'One country, two systems' at heart of appeal

PUBLISHED : Thursday, 06 May, 2010, 12:00am
UPDATED : Thursday, 06 May, 2010, 12:00am

The Court of Final Appeal will be asked to decide whether it has jurisdiction to determine issues of state immunity in a case that will put the 'one country, two systems' principle to the test.

The case, which highlights the city's role as a dispute resolution centre, involves an application by a New York company, FG Hemisphere Associates, which invests in emerging markets and distressed assets, to the Hong Kong courts to enforce two arbitral awards made against Congo.

The awards were made in 2003 in France and Switzerland, and FG claims the Democratic Republic of Congo still owes it US$102 million.

The Court of Appeal struck down in February a judgment by the Court of First Instance refusing to enforce those awards for lack of jurisdiction.

By a 2-1 majority, the appeal judges ruled against Congo's argument - supported by the Hong Kong government and the Ministry of Foreign Affairs in Beijing - that it enjoyed absolute state immunity from the jurisdiction of Hong Kong's courts.

In a written judgment yesterday, Mr Justice Frank Stock granted leave to appeal to the top court on three key issues:

Is Hong Kong forbidden by the Basic Law to determine whether a foreign state is entitled to immunity in the courts?

Does Hong Kong adhere to the doctrine of restrictive immunity? This is the idea that a state is immune in regard to acts performed in its sovereign capacity but not commercial acts or others covered by private law.

Does a state that has submitted itself to international arbitration waive any immunity in regard to enforcement of arbitral awards by the courts?

The Basic Law states that Hong Kong courts 'shall have no jurisdiction over acts of state such as defence and foreign affairs'. Congo had argued that state immunity fell under the central government's jurisdiction over foreign affairs and the city's courts were therefore constrained on any such matter by the Basic Law.

The secretary for justice argued that Hong Kong's law should reflect the position of the central government, which does not accept the doctrine of restrictive immunity, and that Congo should therefore enjoy absolute immunity for all its actions.

But during the appeal, Michael Thomas SC, a former attorney general, argued the central government could hardly have expected Hong Kong, as an international financial and trading centre, to abandon the idea of restrictive immunity and to grant absolute immunity to states in cases of this nature.

The appeal court ruled that the common law as practised in Hong Kong recognised restrictive immunity in such matters.

'The ability of the common law to progress with the demands of justice cannot be elided with statements that the executive and the judiciary should speak with one voice on matters of sovereignty to justify the argument that once China resumed sovereignty ... Hong Kong - enjoined by the Basic Law to apply the common law - should then ignore the customary international law,' Madam Justice Maria Yuen Ka-ning wrote.

'There is no suggestion in the evidence that the maintenance of the common law of restrictive immunity would prejudice the sovereignty of the PRC.'

The case has arisen at a time when the city is reforming its arbitration laws in line with international practice in an effort to promote itself as a centre for dispute resolution.