "Par in pare non habet imperium" (one Sovereign cannot have any power over another Sovereign). The rule is thus stated in Oppenheim's International La (8th Edn.), Art. 115(a) at page

264. "The third consequence of State equalit is that according to the rule Par in parem non habet imperium (no State can claim jurisdiction over another). Therefore, although States can sue in a foreign Court they cannot as a rule be sued there unless they voluntarily submit to the jurisdiction of the Court concerned".

Indeed, the locus classicus is the judgment of the United States Supreme Court in The Schooner Exchange v. McFaddon ((1812), 7 Cranch 116delivered by Marshall, C. J. He observed :- "This full and absolute territorial jurisdiction being alike the attribute of every sovereign, and being incapable of conferring extra-territorial power, would not seem to contemplate foreign sovereigns nor their sovereign rights as its objects. One sovereign being in no respect amenable to another, and being bound by obligations of the highest character not to degrade the dignity of his nation, by placing himself or its sovereign rights within the jurisdiction of another, can be supposed to enter a foreign territory only under an express license, or in the confidence that the immunities belonging to his independent sovereign station, though not expressly stipulated, are reserved by implication, and will be extended to him.

This perfect equality and absolute independence of sovereigns, and this common interest compelling them to mutual intercourse, and an interchange of good offices with each other, have given rise to a class of cases in which every sovereign is understood to waive the exercise of a part of that complete exclusive territorial jurisdiction, which has been stated to be the attribute of every nation."

It was considered to be an insult to the dignity of foreign sovereigns to implead them before the Courts. Lord Campbell Chief Justice observed in, De Haber v. The Queen of Portugal (1851) 17 Q B 2,06 (207)), "to cite a foreign potentate in a municipal Court, for any complaint against him in his public capacity, is contrary to the law of Nations, an insult which he is entitled to resent".

On the other hand, according to the modern or restricted theory, the immunity of the sovereign is recognised with regard to the sovereign or public acts (juri imperil) of a State, but not with respect to private acts (jure gestionis).

This theory is the outcome of the circumstance that in the course of the 19th Century commercial entrepreneurs appeared on a considerable scale, creating monopolies in particular trades, and operating railway, shipping and postal services. The First World War increased such activities, and appearance of Socialist and Communist States where greater prominence is given to the public sector in national economies contracts and dealings of a private nature began to be entered into by these extensions or depart--ments of foreign States. After earlier doctrinal developments Belgian and Italian Courts responded to the extension of state activity by developing a distinction between acts of government ( jure imperii) and acts of a commercial nature (jure gestionis) denying immunity from jurisdiction in the latter case. This approach is referred to as the doctrine of restrictive immunity and has gradually by now been adopted by the Courts of a large number of countries. Indeed, one writer, after surveying the case-law concluded as long ago as in 1953 that "the theory of absolute immunity is today nearly universally condemned it is only followed with difficulty and not without hesitation by the Courts of a few countries" (Lalive, `L' Immunite de Jurisdiction des Etats et des Organization international ((1953) 84 H R 205. At 239 U. K. Courts Parlement Beige ((1980) 5 P D 197to a Belgian mail ship engaged mainly in public service. Forty year later, in the Porto Alexander (1920 P. 3the same Court was presented with a claim of immunity for another government vessel, but this time one engaged exclusively in commercial activities; nevertheless, the earlier decision was regarded as controlling, irrespective of the use to which public vessels were put. In The Cristina (1938 A C 485a case in which the Spanish Government of General Franco had, by force, used in implementing the decree of requisition, taken possession of a ship lying in Cardiff harbour followed the doctrine of unrestricted immunity with inexorable rigidity.

However, strong misgivings about the rigid application of the absolute theory was expressed by three of the Lords who reserved their freedom to re-examine the holding in the Porto Alexandre, cited above, Lord Maugham explained his views in referring to :- "The absurdity of the position which our Courts are in if they must continue to disclaim jurisdiction in relation to commercial ships owned by foreign Governments. The matter has been considered over and over again of late years by jurists, by English lawyers, and by businessmen, and with practical unanimity they are of the opinion that, if Governments or corporation formed by them choose to an navigate and trade as shipowners, they ought to submit to the same legal remedies and actions as any other shipowner . . . . . : '

Nevertheless, the doctrine of unrestricted immunity continued to be adopted by the Courts, a notable instance being Krajina v. The Tass Agency ((1949) 2 All E R 274). The plaintiff claimed damages for a libel contained in The Soviet Monitor which the defendants had published through their London office, this having been registered in the Register of Business Names set up under the Registration of Business Names Act, 1916. Yet the Tass Agency was treated as a department of the Soviet Union and the plea of immunity was upheld. The decision led to some public disquiet and on 23rd November 1949 a debate took place in the House of Lords in the course of which the Lord Chancellor, Earl Jowitt, acknowledged the existence of the grave problem `whether the law of this country affords to organs of foreign States a wider immunity than is desirable or strictly required by the principles of international law observed in the countries of the world." A somewhat similar view was expressed in the more recent case of Rahimtoola v. Nizam of Hyderabad ((1958) A C 379 (422)wherein his dissenting opinion Lord Denning observed;-- "It is more in keeping with the dignity of a foreign sovereign to submit himself to the rule of law than to claim to be above it, and his independence is better ensured by accepting the decisions of Courts of acknowledged impartiality than by arbitrarily rejecting their jurisdiction. In all civilized countries there has been a progressive tendency towards making the sovereign liable to be sued in his own Courts; notably in England by the Crown Proceedings Act, 1947. Foreign sovereigns should not be in any different position. There is no reason why we should grant to the departments or agencies of foreign governments an immunity which we do not grant our own, provided always that the matter in dispute arises within the jurisdiction of our Courts and is properly cognizable by them."

But the above view was only the minority view and Sucharit Kul in his book published in 1959 "State Immunities and Trading Activities in International Law" remarked after concluding a survey of State practice that "England seems to be the only country that persists in the systematic adherence to the orchaic view of immunity".

