Case Spotlight: Foreign Embassies Not Automatically Immune To Unfair Dismissal Claims

Generally, a foreign sovereign or state cannot commit a legal wrong and is immune from civil suits or criminal prosecution. This protection is commonly known as “sovereign immunity”.  In Malaysia, the courts have adopted the “restrictive” sovereign immunity approach, whereby a foreign state can be held liable in limited circumstances (eg: actions of a pure commercial or private law nature). 

Even then, does this “restrictive” sovereign immunity automatically shield the foreign sovereign from being dragged to the Industrial Court for unfair dismissal claims?

On 20 June 2022, in The United States of America v Menteri Sumber Manusia & Ors [2022] 1 LNS 1253, the Federal Court answered whether the Industrial Court has jurisdiction to hear unfair dismissal claims lodged by employees of foreign embassies.

 

Brief Facts

  • Before the Industrial Relations (Amendment) Act 2020, the Minister of Human Resources (“Minister”) was vested with the power to decide whether an employee’s representation ought to be referred to the Industrial Court. 
  • The Embassy of the United States of America (“US Embassy”) dismissed a security guard (“Employee”) (“Employee’s Dismissal”).
  • The Employee lodged a representation of unfair dismissal under Section 20(3) of the Industrial Relations Act 1967. 
  • As there was no settlement, the Minister referred the matter to the Industrial Court for adjudication (“Minister’s Decision”). 
  • The US Embassy applied to the High Court for judicial review against the Minister’s Decision, to quash the referral because the US Embassy has sovereign immunity.
  • The High Court quashed the Minister’s Decision, and this decision was later reversed by the Court of Appeal. The Court of Appeal held that the Industrial Court was the proper forum to decide on the Employee’s nature of work, and whether sovereign immunity applied. Such issue should not be decided by judicial review against the Minister’s Decision. 
  • The US Embassy appealed to the Federal Court.

 

Federal Court’s Findings

The Federal Court viewed the central issue as “whether the judicial review proceedings in the High Court is in fact the proper forum to decide the issue of restrictive doctrine of sovereign immunity”. 

The Federal Court clarified that the Minister’s role is only to ascertain whether the Employee’s representations raised serious questions of fact or of law calling for adjudication by the Industrial Court. If there are mixed questions of law or fact arising from the representations, the proper and only forum to decide on the issues would be the Industrial Court. 

As whether the Employee’s nature of work (ie: whether it involves diplomatic / governmental functions) is a serious and difficult question of law the determination of this issue would require findings of facts of the precise nature, duties and job scope of the Employee. These findings of facts should be made by the Industrial Court.

If a party is aggrieved by the preliminary issue of sovereign immunity, the proper recourse is to apply for judicial review against the Industrial Court only after the Industrial Court has determined the issue of sovereign immunity.

 

Key Takeaways 

The Federal Court did not expressly find that the doctrine of sovereign immunity does not apply to the US Embassy in an unfair dismissal claim. The Federal Court declined to answer this question because the proper forum to determine this is the Industrial Court.

What the Federal Court’s decision means is that the Employee will now have his chance to litigate his unfair dismissal claim at the Industrial Court, and the US Embassy can raise the defence of sovereign immunity at the Industrial Court.  Whether the US Embassy is immune, or whether the dismissal is fair, are questions to be determined by the Industrial Court. In this case, due to the judicial review and various appeals, it has taken 14 years for the Employee to even have a chance to commence his claim (the Employee was dismissed in 2008).

There is still a possibility that the Industrial Court will dismiss the Employee’s claim, whether on the basis of sovereign immunity or otherwise. See our earlier article on sovereign immunity, which spotlighted a case where the Industrial Court held that it had no jurisdiction to hear the unfair dismissal claim of an employee of a foreign state if the employee was performing governmental and sovereign functions.

The Federal Court’s decision therefore guarantees the right of an employee working for foreign embassies to at least have their representations of unfair dismissal referred to the Industrial Court. This is now further entrenched by the Industrial Relations (Amendment) Act 2020, where the Director General now must refer disputes that cannot be resolved at the conciliation meeting as a matter of law, without exercising discretion.

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This article was written by Donovan Cheah (Partner) and Leow Ho Eng (Associate). Donovan has been named as a recommended lawyer for labour and employment by the Legal 500 Asia Pacific for 2017-2022, and he has also been recognised by Chambers Asia Pacific and Asialaw Profiles for his employment law and industrial relations work.

Donovan & Ho is a law firm in Malaysia, and our employment practice group has built a reputation for providing strategic employment advice to local and global organisations.  Our team of employment lawyers provide advice on employment law and industrial relations including review of employment contracts, policies and handbooks, advising on workforce reductions, and managing dismissals of employees for poor performance or misconduct. We also represent clients in unfair dismissal claims and employment-related litigation. Have a question? Please contact us.

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