Australian International Islamic College Board Inc IA 30976 v Kingdom of Saudi Arabia & Anor

In this matter the appellant’s action against the Kingdom of Saudi Arabia was dismissed at first instance on the basis that the respondents were immune from the court’s jurisdiction by virtue of s 9 of the Foreign States Immunities Act 1985 (Cth).  An exception in relation to sovereign State immunity arose in relation to commercial transactions but not if the transaction concerned the provision of scholarships. The question before the Court of Appeal was whether or not the action came within the scope of the exception to foreign state immunity by reason that the proceedings concerned a commercial transaction or was a payment in relation to a scholarship?  The basis of the claim was that the respondents had agreed to meet the education costs of certain students studying at the appellant’s institution and that the costs had not been met.  It was alleged that the respondents had given assurances that the various amounts would be met.  The Court of Appeal (Holmes JA, White JA and Atkinson J agreeing) held that the purpose of the “scholarship exception” was to avoid litigation between foreign states conferring benefits and the recipients of those benefits in the local Courts.  The exception was not concerned with the commercial arrangements between the foreign states and those who were contracted to provide the educational benefits under the scholarships.  The Court also considered the width of the “commercial transaction” exception in the Foreign States Immunities Act and held that so long as the pleaded case concerned a commercial transaction involving the foreign state, that was sufficient and whether or not an action would be stayed did not depend upon the plaintiff establishing that the commercial transaction, in fact, occurred.