Mellenger v. New Brunswick Development Corporation ((1971) 1 W L R 603). However, the majority in the Court of Appeal in Thai-Eorope Tapioca Service v. Government of Pakistan ((C A) (4) (1975) 1 W L R 1485adopted the view that the Court of Appeal was bound to follow the rule of international law as incorporated into English Law by previous decisions in accordance with the principle of stare decivis. In respect of proceedings in personam concerning a body representing a sovereign State the question of employment of the vessel in private trading did not arise. However, a movement away from this view became discernible in the decision delivered by the Privy Council in Phillipine Admiral v. Vallem Shipping (Hong Kong) Ltd. (1977 A C 373) whereby immunity for actions in rem was restricted but any advance towards restricting immunity for action in personam. Was discouraged. (An action in personam is one which impleads the State directly, by naming it as the defendant in the case and not indirectly by proceedings in rem brought against property (usually a ship) in which the State has an interest). 1n this case, the Privy Council held that though a foreign State cannot be sued in a British Court in an action in personam, even if a suit involved a commercial transaction, an action in rem can be brought against a ship owned by a foreign State in case it is engaged, in ordinary commerce.

The final point of judicial development occurred early in 1977 by the decision of the Court of Appeals in Trendtex Trading Corporation Ltd. v. Central Bank of Nigeria (1) when Lord Denning M. R.

And Shaw L. J., Stephenson L. J. Decided that even if the defendant-Central Bank of Nigeria-was a department of State it was not entitled to immunity in respect of a commercial transaction such as a letter of credit.

According to the above judgment, International Law had changed to a doctrine of restrictive immunity. In view of the importance of this case, it deserves to be noticed in some detail.

The defendant, the Central Bank of Nigeria, was incorporated by Act of the Nigerian Parliament. It was not declared to be a department of State; but it acted as the reserve Bank of Nigeria, and conducted the accounts of the Federal and State Governments and other governmental institution.

It was empowered to conduct accounts for other persons in Nigeria with the consent of the Central Government, but it did not in fact do so. The Bank was wholly owned by the Central Government, which appointed officers and retained a considerable degree of control over the conduct of its affairs.

Lord Denning, dealing with the doctrine of immunity which was being propounded on the basis of the consensus of civilised nations, observed; "To my mind this notice of a consensus is a fiction . . . . . .The courts of every country differ in their application of it. Some grant absolute immunity. Others grant limited ,immunity with each defining the limits differently . . .Yet this does not mean that there is no rule of International Law on the subject. It only means that wediffer as to what that rule is which country delimits for itself the bounds of sovereign immunity . . . . . It is, I think, for the courts of this country to define the rule as best they can, seekingguidance from the decisions of the courts of other countries, from the jurists who have studied the problem, from treaties and conventions and, above all, defining the rule in terms which are consonant with justice rather than adverse to it . . . . . .

"A fundamental question arises for decision : what is the place of International Law in our English law ? One school of thought holds to the doctrine of incorporation. It says that the rules of international law are incorporated into English law automatically and considered to be part of English law unless they are in conflict with an Act of Parliament. The other school of thought holds to the doctrine of transformation. It says that the rules of International Law are not to be considered as part of English. Law except in so far as they have been already adopted and made part of our law by the decisions of the Judges, or by Act of Parliament, or long established custom. The difference is vital when you are faced with a change in the rules of International Law. Under the doctrine of incorporation, when the rules of International Law change, our English law changes with them. But, under the doctrine of transformation, the English law does not change. It is bound by precedent. It is bound down to those rules of International Law which have been accepted and adopted in the past. It cannot develop as International Law develops.

As between these two schools of thought, I now believe that the doctrine of incorporation is correct.

Otherwise I do not see that our courts could ever recognise a change in the rules of International Law . . . . . . . . . . International Law does change, and the courts have applied the changes without the aid of any Act of Parliament. Thus, when the rules of International Law were changed(by the force of public opinion) so as to condemn slavery, the English courts were justified in applying the modern rules of International Law . . . . . . . . . Again, the extent of territorial waters varies from time to time according to the rule of International Law current at the time, and the courts will apply it accordingly : See R. V. Kent Justices ex parte, Lye (1967) 2 K. M. 153 at pp. 173, 189 ; (1967) 1 All E R 560 at pp. 564, 574. The bounds of sovereign immunity have changedgreatly in the last 30 years. The changes have been recognised inmany countries, and the courts-of our country and of :others- have given effect to them, without any legislation for the purpose, notably in the decision of the Privy Council in Philippine Admiral (Owners) v. Wallem Shipping (Hong Kong) Ltd. 176 2 W L R 214 - 1977 1 All ER78.

" . . . . Seeing that the rules of International Law have changed-- and do change-and that the courts have given effect to the changes without any Act of Parliament, it follows to my mind inexorably that the rules of International Law, as existing from to time to time, do form part of our English law. It follows, too, that a decision of this Court, as to what was the ruling of International Law 50 or 60 years ago, is not binding on this Court today. International Law knows no rule of stare decisis. If this Court today is satisfied that the rule of International Law on a subject has changed from what it was 50 or 60 years ago, it can give effect to that change, and apply the changS in our English law, without waiting for the House of Lords to do it.

(After reviewing the evidence and concluding that International Law had changed to a doctrine of restrictive immunity, Lord Denning continued).

"In one respect already the Privy Council have abandoned the absolute theory and accepted the restrictive theory. It is in respect of actions in rem :See Phillippine Admiral (Owners) v. Wallem Shipping (Hong Kong) Ltd. (1976) 2 W L R 214 at p. 233; (1976) 1 All E R at pp. 95, 96 But unfortunately, the Privy Council seem to have thought that the absolute thereof still applied to actions in personam. They said ((1976)2 W. L R 214 at p. 233; (1976) 1 All E R 78 at p. 95} -"It is no doubt open to the House of Lords to decide otherwise but it may fairly be said to be at the least unlikely that it would do so". That is a dismal forecast. It is out of line with the good sense shown in the rest of the opinion of the Privy Council . . . . . . . . . . Such reasoning is of general application. It covers actions in personam. In those actions, too, the restrictive theory is more consonant with justice. So it should be applied to them. It should not be retained as an indefensible anomaly.

"I see no reason why we should wait for the House of Lords to make the change. After all, we are not considering here the rules of English law on which the House has the final say. We are considering the rules of International Law. We can and should state our view as to those rules and apply them as we think best, leaving it to the House to reverse us if we are wrong . . . . . . . .

"It was suggested that the original contracts for cement were made by the Ministry of Defence of Nigeria, and that the cement was for the building of barracks for the army. On this account it was said that the contracts of purchase were acts of a governmental nature jure imperil--and not of a commercial nature jure gestionis. They were like a contract of purchase of boots for the army. But I do not think this should affect the question of immunity. If a government department goes into the market places of the world and buys boots or cement--as a commercial transaction-that government department should be subject to all the rules of the market place. The seller is not concerned with the purpose to which the purchaser intends to put the goods.

