Canada v Edelson

• Jurisdiction: Israel
• Date: 03 June 1997
• Court: Supreme Court (Israel)

Israel, Supreme Court.2

(Barak, President; Mazza and Strasberg-Cohen, Justices)

Her Majesty the Queen in Right of Canada

and

Edelson and Others

State immunity Jurisdictional immunity Whether rules forming part of customary international law Whether restricted or absolute Distinction between acts performed jure imperii and jure gestionis Nature and purpose tests Test of whether a private entity other than the State could have been a party to the act Freedom of States to adopt different rules pending the development of a standardized international practice Purchase or rental of buildings for ambassadorial residence not covered by State immunity Head of State Action against Head of State in substance an action against the State itself

Diplomatic relations Diplomatic immunity Ambassador Whether acting as State's representative in conclusion of lease or as party to legal proceedings Party to lease being sovereign State of Canada Dispute covered by State immunity rather than diplomatic immunity

Relationship of international law and municipal law Customary international law Part of the law of the State of Israel Conflict between rules of customary international law and Israeli legislation Whether the latter prevails The law of Israel

Summary:The facts: Rivka and Aaron Reinhold (the respondents) leased their house from 1986 to Her Majesty the Queen in Right of Canada (the appellant) to serve as the residence of the Canadian Ambassador to Israel. In 1991, the respondents filed two consecutive suits with Magistrates' Courts concerning Canada's right to exercise an option to extend the lease. In both suits, Canada claimed sovereign immunity. Both Courts accepted the respondents' contention that the sovereign immunity of States is restricted.

However, they differed on whether the immunity applies to a dispute over a lease of an ambassador's residence. One decided in favour of the respondents and the other in favour of the appellant. The appeals were combined and heard jointly.3 The District Court held that State immunity was restricted, applying only to acts in which the State exercised its sovereign powers. In this case the dispute was entirely within the realm of private law, to which immunity did not apply. On appeal to the Supreme Court, the appellant claimed that the adjudication of the dispute was precluded by both diplomatic and sovereign immunity.

Held: The appeal was dismissed.

(1) The dispute fell within the realm of State immunity. The legal entity party to the lease was the State of Canada. The expression the Queen in Right of Canada referred only to the symbolic role of the Head of State and did not mean that the action was against the Queen herself. The Canadian Ambassador merely acted in his capacity as the appellant's representative and was not party to the lease or to the proceedings. Neither his personal immunity, nor the immunity granted to the residence of a head of a diplomatic mission, was at issue. The immunity at issue in this case was State immunity rather than diplomatic immunity (para. 11).

(2) The rules of State immunity were part of customary international law, which was part of the law of Israel. In the case of a conflict between those rules and Israeli legislation, the latter prevailed. Customary international law recognized the immunity granted to foreign States in civil proceedings. This immunity was procedural. The foreign State could waive it, either expressly or impliedly. This basic approach was generally accepted in both common law and civil law jurisdictions. This immunity was recognized in its relative and restricted, rather than its absolute, form (paras. 15 and 21).

(3) The accepted approach to State immunity in customary international law distinguished between acts of State covered by immunity and private (or commercial) acts which were not covered by immunity. The first dealt with the foreign State's acts in its sovereign capacity, acta jure imperii. The second category included the foreign State's private acts, acta jure gestionis (paras. 245).

(4) The generally, though not universally, accepted approach in customary international law was that the determining, though not exclusive, criterion was the legal nature of the State's act rather than its purpose. The question was whether a private entity other than the State could have performed the act in question, even if doing so would have required a State-issued permit or licence. If the answer was yes, the act was a private not a sovereign act. The distinction between sovereign and private acts was not clear-cut. Thus, different States could adopt different guidelines in this context. Pending the development of standardized international practice regarding this issue, each

State inevitably applied its own locally accepted criteria in accordance with its existing national jurisprudence (paras. 26 and 289)

(5) State immunity should not be recognized with respect to the purchase of buildings for ambassadorial residences, nor the rental of premises for this purpose. In this case, Canada did not enjoy State immunity. Leasing a building to serve as an ambassador's residence was a private law act, to which sovereign immunity did not apply. The fact that the transaction was not carried out for profit had no bearing on the case (paras. 31 and 34).

