IBRD Court Fees Case

Summary:2The facts:—On 2 February 2015, the International Bank for Reconstruction and Development (“IBRD”) initiated a lawsuit against several other entities before the Klagenfurt Regional Court. In the submission initiating proceedings (Klagsschrift), the IBRD argued that it was exempt from court fees on the basis of Article VII Section 9 of the Articles of Agreement of the International Bank for Reconstruction and Development (“IBRD-AoA”)3 and

The IBRD objected to that order to the President of the Klagenfurt Regional Court, who confirmed it by way of decision on 10 July 2015. The reasoning stipulated that the initiation of the lawsuit fell outside of the scope of Article 10(3) of the Establishment Agreement, as it did not constitute a “transaction” (which was exempt from taxes, recording charges and court fees) and the obligation to pay court fees was not triggered by the written submission as such (as a potential document relating to a transaction), but by the civil proceedings in their entirety. Moreover, the court fees were not “taxes” within the meaning of that provision.

The IBRD appealed that decision to the Federal Administrative Court. It argued that the sale of bonds, which were the subject of the civil proceedings, were undoubtedly a “transaction” within the meaning of Article 10(3) of the Establishment Agreement. As a result, the submission initiating proceedings constituted a document relating to a transaction (which was likewise exempt). Moreover, the IBRD was exempt from court fees on the basis of Article VII Section 9(a) of the IBRD-AoA, which exempted it from “taxes and custom duties”. These terms were to be understood more broadly in international law than in Austrian law, as to include any charges, including court fees. In addition, it asserted that the President of the Klagenfurt Regional Court lacked the competence to order unilaterally the payment of court fees. Rather, the Establishment Agreement foresaw a specific procedure for questions concerning the interpretation of the Agreement between the Republic of Austria and the IBRD.

The Federal Administrative Court granted the appeal and annulled the decision, while declaring an appeal to the Supreme Administrative Court admissible. It held that, pursuant to Article 20(1) of the Headquarters Agreement, all disputes between the Republic of Austria and one of the Organizations concerning the interpretation of the Agreement should be submitted to arbitration. Thus, until such a resolution within the meaning of Article 20(1) was taken, the authority might not order the payment of court fees, likewise the Federal Administrative Court might not reject the appeal. In any event, Article 10 of the Establishment Agreement provided for the exemption from the pertinent fees.

The President of the Klagenfurt Regional Court lodged an ex officio appeal against that decision to the Supreme Administrative Court, with the IBRD being a co-involved party in the proceedings.

Held:—The appeal was allowed. The Austrian authorities had jurisdiction over the matter and the IBRD was not exempt from the obligation to pay court fees.

(1) International organizations were regularly granted immunity from civil lawsuits, with international financial institutions (such as the IBRD) enjoying only limited immunity. Despite their immunity, international organizations remained fully bound by domestic law and are thus obliged to fulfil their contracts under private law. The gap in legal protection was closed through dispute settlement procedures. However, treaty provisions on dispute settlement had no significance for the question as to what extent an international organization might enjoy immunity. In the context of the IBRD, the question was to be exclusively assessed on the basis of the pertinent treaty provisions, namely Article VII Section 3 of the IBRD-AoA and Article 5 of the Headquarters Agreement (paras. 57–63 and 69).

(2) International organizations might waive their immunity from jurisdiction. In particular, the initiation of or participation in proceedings constituted such a waiver. Thus, the international organization became subject to the judicial assertion of all claims by the opponent resulting from these proceedings and became subject to all judicial orders issued in these proceedings. This included orders on the payment of court fees (paras. 64–8).

(3) The question of a material exemption from court fees was to be separated from the question of immunity from jurisdiction. Article 10(1) of the Establishment Agreement provided for an exemption from taxation. However, a contextual interpretation taking account of explicit listing of “taxes, recording charges and court fees” in Article 10(3) of the Establishment Agreement prevented a broad reading of the term “taxation” that also included court fees. Article 10(3) provided for an exemption also from court fees for all “transactions” and (in the German version) “all documents relating to such transactions” or (in the English version) “all documents recording such transactions”. It was undisputed that a lawsuit as such did not constitute a transaction. The exemption for “documents” also did not apply. The obligation to pay court fees was not triggered by the drafting of a submission initiating proceedings, but rather its filing at the court. The subject of the court fees was the civil proceedings of the first instance rather than the submission initiating proceedings. Therefore, Article 10(3) of the Establishment Agreement did not apply (paras. 70–7).

(4) Article VII Section 9(a) of the IBRD-AoA further provided immunity “from all taxation and from all customs duties”. The obligation to pay court fees neither fell under “taxation” nor under “customs duties”. This was supported by a contextual interpretation, as Article VII Section 3 IBRD-AoA used the terms “judicial process” and “action”, which was terminologically distinct from the term “operations and transactions” used in Section 9. Thus, the provision provided no basis for a personal exemption of the IBRD from court fees (paras. 78–80).