"There is another answer. The plaintiffs here are not suing on the contracts of purchase. They are claiming on the letter of credit which is an entirely separate contract. It was a straightforward commercial transaction. The letter of credit was issued in London through a London bank in the ordinary course of commercial dealings. It is completely within the territorial jurisdiction of our courts. I do not think it is open to the government of Nigeria to claim sovereign immunity in respect of it . . . . . . . .

"If we are still bound to apply the doctrine of absolute immunity, there is, even so, an important question arising on it. The doctrine grants immunity to a foreign government or its department of State, or any body which can be regarded as an "alter ego or organ" of the govern--ment . . . . . . In some countries the government departments conduct all their business through their own offices- -even ordinary commercial deflings-without setting up separate corporations or legal entities. In other countries they set up separate corporations or legal entities which are under the complete control of the department, but which enter into commercial transactions, buying and selling goods, owning and chartering ships, just like any ordinary trading concern. This difference in internal arrangements ought not to affect the availability of immunity in International Law. A foreign department of State ought not to lose its immunity simply because it conducts some of its activities by means of a separate legal entity. It was so held by this court in Baccus SRL v. Serviclo Nacional del Trigo (1957) 1 Q B 438 ;=(1956) 3 All E R 715. "

Stephenson L. J. Put the arguments even more clearly :- "I would find less difficulty in accepting restrictive immunity in place of absolute immunity if restrictive immunity were as generally accepted today as absolute immunity was in the past-and that may not have been as universally accepted as I have assumed. But rules of Interna--tional law, whether they be part of our law or a source of our law, must be in some sense `proved', and they are not proved in English courts by expert evidence like foreign law : they are `proved" by taking judicial notice of 'international treaties and conventions' authoritative text books, practice and judicial decisions of other courts in other countries which show that they have 'attained the position of general acceptance by civilised nations' : The Cristina 19311 A C 485, 497, per Lord MacMillan : and those sources come seldom if ever from every civilised nation or agree upon a universal rule : they move from one generally accepted rule towards another. But if none moved, old rules would never die and new rules never come into being. Some move must be made by States, or their tribunals, or jurists, to prevent petrifaction of the living law. When should a court of law accept or adopt or incorporate or assent to what is alleged to be a new rule of international conduct ? Can an English court ever make the first move in this country ? Or must it wait for a "Tate letter' from the Government of the United Kingdom ? Or for an Act of Parliament ? -If one asks the questions indicated by the judgment in West Rand Central Gold Mining Co. Ltd. v. The King (1905) 2 K B 391 the answers do not give 'Trendtex' much help. Have civilised States agreed that the doctrine of restrictive immunity shall be binding upon them in their dealings with one another ? The answer is doubtful ; many have. In there evidence that Great Britain has ever assented to the doctrine ? The answer must be no-until she ratifies the European Convention on State Immunity which she signed at Basle on May 16, 1972, and perhaps also the Brussels Convention of 1926. Has it been proved by satisfactory evidence that the doctrine has been recognised and acted upon by our own country ?

No, Or that it is of such a nature, and has been so widely and generally accepted, that it can hardly be supposed that any civilised State would repudiate it ? The answer to that might be yes ; the Government of Nigeria has not repudiated the doctrine by instructing the Bank to plead immunity for what it alleges to be an act done jure imperii, but it is a bold claim that no civilised State would repudiate the application of the restrictive doctrine to actions in personam, and inconsistent with the opinion of the Privy Council to which Lord Denning M. R. Has referred, that the House of Lords is unlikely to apply it to them. Have the opinions of jurists received the express sanction of international agreement, or have they grown to be part of International Law by their frequent practical recognition in dealings between various nations ? On al( the material put before us I could not answer that question in the affirmative. It is clearly difficult if not impossible to prove that governments have acted on the 'rule' of restrictive immunity by failing to plead immunity for ordinary commercial transactions ? How do you prove that the gestation of a new rule is over and that it has come to birth ? Or that an old rule has grown and developed into a new form'.

It is part of Mr. Bingham's case that a vacuum may have been created in the law of nations by the dissent of many from the old rule, but that the vacuum has not been filled by any agreed new rule.

Even if the law of nations does not abhor a vacuum, it is entirely unsatis--factory that the Courts of this country should not lift a finger to help fill it by a new rule which is `consonant with justice'. In my judgment this new rule is consonant with justice. It is in accord with the law merchant which requires that payments on letters of credit should be honoured. It is now so widely and generally accepted that no civilised country which has not yet expressly assented to it should be presumed to repudiate it. It would be repugnant to justice if an English Court were to repudiate it in modern conditions and so in effect extend the old rule of immunity to transactions which were never considered subject to it by former judges and Jurists because such transactions would never in their time have been carried out by sovereign States or their emanations."

There can be doubt that by this judgment International Law so far as United Kingdom was concerned had changed to a doctrine of restrictive immunity. The decision in Trendtex's case was followed in Hispano v. Central Bank (1979) 2 Lloyd's Law Rep. 277 (C A),and establishes that Trendtex case was not decided per incuriam.

The matter now in the U. K. Is governed by Legislation and the U. K. Parliament appears to have approved the restrictive theory by enacting the State Immunity Act, 1978. The provisions reproduced below are relevant in this context :- "1.--(1) A State is immune from the jurisdiction of the Courts of the United Kingdom except as provided in the following provisions of this Part of this Act.

(2) A Court shall give effect to the immunity conferred by this section even though the State does not appear in the proceedings in question.

2------------------.

3.-(1) A State is not immune as respects proceedings relating to--

(a) a commercial transaction entered into by the State ; or

(b) an obligation of the State which by virtue of a contract (whether a commercial transaction or not) falls to be performed wholly or partly in the United Kingdom."'

Thus, the main citadel in the western world upholding the absolute theory of immunity has fallen.

U. S. A.

The trend towards the theory of restricted immunity in the United States of America began with the famous "Tate" letter (namely the letter written by the Acting Legal Adviser of the Department of State, Jack B. Tate to the Acting Attorney-General) dated 19th May, 1952. The relevant parts of this letter may be reproduced below with advantage :- "A study of the law of sovereign immunity reveals the existence of two conflicting concepts of sovereign immunity, each widely held and firmly established. According to the classical or absolute theory of sovereign immunity, a sovereign cannot, without his consent, be made a respondent in the Courts of another sovereign. According to the newer or restrictive theory of sovereign immunity, the immunity of the sovereign is recognized with regard to sovereign or public acts ( jure imperii) of a State, but not with respect to private acts (jure gestionis). There is agreement by proponents of both theories, supported by practice, that sovereign immunity should not be claimed or granted in actions with respect to real property (diplomatic and perhaps consular-property excepted) or with respect to the disposition of the property of a deceased person even though a foreign sovereign is the beneficiary."

