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Mark Sharp

IN 1990, Judge Kimba Wood was flying high.

She had just sentenced Michael Milken to 10 years in jail, at the time the stiffest term for securities fraud, in the United States' biggest ever financial scandal.

 But she took a tumble when she applied for the post of President Bill Clinton's attorney general.

 Scooped into a controversy concerning her domestic worker's tax, Mr Clinton avoided possible scandal and passed Judge Wood over for the top judicial post in favour of Janet Reno.

 Then, in June 1996, Judge Wood was bouncing back, in the case of Hong Kong-based Matimak Trading versus Day Kids Sportswear. Matimak claimed it had shipped goods worth US$80,000 but was not paid. The company filed a writ with intent to sue. But Judge Wood had a rabbit up her sleeve. With no prompt from the defendant, Judge Wood, in what is called sua sponte in legal terms, raised the issue of jurisdiction. In plain English, Judge Wood made a spontaneous ruling, raising the question of the plaintiff's jurisdiction.

 Should Hong Kong companies have jurisdictional rights in the US federal courts?, she asked.

 Then, having raised the question, she promptly answered: No!  By doing so, Judge Wood has opened a commercial and political can of worms spanning the dependent territories of Britain as well as post-colonial Hong Kong.

 The Matimak matter was discussed at great length in the second circuit court of appeal, three days before the Hong Kong handover, which went down to the bones of the American Constitution, throwing up fresh areas of uncertainty over the issue of what constituted a foreign state.

 It was argued that, because Hong Kong had a large degree of autonomy in areas of trade relationships, it could not be regarded as a foreign state and was therefore 'stateless'.

 Its subjects and corporations had no rights to sue in American federal courts.

 Ironically, the judges argued that the Hong Kong Policy Act of 1992 stated that only 'with respect to economic and trade matters' should the United States 'continue to treat Hong Kong as a territory which is fully autonomous from the United Kingdom'.

 'The fact that the Hong Kong Companies Ordinance may be 'ultimately traceable' to the British Crown is too attenuated a connection,' it was argued.

 But the one dissenting judge among the three argued: 'The burgeoning global business community fosters economic interdependence and the United States cannot act without regard to concerns of the rest of the world.

 'Despite the loss of Hong Kong, there are several remaining British Crown Colonies subject to direct control by the British Government. Corporations in the colonies as well as other dependent territories are placed in jeopardy by the majority's holding. Hong Kong is part and parcel of the Commonwealth.'  The British government for its part submitted a supporting brief to the Supreme Court, arguing that it had 'a substantial interest in expressing to the Court its views' with respect to the Matimak case.

 It stated its case that companies incorporated in Hong Kong before the handover were operated under the sovereignty of the United Kingdom.

 'They should have been regarded as British companies and not as stateless entities,' the statement said.

 The US Supreme Court chose last week to unanimously reject Matimak's appeal. So this is effectively the end of the story for Matimak. But the can of worms has been prised wide open and it is far from the end of the story for Britain and Hong Kong.

 Hong Kong is now an inalienable part of China, as the SAR government argues, but it is still highly autonomous with the exception of defence and foreign affairs.

 And this was key to the defendant's victory in the case. The borders of the case are far from clear. It may not, as the Hong Kong government appears to believe, be only Britain's problem.

 The US and Hong Kong are, and were before the handover, World Trade Organisation (WTO) members. As such, they are bound by the Trade Related Intellectual Property (Trips) agreement. This essentially requires WTO members to accord most favoured nation treatment as well as access to civil jurisdiction procedures in each others' countries, and was overlooked in the Matimak ruling.

 It is quite clear that Hong Kong is a special case, from a historical standpoint. The US recognises both China and Britain as foreign states so there is no excuse for digging deep into the legal quagmire to deny any company here justice.

 Judge Wood has made a name for herself again. But it would appear that justice in the American courts is not something she will be remembered for.



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