This article discusses the recent Federal Court decision of The United States of America V. Menteri Sumber Manusia & Ors And Another Appeal [2022] 6 CLJ 493.

In coming to its decision, the Federal Court tackled the application of sovereign immunity in the industrial relations context and provided guidance on when the Industrial Court has jurisdiction to adjudicate a claim against a foreign embassy.

The short answer to the latter? “It depends.”

Facts

Mr. Subramaniam a/l Letchimanan is a Malaysian who worked as a security guard at the Embassy of the United States of America (“Employer“)”.

He was dismissed from his employment without reason and, consequently, decided to file a representation under s. 20(1) of the Industrial Relations Act 1967 (‘IRA’) against his employer. i.e. the United States of America.

He claimed that his dismissal was without just cause and he sought to be reinstated.

After an unsuccessful conciliation process, the Minister of Human Resources (‘Minister’) exercised his discretion to refer the dispute to the Industrial Court to be adjudicated.*

*This case arose prior to the Industrial Relations (Amendment) Act 2020 (“Amendment“). Since the coming into force of the Amendment, the Minister no longer plays a role in the process, and any dispute that cannot be resolved through the mandatory conciliation process will automatically be referred to the Industrial Court for adjudication. Since then, there is limited room for judicial review as there is no longer an exercise of discretion by an executive to be reviewed.

The Employer then filed a judicial review application to challenge the referral of the Minister on the basis that it (and its embassy) were immune from the jurisdiction of the Industrial Court, relying on the doctrine of sovereign immunity.**

**At this juncture it may be helpful to understand what “sovereign immunity” is. The Industrial Court case of Davinder Kaur v. Mauritius High Commission [2021] 1 ILR 472 which dealt with similar facts, is explained as follows:

Sovereign immunity or state immunity is a legal doctrine whereby one sovereign state cannot be sued before the courts of another sovereign state without its consent. It is a principle of customary international law, founded on the notion of par in parem non habet imperium (equals do not have authority over one another)… The rationale for state immunity had been to promote comity and good relations between states by respecting another’s state sovereignty and to deny it would be inimical to good relations between states and be a violation of international law. The scope of sovereign immunity very much depends on the international treaties ratified by Malaysia and the laws passed by Parliament to give effect to those treaties. Malaysia subscribes to the common law doctrine of restrictive immunity, which recognises state immunity only in respect of acts done by a state in the exercise of sovereign authority (jure imperil), as opposed to absolute immunity…”

The High Court allowed the application and quashed the Minister’s referral. However, upon appeal, the Court of Appeal overturned the High Court’s decision, effectively finding that the referral was legitimate and the Industrial Court could hear Mr. Subramaniam’s claim.

Dissatisfied with the decision, the Employer appealed to the Federal Court, and upon obtaining leave, posted 3 questions of law to be decided by the Federal Court.

Nevertheless, legalese aside, the Federal Court essentially focused on resolving one issue only, which is:

“Is the High Court the correct forum to decide on whether the Industrial Court has jurisdiction to adjudicate Mr. Subramaniam’s claim against the United States of America?” (paraphrased)

The Court’s finding is as stated below.

Findings

The Court held that Malaysia adopts the restrictive doctrine of sovereign immunity, which meant that not all acts of the sovereign foreign state are immune from legal action but only those that are primarily governmental or diplomatic in nature and character.

This means a foreign state can be subjected to legal action in Malaysia if the action of the foreign state that is being questioned is not governmental or diplomatic in nature and character but of commercial or private.

The Court cited with approval a summary of the guiding principles submitted by the Federal Counsel that was deduced from United States case law. The principles are as follows:

  1. a state engages in commercial activity where it exercises only those powers that can also be exercised by private citizens, as distinct from those powers peculiar to sovereigns;
  2. a foreign sovereign’s motives are immaterial to the analysis, the issue is whether the particular action performed, whatever the motive behind it, is the type of actions by which a private party engages in trade or commerce;
  3. a foreign state employer-employee relationship can be commercial depending upon the context; the question courts must ask is whether the activity is typical of a private party engaged in commerce;
  4. if there is nothing quintessentially governmental about the employee’s work, the commercial exception applies; a court’s inquiry in applying the commercial activity exception turns on the activity’s nature as opposed to the purpose of the activity; and
  5. the employment of American citizens or third country nationals as civil service personnel by foreign state in the US is commercial activity and falls under the immunity exception; the only employment relationships of a foreign state that are governmental in nature are relationships with diplomatic, civil service or military employees who are neither US citizens nor third country nationals employed in the US, the hiring of all other employees is commercial.

In the case, the Employer argued that Mr. Subramaniam was employed to work in a security capacity and that his duties were not only to provide security but also to maintain the inviolability of the Embassy’s premises. The Employer argued that those duties were not merely auxiliary but integral to the core sphere of sovereign activity.

However, Mr. Subramaniam argued that his responsibilities as a security guard at the Embassy were mere routine and menial in nature and were similar to those of his counterparts in the private sector, and that his dismissal was purely that of an employer and nothing more.

Considering the dispute in facts, the Court held that an inquiry must be made and there must be determination and findings of facts of the precise nature, duties as well as the job scope of Mr. Subramaniam first, before it can be determined whether the employment was of a governmental and diplomatic nature or a private or commercial nature, and consequently whether the doctrine of sovereign immunity is applicable to shield the Employer from litigation.

Therefore, in short, the Federal Court did not decide whether the Employer has immunity but simply found that the case should be adjudicated by the Industrial Court, for the Industrial Court to find out the precise nature of Mr. Subramaniam’s employment first, and then for the Industrial Court to decide if the Employer does have sovereign immunity.

The Court found that the High Court and the judicial review process were not the right ways to make a determination on such issues of mixed questions of fact and law.

The appeal is accordingly allowed, and the matter is then referred to the Industrial Court to be adjudicated.

Conclusion

Whilst the application of this case is now limited due to the change in law (as explained above), the Court’s explanation of the doctrine of sovereign immunity in the employment law context remains applicable.

Foreign states with a presence in Malaysia should review the employees working under them, to have clarity as to which employees exercise roles that are of a governmental and diplomatic nature and which are purely of a commercial and private nature. Then, these embassies, agencies, and organizations will have a better understanding of their obligations towards these employees, and the employment laws that are applicable.

Suffice to say that there is no absolute and blanket immunity, and foreign states should not assume that their actions will have no legal repercussions in Malaysia. Meanwhile, the case is good news for Malaysian employees as the Industrial Court continues to keep its door as widely open as possible to ensure that more can utilize it to seek justice and relief.

This article was written by Louis Liaw ([email protected]), Senior Associate at Chong + Kheng Hoe, with a focus on Employment Law.

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