Thereafter, reference was made in some detail to the Courts of the countries which were following either one or the other of the two theories in the field and the conclusion was, thus, expressed :- "It is thus evident that with the possible exception of the United Kingdom little support has been found except on the part of the Soviet Union and its satellites for continued full acceptance of the absolute theory of sovereign immunity. There is evidence that British authorities are aware of its deficiencies and ready for a change. The reasons which obviously motivate State trading countries in adhering to the theory with perhaps , increasing rigidity are most persuasive that the United States should change its policy. Furthermore, the granting of sovereign immunity to foreign Governments in the Courts of the United States is most inconsistent with the action of the Government of the United States in subjecting itself to suit in these same Courts in both contract and tort and with its long established policy of not claiming immunity in foreign jurisdiction for its merchant vessels. Finally, the Department feels that the widespread and increasing practice on the part of Governments of engaging in commercial activities makes necessary a practice which will enable persons doing business with them to have their rights determined in the Courts. For these reasons it will hereafter be the Department's policy to follow the restrictive theory of sovereign immunity in the consideration of requests of foreign Governments for a grant of sovereign immunity."

It was observed by the United States Supreme Court in Alfred Dunhill v. The Republic of Cuba(1976)

425 U S 682, that the Tate Letter was an evidence of the fact that "the U. S. Abandoned the absolute theory of sovereign immunity and embraced the restrictive view under which immunity in our Courts should be granted only with respect to causes of action arising out of a foreign State's public or Governmental actions and not with respect to those arising out of its commercial or proprietary action. This trend in U. S. A. Ultimatedly culminated in the adoption of the U. S. Foreign Sovereign Immunities Act, 1976.

The Act came into force with effect from 19th January, 1977 and it sought to codify as well as modify the Substantive Law of Sovereign Immunity in U. S. A. It was also the objective of the Act to make the application of the law more uniform, fair and predictable by relieving the Department of State of the responsibility to determine claims of such immunity and remitting them exclusively to the judicial determination. (The President of United States also made observations to this effect in his statement of 22nd October, 1976). It is assumed that by depoliticising the question of sovereign immunity, diplomatic .Irritants with foreign States, will be removed. In future the Department of State will appear only as amicus curiae in cases of significant interest to the Government rather than determining claims of sovereign immunity itself.

Whereas it is assumed that the rules of Customary International Law provided that a foreign State has immunity from the jurisdiction of local Courts (section 1604), the Act provides for certain exceptions to the immunity of foreign States. The exceptions to the immunity of foreign - sovereigns have essentially been provided in respect of their commercial activity. The term 'commercial activity' of a foreign State has been defined in section 1603, paragraphs (d) and (e) of the Foreign Sovereign Immunities Act, 1976. Which read as follows :- "(d) 'A Commercial activity' means either a regular course of commercial conduct or a particular commercial transaction or act. The commercial character of an activity shall be determined by reference to the nature of the course of conduct or particular transaction or act, rather than by reference to its purposes.

(e) 'A commercial activity' carried on in the U. S. By a foreign State' means commercial activity carried on by such State and having substantial contact with the United States."

This Act, thus, adopts the restrictive doctrine of State immunity in the U. S. A. According to which the acts jure gestionis of Foreign State no more enjoy immunity from the jurisdiction of the U. S. Courts.

Canadian Courts The Canadian Courts also follow the doctrine of restrictive immunity. In Zodiak International Products Inc. v. Polish People's Republic ((1977) 81 D L R 656), Quebec C. A. One issue was considered ; the degree of immunity which should be accorded to a sovereign State in litigation concerning a commercial contract. It was held the doctrine of restrictive immunity which holds that a sovereign State is not immune from being impleaded in the Courts of another States where the cause of action concerns matters other than legislative or Interna--tional transactions of the sovereign State is part of the law of Canada.

Civil Law Countries Max Sorenson in his Manual of Public International Law has referred to the practice of Civil Law countries. He observes that the variations of the restrictive theory have been applied by most courts in civil law countries. The leading Belgian Supreme Court case, decided in 1903, is Societe anonyme des Chemins de Fer Liegeois-Luxembourgecis v. Etat Nierlandair Belge ((1908) 1 P. 294in which Holland was denied immunity in an action involving a contract for work on a Dutch railway station in Holland. The transaction was deemed to be a private act of a commercial character.

Using similar reasoning, Italian Courts denied immunity before the turn of the century in cases such as Gutteriez v. Elmilik ((1886) 1 Foro ltal. 913), decided by the Florence Court of Cassation in an action for recovery of fees on a contract for services rendered on behalf of the Bey of Tunisia. Later Court of Cessation decisions include denial of immunity for acts connected with the floating of public loans French Ministry of Finance v. Banca italiana de Sconto (AD (1931-2) Case No. 14), and with the selling of foodstuffs De Semenojf v. Railway Administration of the Norwegian States (AD (1935-7) Case No. 92). A recurring theme in many Italian decisions is the assertion that the controlling standards for defining public and private acts are those found in Italian Law, not in the law of the State claiming immunity (for example, Floridi v. Sovexportfilm ((1955) 49 AFIL 98), Borga v. Russian Trade Delegation (1 L R 1955 P. 235 The Swiss courts were also among the first to adopt the restrictive theory. In 1918, the Swiss Supreme Court assumed jurisdiction in a case involving public loans on the ground that the legal relationship created between the Foreign State's Ministry of Finance and Swiss bondholders was of a private law nature (K. K. Osterreichische Finanzministerium v. Deryfus, ESB-G, Vol. 44, i, pp. 49 ff).

There exists in Swiss practice a dual require--ment: the act must be of a private or commercial character, and it must have some connection with Swiss territory. In Hellenische Republik v.

Obergerichi Zurich, decided in 1930 (ESB-G, Vol. 56, i, pp. 237 ff), immunity was upheld because the contract on which the suit was based had been performed outside Switzerland. C. F. Kingdom of Greece v. Fulius Bat & Co. (I L R 1956 P. 195).