The following is the text of the judgment of the Court, delivered by President Barak, with whom the other members of the Court agreed:

A house was rented to a foreign state, which intended to use the premises as a residence for its ambassador to Israel. A dispute arose between the lessor and the lessee regarding the terms of the lease. The Court was asked to issue a declaratory judgment regarding the lessor's rights. In addition, the Court was asked to determine the appropriate amount of rent to be paid. The issue before the Court is whether or not the lessee has immunity with respect to the dispute's adjudication before an Israeli court.

The Facts

1. Rivka and Aaron Reinhold are the owners of a house in Herzliya. As of May 13, 1986, they let the house to Her Majesty, the Queen in Right of Canada.

The Canadian ambassador to Israel acted in the lessee's name. The house was to serve as the residence of the Canadian ambassador to Israel. The lease was set for five years, ending on May 13, 1991. The lessee was granted the option of extending the lease for three additional periods. The maximum period for which the lease could be extended was set at a total of five years. Exercise of this option and extension of the lease was contingent on securing the consent of Bank Mizrahi, in whose name a mortgage on the house was registered. The Bank Mizrahi notified the Canadian government that it had transferred the mortgage rights to Mr Edelson, and that the latter and, as such, Bank Mizrahi itself did not consent to the lease's extension. The owners then demanded that the Canadian government vacate the premises at the end of the original five-year period. The Canadian government refused, claiming that it had the option of extending the lease.

Proceedings in the Magistrate Court

2. Reinhold applied to the Herzliya Magistrate Court, seeking a declaratory judgment stating that the lease had expired with the passage of the original five years, which had elapsed since the beginning of the lease on May 13, 1991. This being the case, they claimed that they were entitled to demand that the Canadian government vacate the premises.

The Canadian government was summoned to the hearing but did not appear in court. Instead, the Canadian ambassador to Israel dispatched a letter to the judge on his government's behalf. The letter stated that, in accordance with international law, a foreign sovereign is not subject to the jurisdiction of an Israeli court. Instead, it enjoys absolute immunity with respect to all legal proceedings. The Court was therefore requested to dismiss the suit.

The Court summoned the Attorney-General to participate in the hearing. It considered the submission of the Canadian government. In a well-reasoned judgment, which skillfully and comprehensively reviewed both Israeli and international law, Judge Y. Gellin held that the sovereign immunity enjoyed by foreign states is restricted immunity, applying exclusively to the foreign state's acts in its sovereign capacity, not to its acts in a private capacity. The latter category also includes the foreign sovereigns financial and commercial transactions. As per Judge Gellin's opinion, renting premises to serve as an ambassadorial residence falls into the category of the foreign sovereign's financial or commercial transactions. Therefore, he concluded, the foreign sovereign's immunity does not apply to a dispute over a lease of an ambassador's residence.

Judge Gellin was aware of the Supreme Court's ruling in CA 347/71 Sensor v. General Consulate of Greece [IsrSC 26(2) 328]. According to Sensor, a diplomat enjoys absolute immunity from the jurisdiction of Israeli courts. This having been said, Judge Gellin deemed the Sensor ruling obiter dictum, which was therefore not binding upon his court.

Judge Gellin accepted the petition and granted the declaratory judgment requested by Reinhold. The Canadian government appealed to the magistrate court, requesting that it revoke its ruling, by reason of it having been decided in absentia and without the presentation of a defense. The magistrate court (per Judge Gellin) rejected this request.

3. The Canadian ambassador did not vacate the premises upon the expiry of the original lease. As a result, Reinhold filed an additional suit with the magistrate court. This time, they filed the suit in the magistrate court in Bat-Yam, demanding payment of appropriate rent for the period following the lease's original term, after May 13, 1991. Moreover, they requested an interlocutory decision, obligating the Canadian government to pay the sum, which it admitted to owing under the terms of the original lease. In response, the Canadian...