Appeal court quashes African country's state immunity claim

PUBLISHED : Thursday, 11 February, 2010, 12:00am
UPDATED : Thursday, 11 February, 2010, 12:00am

The appeal court has struck down a claim of state immunity by the Democratic Republic of the Congo (DRC) and ordered it to pay its creditor the sum of US$104 million under two foreign arbitral awards.

Yesterday's decision stemmed from an appeal against a 2008 judgment by Mr Justice Anselmo Reyes of the Court of First Instance declaring that Hong Kong courts had no jurisdiction over the DRC and refusing to enforce the awards against it.

The appeal was launched by US firm FG Hemisphere Associates LLC.

FG asked the court to enforce two arbitral awards it obtained in France and Switzerland in April 2003 against the DRC.

The appeal court also restored an injunction obtained by FG restraining China Railway Group from transferring to the DRC government about US$200 million as 'entry fees' for acquiring mineral exploitation rights in a massive programme of investments Chinese state-owned companies made in the DRC. Reyes had set aside the injunction.

FG argued the DRC could claim immunity only in matters related to foreign affairs, and a commercial deal was not covered under the notion of 'restrictive immunity'.

The DRC countered it was entitled, as a foreign state, to 'absolute immunity' from jurisdiction and execution.

In 2008, Reyes held that the circumstances under which China Railway was to pay the entry fees did not constitute a conventional commercial transaction.

He found it was a joint venture between two sovereign states and so the DRC should enjoy immunity from execution of the awards in the city's court.

The appeal court overturned his decision by a 2-1 majority.

With Mr Justice Wally Yeung Chun-kuen dissenting, Mr Justice Frank Stock and Madam Justice Maria Yuen Ka-ning granted the appeal and enforced the arbitral awards.

Stock wrote in his judgment that the entry fees were not paid solely for public purposes and were partly intended for commercial purposes.

He ordered the case remitted to the Court of First Instance for further examination on how much of the fees were immune from execution.

He also held that the DRC was not exempted when the restrictive principle of state immunity applied.

He wrote that the doctrine of restrictive immunity was applied in Hong Kong according to the common law and differed from the principle adopted on the mainland of state immunity.

Stock said two letters issued by the Office of the Commissioner of the Ministry of Foreign Affairs to clarify the position of the central government stated that only the principle of absolute immunity applied in China - although it was a signatory to the 2004 United Nations Convention on Jurisdictional Immunities of States and Their Property, which acknowledged the restrictive doctrine - because the country had not yet ratified the convention.

Jurisdiction taken

HK judges may restrict immunity, while law on mainland does not

Amount the Democratic Republic of the Congo must pay US firm under two European arbitral awards, in US$: $104m