After the First World War substantial additions were made to the list of States committed to the restrictive theory. Some al4thorities are hesitant to place France firmly in this category (see Hamson, 'Immunity of Foreign States: the Practice of the French Courts', (1950) 27 BYIL 293 but it is nevertheless true that French Courts, by invoking the principles of acte de commerce or acte de gestion privie as opposed to acte de puissance publique, have moved a great distance from their unqualified acceptance of absolute immunity throughout the nineteenth century. The reversal was most clearly apparent in Roumania v. Pascalet (AD (1923-4) Case No. 68), where the Commercial Tribunal of Marseiles ruled that the purchase of goods for resale to nationals was an acte de commerce, from which immunity would be withheld. Similarly, in Chaliapine v. USSR (AD (1935-7)

Case No. 85), the Soviet Union was not given immunity in a suit for breach of copyright in the form of publication and sale of certain books. More recently, the Court of Cassation refused to sustain a claim that a Foreign State enjoyed immunity when acting as a trustee of private property Pracureur-General v. Vesting (AD (1946) Case No. 32 ). A long line of decisions regarding various Government instrumentalities in particular Soviet trade delegations, suggests that another controlling test . Is the extent to which the French Courts view the instrumentality and the Government as clearly separable. Where the evidence of separation is strong, the Courts have been reluctant to grant immunity (Societe le Gostorg et USSR v. Association France Export (AD (1925-6) Case No. 125). A greater willingness to grant immunity is displayed when evidence of separability is less conclusive Societe Viajes v. Office .National du Tourisme Espagnol (AD (1935-7) Case No. 87).

There have been a few relevant Greek decisions, but the Courts have generally echoed the explicit ruling in Soviet Republic (Immunity in Greece (AD (1927-8) Case No. 109), a suit on a contract for delivery of cattle. It was held that State subjects itself to local jurisdiction, whenever it acts as an entrepreneur, undertakes ordinary civil business, and enters a contract of municipal law. See also the dicta in Consular Premises (Greece) Case (AD (1931-2) Case No. 187).

Austrian Courts, after adopting the restrictive concept as early as 1919 Austro-Hungarian Bank v.

Hungarian Government ((1920) 28 Z I 506) and then casting some doubt on their position in a later series of cases, have recently re-armed the restrictive doctrine. The Supreme Court handed down in 1950 one of the most elaborate immunity decisions to come from any European Court. In a suit concerning rights to use certain trade-marks that had been nationaliz--ed by Czechoslovakia, the Court, after an exhaustive review of all relevant sources of law, concluded that according to International Law foreign States are exempt from domestic jurisdiction only with regard to their acts jure imperii ; and that according to municipal law States are subject to the jurisdiction of Austrian Courts in all disputes arising out of private law relationships. The conclusions were expressed in the following words :- "The Supreme Court, therefore, reaches the .Conclusion that it can no longer be said that under recognized International Law so-called acta gestionis are exempt from municipal jurisdiction;-- -..Accordingly, the classic doctrine of immunity has lost its meaning and, ratione cessante, can no longer be recognized as a rule of International Law."

(Dralle v. Republic of Czechoslovakia (I L R 1950 Case No. 41), these conclusions were reiterated by the Administrative Court in Soviet Distillery in Austria Case (I L R 1954 P.101) (1921) ERZ, Vol. 103, pp. 274 ff ; AD (1919-22) Case No. 102).

German Courts at the beginning of this century firmly supported the abso--lute concept (see the German Supreme Court decision in the Ice King Case, Gustaf Selling v. United States Shipping Board, disclaiming jurisdiction in a suit for collision damages). The absolute concept was abandoned in the realm of maritime law in 1938 with the decision in the case of Visargi and Sienna (AD (1938-40) Case No. 94). Significantly, the ruling was based on the 1926 Brussels Convention which Germany had ratified. Since 1950 German Courts have displayed an unmistakable tendency towards the restrictive theory Republic of Lativia Case (L R 1955 P. 230). In re: Danish Railways in Germany (I L R 1953 P. 178), Restitution of Property (Republic of Italy Case) (I L R 1951 Case No. 52).

Finally in a suit by a German firm to collect a small bill for repairs in a foreign embassy building (claim against the Empire of Iran Case), the German Constitutional Court after a very elaborate review of the practices of States the lateral and multilateral conventions and views of International Law Writers ruled that International Law does not preclude the exercise of jurisdiction by German Courts in proceedings that involve a foreign State's activities jure gestionis.

The following extracts from this decision can be reproduced hereunder with advantage :- "Modern writers on International Law largely, if not overwhelmingly, support the restrictive theory of State immunity.

Taking into consideration the lack of uniformity in State practice, the view is also put forward that customary International Law possesses no rule at all on State immunity."

Absolute State immunity is approved in the literature of the Communist countries. In particular, the work, International Law published in 1957 by the Academy of Sciences of the Soviet Union, upholds the theory of absolute immunity. Molodzow claims the immunity also applies to State-owned trading ships. Schur-schalow is of the opinion that in order to justify encroachments on the rights and privileges of Soviet trade missions, the bourgeois jurists invented the theory of the "trading State". Lasok explains (Polish Private International Law, in Studies in Polish Law (Law in Eastern Europe, No. 6, 1962), p.

121. At p. 132) that in Polish Law the doctrine of State Immunity applies to all State activities and recognizes no exceptions.

Apart from the above, the view that States are entitled to immunity also for their non-sovereign activities hardly appears now in interna--tional Legal doctrine (cf. Lalive, loc. Cit. p. 222. n. 2).

A comprehensive assessm ent of the judicial practice, a few treaty provisions, the efforts at codification and writings on International Law show that unrestricted immunity can no longer be regarded as a rule of customary International Law. One must concur with the view of the Australian Supreme Court in its decision of 10th May, 1950 (S. Z., Vol. 23, p. 304, at p. 322) that `today it can no longer be said that according 'to recognized International Law so-called acta gestionis are exempt from municipal jurisdiction."

The conclusion was expressed thus :- "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.

Whether a State is entitled to immunity does not depend on the purpose of the function which the Foreign State is thereby pursuing. The distinction of sovereign functions according to the nature of the transaction, and the qualification of the transaction according to national law, may not yet have found the comprehensive recognition which is indispensable for a general rule of International Law ; it is, however, so widespread that a grant of immunity going beyond it can no longer be seen as being required by general International Law."

(Foe the text of the decision, See (1964) 24 Zairv 279 later reported IV72) 45 I L R 57).

Dutch Courts also seem to have abandoned the absolute doctrine. Assessment is difficult because of several contradictory decisions and occasional divergence between the views of the Courts and the disposition of the political branches. A recent Amsterdam Court of Appeals decision, however, applied the restrictive theory in a suit arising out of an alleged breach of an employment contract with a defendant State Bank. In reversing the lower Court decision upholding immunity, the contract in question was labelled an act of private law character Krol v. Bank of Indonesia ((1958) 2 1 L R 1-80cf. Nederlandse Rijinbank, Amsterdam v. Muhlig Union (A D (1947) Case No. 27). ' '

The highest Appeal Court of Jordan (the Supreme Court of Cassation in its decision of 28th July 1958 asserted jurisdiction over the French Government in respect of a claim for payment of rent, holding that the Courts of many countries had decided that the immunity of foreign States is restricted to their `official functions'.

