Since the Court of Final Appeal ruling in Democratic Republic of the Congo v FG Hemisphere Associates LLC (No 2) (2011) 14 HKCFAR 395, it has been clear that state immunity in Hong Kong applies to states even when they contract in a purely commercial capacity.
China’s foreign ministry stated at the time that “the courts in China have no jurisdiction over, nor in practice have they ever entertained, any case in which a foreign state or government is sued as a defendant or any claim involving the property of any foreign state or government, irrespective of the nature or purpose of the relevant act of the foreign state or government…”. This came to be known as the “absolute” doctrine of state immunity.
Fast forward twelve years and it is all change as Hong Kong and Macau will join the mainland (following its passing of the Foreign State Immunity law) in adopting a “restrictive” doctrine of foreign state immunity, introducing an exception for commercial activities and recognising existing contractual and treaty-based waivers which are presently ineffective in Hong Kong.
This will mean that parties can sue foreign states in Hong Kong and enforce against their commercial assets without the need to obtain a waiver of immunity from the foreign state.
The new Foreign State Immunity Law, passed at a session of the National People’s Congress (NPC) Standing Committee in September, brings the country into line with other jurisdictions around the world, such as Australia, Singapore and the United Kingdom.
There will be no change to arbitration proceedings, as foreign states were already unable to claim immunity from arbitrations seated in Hong Kong since arbitral tribunals do not apply sovereign authority of one state over another. In terms of enforcement however, states will no longer be able to claim immunity from enforcement of an arbitral award or a judgment in Hong Kong.
The changes will further enhance Hong Kong’s role as a premier dispute resolution centre, giving parties the option to have their claims against foreign states adjudicated by the excellent Hong Kong judiciary. With its position as an international finance centre and the home to so many international corporations and organisations the new law will be a welcome development for Hong Kong.
Authored by Byron Phillips, Nigel Sharman.