Hong Kong Squanders a Valuable Asset

The Hong Kong government itself is taking the lead in undermining the judicial autonomy which the territory is supposed to enjoy and which makes it unique, not only in China but in Asia.

In doing so it threatens the territory's position as an international center that can deliver autonomous justice in commercial disputes. In particular, the government has intervened in a case before the Court of Final Appeal to press the widest possible interpretation of powers reserved for Beijing under the Basic Law, Hong Kong's mini constitution.

The case involves a claim for US$100 million brought against the Republic of Congo by a fund, FG Hemisphere Associates, which had bought the Congo debt at a steep discount.

The defendants also include the China Railway Group, a Chinese state-owned company that holds the assets that FG Hemisphere is claiming. It is that state ownership that makes the threat particularly serious, given that most major Chinese companies remain state-owned.

The Hong Kong government is supporting the Congo/China Railway claim that Hong Kong has no jurisdiction in the matter because Congo is a sovereign state and thus this a matter for the other sovereign, China, not the subsidiary jurisdiction.

It argues that Articles 13 and 19 of the Basic Law are clear that "foreign affairs" and "acts of state" issues are the responsibility of Beijing and that this supersedes any issue of limited sovereignty which may have existed before the 1997 handover.

In the 1980s British courts established the notion that sovereign immunity did not apply to commercial deals. This, the claimant argues, was followed by Hong Kong and that nothing had changed since then. The Basic Law clearly provided for continuation of the pre-1997 legal system and decisions. This case was clearly a commercial one and did not fall within the definition of "foreign affairs" in the Basic Law, nor was it an "act of state."

The Hong Kong government argues that because China has no concept of limited immunity, immunity must therefore be absolute and this must take precedence over Hong Kong's claims to jurisdiction. Local courts must follow Beijing.

The FG Hemisphere claim was originally rejected by the Hong Kong courts but was allowed on appeal. Now the top Court of Final Appeal has three fundamental choices – to allow the claim and anger Beijing, to reject the claim or to refer the issue of its own remit to the National People's Congress, China's rubber stamp parliament, which will surely give a narrow interpretation to Hong Kong's jurisdiction.

Possibly the Hong Kong court will reject the claim, not on jurisdictional grounds but on limited ones relating to the fact that FG Hemisphere was not the original creditor but bought the debt simply with the view of trying to force a judgment and make a profit. Such an outcome might put off the day when the NPC made further inroads into Hong Kong's fast diminishing autonomy.

But the fact that the Hong Kong government has intervened in the case rather than let the parties themselves fight it out demonstrates the eagerness with which local officials, in this case the secretary for justice, are to ingratiate themselves with Beijing.

Ironically this kowtowing coincides with a reminder of a previous effort to undermine local autonomy. Back in 1999 the government was so upset by a Court of Final Appeal ruling on interpretation of the right of abode in Hong Kong under the Basic Law to include the non-Hong Kong-born children of Hong Kong residents that it went to the National People's Congress to have the decision overturned. It accompanied that demand with a barrage of fanciful data dreamed up by a compromised statistics department that a flood of people would rush into the territory were the court's decision followed.

The numbers of supposed potential migrants were more than double what the same department had concluded just two years earlier. Naturally the NPC decision did not apply to the many US, Canadian and other children born of Hong Kong officials who had sent their wives overseas to ensure foreign passports.

Now however, with Hong Kong facing declining school intake, aging population and a shortage of young workers to do tough construction and other dirty jobs is now looking to allow many of these same mainland "hordes" people to move to Hong Kong.

The bottom line of both cases shows a government run by an arrogant and increasingly corrupted officialdom that appears to care little about the one big advantage that Hong Kong enjoys over Shanghai and other Chinese cities – the rule of law and the sanctity of contract.