Support for the restrictive theory can be found in the relatively in frequent decisions by the Courts of Argentina, Ireland and Egypt. Egyptian Court, it should be noted, have on at least one occasion opted for the restrictive theory, thereby continuing the attitude that was long a practice of the Egyptian Mixed Courts, which ceased to function in 1948 Republic of Ygusolavia v. Kafr El-Zayat Cotton Co. 'Ltd. (1 L R 1959 Case No. 54The positions of Courts in the Scandinavian countries, most of Latin America, Luxembourg, and Turkey remain an open question.

Soviet Union We may now take up the position of Soviet Union on this issue. The question has been dealt with by Mr. M. M. Boguslavsky, Professor, Institute of State and Law of the Academy of Sciences of the USSR Member of the Board of Editors of the Soviet Yearbook of International Law, in an article contributed in the Netherlands Year Book of International Law (Volume X-1979). The following extracts explain the Soviet Doctrine of Foreign State Immunity:-- "Soviet doctrine is based upon the absolute theory of foreign State immunity. According to this theory a foreign State possesses judicial immunity, by which is meant the exemption of a State from the jurisdiction of another State. The result of this is that no suit may be brought against a foreign State as a defendant without its consent." .

The following further remarks are also significant:- "The application of the, rules on immunity does not mean that disputes with a State may not be examined at all. A suit against a State may be brought in the State's own courts, and in the courts of another country, but only with the defendant State's consent. Where that consent is not given, the- plaintiff, if a private person, may apply to his own Government to ask it to start diplomatic negotiations with the foreign State for the solution of the dispute in accordance with the principles of International Law. In international trade practice, a firm concluding a contract with a State usually negotiates the inclusion in such contract of an arbitration clause, and the State concerned thus gives its consent to the examination of the dispute."

He also remarks: "It is well-known that in the last twenty years the doctrine of restrictive or functional immunity has become widespread in the doctrine and practice of many States. It is submitted that this doctrine suffers from substantial shortcomings creates uncertainty in practice and is not to be applied with regard to socialist States."

Discussing the distinction between ,lure imperil and Pure gesttonfs, it is remarked:-- "The distinction between acta jure imperil and Pure gestionis, which underlies the doctrine -of restrictive immunity, is thoroughly artificial and introduces a subjective element into the solution of the problem, thereby facilitating the taking of arbitrary decisions and giving rise to the danger of abuses."

The Soviet Legislation on the point of immunity is also referred to in this article and it is observed: According to Article 61 of the Fundamental Principles of Civil Procedure and the corresponding Article 435 of the Code of Civil Procedure of the RSFSR), "Bringing a suit against a foreign State, provisional attachment and the levy of execution against the property of a foreign State located in the USSR is permitted only with the consent of the competent agencies of the State in question."

"In those cases in which the same inviolability as is guaranteed to foreign States and their property in the USSR is not guaranteed to the Soviet State and its property' in a foreign State, the Council of Ministers of the USSR or other authorised organs may order the application of counter-measures with regard to that State and its property. So, contrary to earlier legislation, the immunity rule is formulated in the law currently in force without reference to reciprocity."

The immunity rule, thus, bears an absolute character.

However, international agreements can be entered into on this subject but, it is explained that- .

"The international agreements concluded by the Soviet State start from the principle of immunity, at the same time providing for certain exceptions to this principle."

East European Countries .

Most of the East European Countries, presumably, hold views similar to those held by the Soviet Union on the doctrine of State immunity. However, the Polish Court apply the principle of reciprocity in determining the immunity of a foreign State in Polish Courts. In the French Consulate in Cracow Case a car belonging to the French Consulate in Cracow ran over and killed a man. The children of the deceased- instituted action against one "J" and the French consulate sued to recover damages in the Court of first instance (the Voivodship Court of Keilce). The Supreme Court of Poland in 1958 held that in so far as the Court of the first intance purported to exercise jurisdiction over the French consulate that part of the proceedings must be quashed. The Court applied the principle of reciprocity in determining whether the Republic of France was immune from the jurisdiction of the Polish Court.

Asian and African Countries As for the position of Asian and African Countries on this question some light is thrown thereon from the results emerging from the deliberations of the Asian-African Legal Consultative Committee. The Asian-African Legal Consultative Committee, as reconstituted in 1958, was comprised of representatives from Burma, Ceylon, India, Indonesia, Iraq, Japan, Pakistan, Sudan, Syria, and the United Arab Republic. The Final Report of its Committee on Immunity of States in respect of Commercial and Other Transactions of a Private Character (as revised in the third session, held at Colombo in January-February 1960) reads, to the extent relevant, as under :- "(2) It is observed, that many of the States today do not confine their activities to the traditional functions of a State. Some of them not only own and control means of production and distribution inside the State but also enter into trading contracts with merchants in foreign countries in the exercise of their State functions. Such contracts are usually entered into on behalf of the State or a Government Department or a State trading organization: It is being increasingly realised that the doctrine of sovereign immunity of foreign States was not meant to include these new and extended functions which are being assumed by the Governments at present. . . In these circumstances it was thought to be opportune for the Asian-African Nations to consider if they should also place restrictions on the immunity granted to foreign States in respect of such activities.

(4) All the delegations except that of Indonesia were of the view that a distinction should be made between different types of State activity and immunity to foreign States should not be granted in respect of their activities which may be called commercial or of private nature. The Indonesian delegate, however, adhered to the view that immunity should continue to be granted to all the activities of the foreign State irrespective of their nature provided they were carried on by the Government itself.

(5) All the delegations were agreed that a State trading organization which is part of the government and is not a separate juristic entity should be treated on the same footing as the Government proper. All the delegations were also agreed that where a State trading organisation has an entity of its own under the Municipal Laws of the State, immunity should not be available to it."

(6) The majority of the delegations were agreed that the trade representa--tive of a Government would not be entitled to immunity for the same reason and on the basis that a foreign Government would not be so entitled. The Indonesian delegation was, however, of a contrary view.

