The United States of America v Menteri Sumber Manusia & Ors and another appeal [2022] 4 MLJ 589

Federal Court  (Putrajaya)

Jurisdiction of Court to hear employment disputes involving a foreign state

1. The Appellant, the United States of America, represented by the Embassy of the United States of America in Kuala Lumpur (“the Embassy”). On 29 September 1998, the 2nd Respondent, a Malaysian national, was hired by the Embassy to serve as a security guard. The dispute arose when, after over a decade of service, the 2nd Respondent’s employment was abruptly terminated on 4 April 2008. He was notified of his dismissal via a phone call from an Embassy official, with no reasons provided for the termination.
2. Feeling unjustly treated, the 2nd Respondent submitted a representation on 23 May 2008 under subsection 20(1) of the Industrial Relations Act 1967 (“IRA 1967”), claiming that his termination was without just cause or excuse and seeking reinstatement to his former position. At that time, a dismissed employee could not directly bring a claim before the Industrial Court. Instead, the Minister of Human Resources (“the 1st Respondent”) could refer the case to the Industrial Court only after the Director General of Industrial Relations (“DGIR”) had attempted, but failed, to achieve a settlement between the parties. Such a referral by the Minister would give the Industrial Court jurisdiction to hear and decide the dispute.
3. A conciliation meeting was held between the Embassy and the 2nd Respondent, but it did not result in a resolution. The Minister later concluded that (a) the 2nd Respondent’s complaint involved serious factual and legal questions that required adjudication, (b) the issue of diplomatic immunity raised by the Embassy was a legal question suitable for determination by the Industrial Court, and (c) the representation was neither frivolous nor vexatious.
4. Following this, by a letter dated 22 April 2019, the Industrial Relations Department informed the Embassy that the Minister had decided to refer the 2nd Respondent’s representation to the Industrial Court, thereby conferring jurisdiction on the Industrial Court to adjudicate the claim under section 20 of the IRA 1967.
5. The United States, however, filed for judicial review at the High Court, asserting that as a sovereign state, it was immune from the Industrial Court’s jurisdiction, and that the question of immunity should be determined by the High Court instead.

Whether, in the context of an employee’s claim that he has been dismissed without just cause or reason by a sovereign state, the proper forum to decide the applicability of restrictive doctrine of sovereignty immunity should be at the Industrial Court or by way of judicial review proceedings in the High Court.

Whether, in the context of an employee’s claim that he has been dismissed without just cause or reason by a sovereign state, the proper forum to decide the applicability of restrictive doctrine of sovereignty immunity should be at the Industrial Court or by way of judicial review proceedings in the High Court.

1. In resolving the issue, the Federal Court examined the legal framework under section 20 of the IRA 1967, which empowers the Minister to refer a dispute to the Industrial Court if the representation raises serious factual or legal questions requiring adjudication. Citing Minister of Labour v Lie Seng Fatt [1990] 2 MLJ 9 (SC), the Court held that this discretion must be exercised in good faith and in line with the purpose of the Act. The Minister’s role is not to decide on the merits but only to determine whether the issues merit judicial consideration. Once referred, the Industrial Court has threshold jurisdiction to hear and determine the dispute.
2. The Court further held that determining the applicability of the restrictive doctrine of sovereign immunity depends on factual findings, particularly the nature of the employee’s duties. Immunity applies only to acts that are sovereign or governmental in nature, while activities of a commercial or private character do not enjoy such protection. This factual determination requires a full hearing involving oral and documentary evidence, which properly falls within the Industrial Court’s fact-finding function. The Court referred to comparative cases such as Benkharbouche v Embassy of the Republic of Sudan [2019] AC 777 (UKSC) and United States of America v Zakhary [2015] F.C.J. No. 295 (Canada), where employment tribunals were recognised as the proper forums to assess such issues.
3. Conversely, the Court observed that judicial review proceedings in the High Court are confined to assessing legality and procedural fairness and are not designed for detailed examination of factual disputes. The High Court, therefore, erred in addressing the issue of sovereign immunity before the Industrial Court had heard any evidence. The appropriate and only forum to determine the issue of immunity is the Industrial Court.
4. The Federal Court also clarified that this case differed from Kathiravelu Ganesan & Anor v Kojasa Holdings Bhd [1997] 3 CLJ 777 (SC), as that case involved an Industrial Court decision that had already been made on the merits. In the present matter, no such adjudication had taken place, and the High Court’s intervention through judicial review was therefore premature.
5. In conclusion, the Federal Court found that the Minister’s reference to the Industrial Court was valid and lawful, and not tainted by illegality, irrationality, or procedural impropriety, referring to R Rama Chandran v Industrial Court of Malaysia & Anor [1997] 1 MLJ 145 (FC). The Court affirmed that the Industrial Court is the competent body to evaluate both factual and legal aspects necessary to determine the application of sovereign immunity.
6. The appeal was dismissed, and the Court of Appeal’s decision was upheld. The Federal Court reaffirmed that when employment disputes involve foreign states, the Industrial Court is the proper forum to determine whether sovereign immunity applies, as the issue requires a comprehensive assessment of both law and fact.

Issues of sovereign immunity in employment disputes must first be examined by the Industrial Court through full evidentiary proceedings, rather than being prematurely decided in judicial review proceedings.