Court of Final Appeal to clarify state immunity law in Hong Kong

The Democratic Republic of Congo (DRC) was last month granted leave to appeal the Hong Kong Court of Appeal decision on state immunity law, FG Hemisphere Associates LLC v Democratic Republic of the Congo and others (CACV 373/2008 & CACV 43/2009).

Earlier this year, a majority of the Court of Appeal refused the DRC's appeal against the enforcement of two ICC arbitration awards that had been rendered against it in France and Switzerland. The US distressed debt fund, FG Hemisphere Associates LLC, sought to enforce the arbitral awards in Hong Kong by intercepting payments due to the DRC by a Chinese state-owned company.

The Court of Appeal decision, which is now being examined by the Hong Kong Court of Final Appeal, clarified several key issues relating to the law on sovereign immunity in Hong Kong. In particular, the Court concluded inter alia that:

1. the doctrine of restrictive state immunity applies in Hong Kong; and
2. a state's agreement to arbitrate does not represent a waiver of immunity from execution.

The Court of Final Appeal decision will bring welcome judicial clarification on the law of state immunity in Hong Kong and, it is hoped, further guidance to parties dealing with sovereign entities. In the meantime, the case serves as an important reminder to private parties to seek clear and express waivers of immunity from execution as well as from suit when entering into agreements with states and state-owned entities.

Please see our full analysis published by Global Arbitration Review here.