The High Court has ruled an American hedge fund can't raid Nauru's Australian bank accounts to recover 1.3 billion yen ($A14.4 million) awarded by the Tokyo District Court.
High Court judges ruled that Nauru's Westpac accounts could not be garnisheed as they were not for commercial purposes, an immunity granted by the Foreign States Immunities Act.
Had the decision gone the other way, Nauru would have been up for a very substantial sum - $31 million when the case was launched, but under half that on the current exchange rate.
The case had its genesis in 1988 and 1989 when the now defunct Republic of Nauru Finance Corporation (RONFIN) borrowed Y9 billion ($A99.97 million) as Japanese bearer bonds, with payment guaranteed by the Nauru government.
When RONFIN defaulted and Nauru refused its obligations as guarantor, the debt was onsold, with Firebird ending up with Y6.5 billion ($A72.20 million).
It launched proceedings in the Tokyo District Court and in 2011, obtained judgment for Y1.3 billion ($A14.44 million) plus interest.
Nauru keeps most of its money in Australia so Firebird sought to enforce the Japanese judgment through Australian courts, starting by registering the decision under Australian law in 2012.
Nauru made no response in the time allowed and so in 2014 Firebird obtained court orders to garnishee Nauru's Westpac accounts.
When Firebird launched its litigation, Nauru's accounts were frozen, leaving the cash-strapped nation so short of funds its finance minister warned the country would soon start shutting down, including refugee processing.
Accounts were unfrozen in 2014.
When its case was rejected, Firebird turned to the High Court.
On Wednesday, High Court judges ruled unanimously that Nauru's bank accounts held in Australia were immune as those accounts held the country's operating funds which were not for commercial purposes.
However, Firebird hasn't been left without hope of ever seeing any of its money.
The High Court reinstated registration of the Tokyo court judgment, meaning Firebird could try again, if any of Nauru's funds were deemed to be for commercial purposes.