(9) The Committee having taken the view of all the delegations into consideration decided to recommend as follows: - The State Trading Organisations, which have a separate juristic entity under the Municipal Laws of the country where they are incorporated should not be entitled to the immunity of the state in respect of any of its activities in a foreign State. Such organisations and their representative could be sued in the Municipal Courts of a foreign State in respect of their transactions or activities in their State.

(ii) A State which enters into transactions of a commercial or private character, ought not to raise the plea of sovereign immunity if sued in the courts of a foreign State in respect of such transactions. If the plea of immunity is raised it should not be admissible to deprive the jurisdiction of the Domestic Courts."

Thus, in transactions of a commercial character the plea of immunity will not be admissible. In other words, the theory of restrictive immunity has been adopted.

Multilateral Conventions Apart from the practice of individual States a number of multilateral international conventions have been entered into which have eroded the doctrine of absolute immunity in the various fields.

Some of the important conventions are listed below :-

(1) Convention for the Unification of certain Rules relating to the Immunity of State-owned Vessels, Brussels, April 10, 1926.

(2) Convention for the Unification of certain Rules, relating to International Carrriage by Air, Warsaw, October 12, 1929.

(3) Convention for Precautionary pre-attachment of Air-Craft, Rome 1933.

(4) Convention on International Civil Aviation Chicago, 1944.

(5) Geneva Convention on the High Seas, April 27, 1958.

(6) Geneva Convention on the Territorial Sea and the Contiguous Zone, April 28, 1958.

(7) Vienna Convention on Diplomatic Relations, 1961.

(8) Vienna Convention on Consular Relations, 1963.

(9) Convention on Special Missions New York, 1969.

(10) Vienna Convention on Representation of States and their relations with International Organization, 1975.

The concept of absolute immunity has been restricted in many spheres by the provisions of these multilateral conventions.

This somewhat lengthy survey of the practice of Municipal Courts of various countries, the legislation promulgated by them and the multilateral conventions entered into by them shows that most States have abandoned the concept of absolute immunity and moved towards the doctrine of restricted immunity at least so far as commercial acts are concerned. This change was duly noticed in the Trendtex Case, and the view was expressed and where there is no unanimity on an issue then considerations of justice and equity may be resorted to, and at least where the area in question has always been regulated by rules which are subject to change and this is a field which is rapidly changing. The judgments also indicate a rejection of the excessively positivist formulation for proving customary rules, expressed for example by the Permanent Court of International in the Lotus Case ((1927PCIJ)A 10).

I am in respectful agreement with the view expressed in Trendtex Case that it is for the Courts to recognise the change in a question where there is no unanimity on an issue and give effect to that rule which is more consistent with the consideration of justice and equity. The survey of State practice made above shows that there is no universal rule on the question of immunity of State to be sued before municipal Courts an as the English Courts have opined (as is evident from Tiendtex Case) it is for the Courts to decide which of the two doctrines namely that o absolute immunity or restrictive immunity it should apply.I am of the view that on account of the increasing involvement of States in International Trade and economic relations it (s only fair and equitable that they should be amenable to the jurisdiction of the Courts as private traders in respect of their private/commercial activities. This view is consistent with the principles of justice and equity, the principles of Islam as well as the trend of State practice of most States. In fact, in our country, the law is that the Court can fill in the gaps which may be found in it by resort to the principles of Islamic Law, justice and equity. Wherever, while interpreting the statute law, more than one interpretation are possible, the one consistent with Islamic principles and jurisprudence may be adopted. Out of two otherwise equally possible interpretations one of which advances the principles of policy and Islamic provisions in the Constitution and the other does not the former unless prohibited by "written" Constitution and the written law may be adopted. My learned brother M. A. Zullah, J. While in the High Court in Haji Nizam Khan v. Additional District Judge, Lyalipur and others (PLD 1976 Lah. 930formulated the rule thus; "Wherever, the expression "justice, equity and good conscience" occurs in law, it shall be interpreted in accordance with Islamic Law and principles. When the law gives discre--petition to the Court and it can be exercised in more than one way, it would be so exercised so as to advance justice and fairplay as understood in Islam.

Rules. Of prudence, propriety and abundant caution and similar other considerations would be applied only in consonance with Islamic standards. Present law when required to be applied to new situation would be followed and applied so as to advance Islamic principles. All doubts in interpretation of laws and appreciation of evidence would be resolved in manner consistent with Islamic principles and jurisprudence in preference to any contrary norm".

So far as the views of the Courts of this country with regard to the question of immunity is concerned some light is thrown by the judgment of this Court in Mir Balueh Khan and others v. Mst.

Lal Bibi and others (PLD 1972 SC 84wherein it was held that old English doctrine that sovereign can do no wrong and cannot be sued in Municipal Court in his own domain is alien to Muslim Shariat Law. The following observations made in the said judgment are significant and may be quoted hereunder with advantage :- "The Muslim Shariat does not embrace the concept of the British common law that a sovereign can do no wrong and cannot be sued in a municipal Court in his own domain. On the contrary in Shariat a sovereign can be sued in the Court of a Qazi and like any other citizen is subject to his jurisdiction and bound to carry out any decree or order passed against him by the Qazi."

Mr. Sharifuddin Pirzada, who presented a very studied and valuable argument on the questions falling for consideration in this case, also drew our attention to a recent publication of the Islamic Council of Europe edited by Mr. Altaf Gaubar entitled "The challenge of Islam" wherein paper contributed by eminent of Muslim Scholars at a Conference organised by the Islamic Council of Europe in the United Kingdom in 1976 have been compiled. In the paper entitled "Islam and International Law" presented by Mr. Sharifuddin Pirzada himself, he has very ably shown that equality of status and absence of discrimination are the hallmarks of the Islamic system.

Coming to the question how far foreign States are immune from the jurisdiction of our Courts in respect of their commercial dealings, two recent decisions of this country show that no such immunity is available. See Messrs Gammon-Layton, Karachi v. Secretary of State for the United States of America (PLD 1965 Kar. 425), wherein the Rule of par in parem non habet imperium was explained and the distinction between acts which are Jure Imperli and those which are only Jure Gestionis pointed out and it was held that the Courts of country had jurisdiction in respect of commercial acts. This judgment was upheld by a Division Bench of the same Court in The Secretary of State of the United States of America v. Messrs Gammon-Layton (PLD 1971 Kar. 314 The same trend is to be noticed in the municipal legislation of Pakistan. See Diplomatic and Consular Privileges Act, 1972 which was enacted to give effect to the Vienna Convention on Diplomatic Relations, 1961 and the Vienna Convention on Consular Relations, 1963; and the State Immunity Ordinance, 1981 (Ordinance VI of 1981). This Ordinance by its 19th Section repeals section 86 and section 87 of the Civil Procedure Code. It also, in its 15th Section, lays down to the extent relevant as follows :- "15. States entitled to immunities and privileges.-(1) The immunities and privileged conferred by this Act apply to any foreign State; and references to State include references to-

(a) the sovereign or other head of that State in his public capacity;

(b) the government of that State; and

(c) any Department of that government, but not to any entity, hereinafter referred to as a "separate entity", which is distinct from the executive organs of the government of the State and capable of suing or being sued.

