Hong Kong: When The Court of Final Appeal’s Decision is Not Final - The Congo Case & State Immunity

Last Updated: 13 June 2011
Article by John M. Hickin and Susanne J. Reynolds

Keywords: Court of Final Appeal, Hong Kong, Congo Case, state immunity

Originally published June 9, 2011

On 8 June 2011, a 3-2 majority of the CFA held in the Congo Case that the common law principle of State immunity, modified in accordance with the Basic Law, to be applied in the Hong Kong courts is that of absolute immunity. This decision is "provisional" as the CFA also held that the Hong Kong courts do not, by reason of the Basic Law, have jurisdiction over the determination of the PRC's policy on State immunity. Accordingly, and for the first time, the CFA has referred to the Standing Committee of the National People's Congress ("SCNPC") a matter of interpretation of the Basic Law, and the ultimate determination on the application of State immunity in Hong Kong.

Historical Approach to State Immunity in the PRC and Hong Kong

Essentially, there are two approaches to State immunity - the restrictive and absolute immunity approach. Restrictive immunity recognises a commercial exception to the otherwise absolute immunity a foreign State is granted from jurisdiction and execution.

The PRC has long maintained an absolute approach to State immunity. Prior to July 1997, the State Immunity Act 1978 (UK) (the "Act") applied to Hong Kong1 which adopted a restrictive approach to sovereign immunity. It provided that foreign States were immune from the jurisdiction of the courts of the United Kingdom except where a State submitted to the jurisdiction or the transaction entered into by the State was of a commercial nature.2 The Act also provided for immunity from the process of execution unless the State consented to the same in writing and in respect of property in use for commercial purposes.3 On 1 July 1997, no legislation had been enacted by Hong Kong to mirror the provisions of the Act and as a result, Hong Kong's position with regard to sovereign immunity has remained unclear since then.

The Congo Case: Background & Lower Court Decisions

In the Congo Case, two ICC arbitral awards for substantial sums were made against the Democratic Republic of the Congo ("DRC"). FG Hemisphere Associates LLC ("FG Hemisphere"), purchased the awards and sought to enforce them against the DRC in Hong Kong by executing against US$104 million in entry fees payable by a consortium of Chinese Enterprises to the DRC in respect of mineral exploitation rights.

FG Hemisphere obtained an order allowing it to enforce the awards as a judgment of the Hong Kong court. The DRC subsequently applied to set aside the order on the basis that the Hong Kong courts had no jurisdiction to adjudicate as the DRC enjoyed absolute State immunity. The Secretary for Justice was granted leave to intervene in the proceedings on the basis that the case was in the public interest.

The Court of First Instance considered the transaction in question was not commercial but a cooperative venture between two sovereign States and as such the dealings would not fall within either the restrictive or absolute immunity doctrines. The Court of Appeal held by a 2-1 majority, that the doctrine of restrictive immunity has been widely accepted by foreign States so as to constitute a rule of customary international law and as such, the common law of Hong Kong as at 30 June 1997 recognised the doctrine of restrictive immunity.4

The CFA's Decision

The CFA (Mr Justice Chan PJ, Mr Justice Ribeiro PJ and Sir Anthony Mason NPJ; Mr Justice Bokhary PJ and Mr Justice Mortimer NPJ dissenting) overturned the Court of Appeal's decision on State immunity. In a joint judgment by the majority, the CFA held that, subject to the determination by the SCNPC, the Hong Kong Courts must adopt a doctrine of absolute immunity to be consistent with the PRC's approach to State immunity.

The CFA agreed with the Court of Appeal that the proper position adopted with respect to State immunity in Hong Kong is to apply the common law previously in force governing State immunity after the lapse of the Act. However the CFA held the common law must be subject to "such modifications, adaptations, limitations or exceptions as are necessary to bring its rules into conformity with Hong Kong's status as a Special Administrative Region of the PRC and to avoid any inconsistency with the Basic Law"5 and as such, it is not open to the Hong Kong courts "to adopt a legal doctrine of state immunity which recognises a commercial exception to absolute immunity and therefore a doctrine on state immunity which is different from the principled policy practised by the PRC,"6 namely the doctrine of absolute immunity.

The CFA's decision was provisional as the majority also held it was under a duty to refer to the SCNPC questions of interpretation of Articles 13 and 19 of the Basic Law. Articles 13 and 19(3) provide respectively that the Central People's Government ("CPG") shall be responsible for foreign affairs relating to Hong Kong, and Hong Kong Courts have no jurisdiction over "acts of state" such as foreign affairs and questions of fact regarding the same require the CPG's determination. The majority of the CFA reached the provisional conclusion that the determination by the CPG of the PRC's policy of State immunity as a policy of absolute immunity is an "act of state such as defence and foreign affairs" within the meaning of Article 19(3).7 The Hong Kong courts therefore do not have jurisdiction over the determination of such policy.

Another question raised in the Congo Case was whether the DRC's submission to international arbitration constituted a waiver as to jurisdiction of the Hong Kong courts in respect of the execution of the arbitral award. The CFA held that where no legislation applies on this point (as is the case in Hong Kong), a party seeking to enforce an arbitration award against a State on the basis of waiver of State immunity must demonstrate the State has unequivocally waived its immunity. The majority of the CFA held the submission of the DRC to international arbitration did not constitute such waiver to jurisdiction or execution in the Hong Kong courts.

Conclusion

Having regard to the majority of the CFA's provisional conclusions and the PRC's approach to State immunity, it appears likely the SCNPC's interpretation will be consistent with the CFA's majority judgment that absolute immunity applies to foreign States in Hong Kong. However, the CFA's judgment is not final until the SCNPC's interpretation is received and as such, the approach to State immunity in Hong Kong remains inconclusive.

Footnotes

1. as extended by the State Immunity (Overseas Territories) Order 1979.

2. sections 2 and 3 of the Act.

3. section 13(3) and 13(4) of the Act.

4. CACV 373/2008 and CACV 43/2009, dated 10 February 2010, para. 78.

5. see the SCNPC's Decision "On the Treatment of the Laws Previously in Force in Hong Kong in accordance with Article 160 of the Basic Law" dated 23 February 1997.

6. FACV 5,6& 7/2010, dated 8 June 2011, paras. 225,226.

7. Ibid. para. 355.

Mayer Brown is a global legal services organization comprising legal practices that are separate entities (the Mayer Brown Practices). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; Mayer Brown JSM, a Hong Kong partnership, and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

P>Learn more about our Hong Kong office, Litigation & Dispute Resolution and International Arbitration practices.

Visit us at www.mayerbrownjsm.com

© Copyright 2011. The Mayer Brown Practices. All rights reserved.

This article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein. Please also read the JSM legal publications Disclaimer.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
John M. Hickin
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
Accounting and Audit
Anti-trust/Competition Law
Consumer Protection
Corporate/Commercial Law
Criminal Law
Employment and HR
Energy and Natural Resources
Environment
Family and Matrimonial
Finance and Banking
Food, Drugs, Healthcare, Life Sciences
Government, Public Sector
Immigration
Insolvency/Bankruptcy, Re-structuring
Insurance
Intellectual Property
International Law
Litigation, Mediation & Arbitration
Media, Telecoms, IT, Entertainment
Privacy
Real Estate and Construction
Strategy
Tax
Transport
Wealth Management
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.