By Gad Coffie
Imagine challenging your landlord’s decision to withdraw an aspect of their otherwise generous hospitality. In less euphemistic terms, imagine litigating against a nation state in their highest court for seeking to terminate a lease on national security grounds.
While the above scenario might seem unusual and perhaps even Hollywood attention-grabbing, it is exactly what the Full Court of the High Court had to grapple with in Government of the Russian Federation v Commonwealth of Australia [2025] HCA 44.
Factual background
This litigation, unlike most matters that come before the High Court, hinged on the validity of a law of the Commonwealth (Home Affairs Act 2023 (Cth)) (the Act) and involved the Commonwealth as a party against another sovereign nation, [1]. This matter was therefore heard within the original jurisdiction of the High Court. It is fair to say that this quirk alone is exciting enough – at least to constitutional law aficionados. To the rest of us, it is sufficient to simply note that by a special case in the proceeding, the parties agreed to a set of questions of law for determination by the Full Court. A special, if nevertheless apt, procedural characterisation.
The subject of the litigation is a piece of land; approximately 11,526 square metres, the south-eastern boundary of which borders State Circle (approximately 300 metres north-west of the Commonwealth Parliament House) [4].
In April 2008, the National Capital Authority on behalf of the Commonwealth made a written offer to lease the land to the Russian Federation, [8]. During the term of the lease, the Russian Federation commenced but had not completed construction on the land before the Act passed into law [10]-[11].
The special case records as an agreed fact that the Commonwealth introduced the Bill for the Act to terminate the lease – not because the Commonwealth had “a need for, or proposed use or application of, the land” but rather based on security advice “as to the risk presented by a new Russian presence so close to Parliament House” [16]-[17].
The Russian Federation sought to, in essence, challenge the constitutional validity of the Act.
The Court’s decision
In summary, the Court held unanimously that:
- the Act is a valid law supported by a head of Commonwealth power;
- it is correct for the operation of the Act to result in the acquisition of property (from the Russian Federation) to which s 51(xxxi) of the Constitution applies; and
- it is correct for the Commonwealth to pay the Russian Federation a reasonable amount of compensation pursuant to s 6(1) of the Act.
There were two pluralistic judgments: one by Gageler CJ, Gleeson, Jagot and Beech-Jones JJ, and the other by Gordon and Steward JJ. Edelman J wrote a separate judgment. In the interests of brevity, I shall deal with the first two ratione decidendi together as if they were one. I shall also refrain from quoting the provisions of the Constitution and the Act that were discussed by the Court.
In their judgment, Gageler CJ, Gleeson, Jagot and Beech-Jones JJ were of the opinion that s 122 provides sufficient legislative support to the Act [22]-[25].
Their Honours at [38] and [39] observed that it is sufficient that the “acquisition of property” is supported by a purpose within Commonwealth legislative power. Their Honours gave examples such as an acquisition of a proprietary interest in land in order to construct and operate a post office within s 51(v) or a lighthouse within s 51(vii) or of a proprietary interest in land or a printing press or a ship to be used for a defence purpose within s 51(vi) [39].
On the issue of compensation, their Honours at [45] rejected the position of the Commonwealth by pointing out that the lease was granted by the Commonwealth and paid for by the Russian Federation in Accordance with Australian domestic law. Their Honours went on to note that:
“As senior counsel for the Russian Federation aptly submitted, the legal position of the Russian Federation for the purposes of s 51(xxxi) of the Constitution is in those circumstances no different in principle from the legal position of an Australian citizen whose lawful occupation of land is terminated by operation of a Commonwealth law the object of which is to create a security zone around a defence establishment.“
In furtherance of the above, their Honours held that “to provide just terms to the Russian Federation for the acquisition of its property in those circumstances is not an inconsistent or incongruous notion … it is what the Constitution requires” [50].
In their joint judgment, Gordon and Steward JJ agreed with the conclusions of Gageler CJ, Gleeson, Jagot and Beech-Jones JJ [52].
Gordon and Steward JJ noted that s 122 has broad application and cited with approval the decision of the Court in Grain Poolof Western Australia v The Commonwealth (2000) 202 CLR 479 [16], thus: “like any other head of power, s 122 should be construed ‘with all the generality which the words used admit’” [56].
On the question of compensation, Gordon and Steward JJ began by giving the term “acquisition” a broad meaning, observing at [64] that:
“In this case, the legal estate in the Land was vested in the Commonwealth. On extinguishment of the Lease, the Russian Federation was deprived of its leasehold interest. But the relevant interest in property was not merely extinguished or reduced without any correlative acquisition. On the termination of the Lease, the Commonwealth acquired the right to exclusive possession of the Land unencumbered by the Lease. The Commonwealth therefore ‘acquired’ property within the meaning of s 51(xxxi).”
Gordon and Steward JJ rejected the contention by the Commonwealth that “it would be incongruous to require a foreign state to be compensated for actions taken to address the risk of that foreign state interfering with Australia’s democratic institutions”. Their Honours then went on to emphasise that “the termination of the Lease would be no less effective at achieving [its national security] purpose if just terms compensation were provided”.
The judgment by Edelman J arrived at the same conclusions by the other members of the Court with a slight exception on the question of the costs of the special case.
Notably, with regards to compensation, Edelman J noted that “the legislatively recited objective of protecting Australia’s national security interests” does not, in the absence of an agreed or proved fact that the termination of the lease was a consequence of the defence of the Commonwealth to an established threat or a response to the commission of an offence, obviate the condition in s 51(xxxi) of just terms compensation [126-127].
Observations and conclusion
The legacy of Government of the Russian Federation v Commonwealth of Australia [2025] HCA 44 to any lay observer would probably be the question, “How did the Russian Federation come to litigate against the Commonwealth of Australia in Australia and before the High Court of Australia?” To my mind, the answer lies in a word not superlatively discussed in this special case – democracy.
The democratic principles of separation of powers and indeed the equality of all persons before the law; here referring to legal persons (or, more particularly in the Act, “body politic” or nation states) has made it possible that the Executive arm of the Australian government and, to an extent, the Legislature were able to be held accountable by the Judiciary. Even at the potential expense of a foreign state.
Another principle underpinning this case is the sacrosanct nature of property rights. The Court concluded that irrespective of the recited objective of the Act, the Russian Federation was entitled to fair and just compensation much like any other person. Further, the fact that the Court ruled that the Commonwealth of Australia should pay the costs of this special case (even though it ‘won’ the special case) is testament to the value the Court placed on this time-honoured common law principle.
Disclaimer: the views expressed in this case note are exclusively those of the author.