(2) A separate entity is immune from the jurisdiction of the Courts of Pakistan, if, and only if-

(a) the proceedings relate to anything does by it in the exercise of sovereign authority; and

(b) the circumstances are such that a State would have been so immune."

Thus, the distinction between acta jure imperis and acta jure gestionis has been adopted and an entity like the Trade representation of the USSR would not be immune from being sued for its purely commercial transactions (acta jure gestionis). It is further evident from a perusal of section 5 of the Ordinance which to the extent relevant is in the following terms :- "5. Commercial transactions and contracts to be performed in Pakistan.-

(1) A State is not immune as respects proceedings relating to-

(a) a commercial transaction entered into by the State, or

(b) an obligation of the State which by virtue of a contract, which may or may not be a commercial transaction, fails to be performed wholly or partly in Pakistan."

Mr. Kbalid Farooq, learned counsel for the respondents urged that the provisions of this Ordinance are not retrospective. However, Mr. Irshad Hasan Khan, learned Deputy Attorney-General refuted this suggestion and drew our attention to Empson v. Smith (I L R 1966 1 Q B 426). As this decision is important on the question of retrospectivity of legislation such as the one under consider--ation, I may discuss the above case at some length.

It was held by Diplock L. J. :- "[The 1964] Act makes radical amendments in the previously existing law on diplomatic privileges and immunity and in particularly draws a distinction between the immunities enjoyed 'by "members of the diplomatic staff" and "members of the administrative and technical staff" of a mission. Section 4 of that Act provides that a certificate issued by or under the authority of the Secretary of State shall be conclusive evidence of any fact relevant to any person's entitlement to any privilege or immunity. A further certificate dated October 20, 1964, was issued under that Act certifying that the defendant was on October 1 and had continued to be a member of the administrative and technical staff of the Diplomatic Mission of Canada in the United Kingdom.

When the action was commenced in March 1963, the defendant was entitled under section 1(1)(a) of the Act of 1952 "to the like immunity from suit and legal process as is accorded to members of the official staff of an envoy of a foreign sovereign power". He was thus entitled so long as he remained on posts to complete immunity from civil suit in the United Kingdom, both as respects acts done his official capacity on behalf of his government and as respects acts done in his private capacity ..........

If the defendant had applied before the passing of the Diplomatic Privi--leges Act, 1964, to have the plaintiff's action dismissed there would have been no answer to his application. But he delayed until Novem--ber, 1964. By that date his right to immunity from civil suit had been curtailed by that Act which applies to the United Kingdom the provisions of the Vienna Convention on Diplomatic Relations, 1961, contained in the Schedule to the Act. By the combined effect of Articles 31 and 37 of the Convention as a member of the administrative and technical staff of the mission his immunity from the civil jurisdiction of the Courts of the United Kingdom does not extend to acts performed outside the course of his duties. Whether he is entitled to immunity in any particular suit no longer demands solely upon his status but also upon the subject-matter of the suit.

It is elementary law that diplomatic immunity is not immunity from legal liability but immunity from suit. If authority is needed for this it is to be found in Dickenson v. Del Solar . . . . . Statutes relating to diplomatic immunity from civil suit are procedural statutes. The Diplomatic Previleges Act, 1964, is in my view clearly applicable to suits brought after the date on which that statute came into force in respect of acts done before that date."

This judgment shows that statutes relating to Diplomatic Immunity are procedural statutes and Diplomatic Privileges Act, 1964 is applicable to suits brought after the date on which it came into force in respect done before that date.

Empson v. Smith, to destroy the finality of the judgments of the Courts below and enable decision to be rendered in accordance with the provisions of the 1981 Ordinance. I am fortified in this view by the judgment of this Court in Commissioner of Sale Tax (West), Karachi v. Messrs Kruddsons Ltd. (P LD1974 SC 180In that case a manufacturer had collected certain amounts from his customers on account of sales tax. He also, under mistake, paid sales tax to the Department but later on, on discovering that articles manufactured by him were exempt from sales tax, claimed refund of the amount from the Department. The Department refused to refund on the ground that having collected the amount from the customers he could not be permitted to retain the same and enrich himself unjustly. The matter ultimately reached the High Court in reference under section 17(1) of the Sales Tax Act, 1951. The High Court in its order dated 11-10-1966 answered the reference in favour of the manufacturer. The Department filed a certificated appeal to the Supreme Court. Pending the disposal of the appeal, section 30-A was inserted in the Sales Tax Act, 1951 by Finance Act of 1967 and the same was further amended by Finance Act of 1568. The result was that under section 30-A the amount collected from customers by a manufacturer of articles exempt from tax was to be refunded to the Government. On the question, therefore, as to what effect the change in law had on the appeal pending before the Supreme Court, it was held that "the effect of final determination" of the rights of parties to a litigation was considered by the Privy Council in John Lemm vThomas Alexender Michell 1912 A C 400) and the principle laid down was that the effect of the judgment which in the "absence of appeal (operates as) as a final determi--nation of the rights of the parties" rests on the general principle that a man is not to be vexed twice for the same cause of action unless, it is "excluded by the Legislature in explicit and unmistakable terms". In the instant case, the pendency of the certificated appeal in his Court had destroyed the finality of the High Courts' order dated 11-10-1966, and, therefore, was hit by the new dispensation in section 30-A of the Act.

The upshot, in my view, of this discussion is that;--

(1) Section 86 of the Civil Procedure Code does not bar the suit filed by the appellant against the respondents ;

(2) That there is no positive rule of Customary International which can be pleaded as a bar of jurisdiction to the maintainability of the suit. On the other band, the rule of International Law followed by most States at present and which rule, in my view, should be followed by the Courts of Pakistan is that act of a commercial nature are not immune from the jurisdiction of the Municipal Courts. Therefore, the plaintiff's suit was maintainable and the decision to dismiss it as incompetent is erroneous and deserves to be set aside.

I would, accordingly, allow this appeal in terms of the directions made in the order of Mr. Justice Karam Elahee Chauhan.