Hong Kong state immunity position clarified

August 2011

Contacts

On 26 August 2011, the Standing Committee of the National People’s Congress (NPC) gave its interpretation of Hong Kong’s mini-constitution, the Basic Law, on state immunity.

In its interpretation, the NPC confirms that the PRC central government has the power to decide the state immunity rules/policies to be applied in Hong Kong and endorses the provisional decision of the Hong Kong Court of Final Appeal (CFA) in a recent case, Democratic Republic of Congo and others v FG Hemisphere Associates LLC, where the CFA decided that the doctrine of absolute immunity applies in Hong Kong (the Congo case). This means that a foreign sovereign state enjoys immunity from proceedings before the Hong Kong courts, even if the state is acting in a purely commercial manner, as opposed to exercising its sovereign powers, unless it voluntarily waives immunity and submits to the jurisdiction of the Hong Kong courts. The Hong Kong CFA also found that a waiver of immunity must take place at the time the sovereign state comes before the court, or by advance agreement in international treaty. This is different to the approach taken in other jurisdictions, such as the United Kingdom and Singapore, which adopt the doctrine of restrictive immunity and have enacted legislation, preventing states from being able to claim immunity in proceedings relating to commercial transactions, and allowing states to contractually waive their right to claim immunity in advance of any proceedings.

The Congo case concerned the issue of whether two arbitral awards could be enforced against assets of the Democratic Republic of the Congo which were located in Hong Kong. The Republic of the Congo claimed that they could not on the basis that it was entitled to claim sovereign immunity over the assets. It is expected that the Congo case will now be restored to the court hearing list and that the CFA will issue a final judgment on the basis of the NPC’s interpretation of the Basic Law on state immunity.