Crown Immunity for Government Agencies of the People’s Republic of China in Hong Kong
Intraline Resources SDN BHD v The Owners of the Ship or Vessel “Hua Tian Long” HCAJ 59/2008
Brief Summary of facts:
This case arose out of the alleged failure of the defendants, Guangzhou Salvage Bureau (GSB), to honour their commitment under a Memorandum of Agreement to make ‘HUA TIAN LONG’, the largest floating derrick crane-barge based in Asia, available to work on offshore Malaysian and Vietnamese oil platform and pipeline projects (‘the Newfield’ and ‘Talisman projects). At the time “HUA TIAN LONG” was under charter to China National Overseas Oil Company, which refused to release the vessel for the Plaintiff’s use. The Plaintiff claimed that it had been unable to complete the Newfield and Talisman projects and claimed damages against the defendant owners- several hundreds of millions of US dollars for fraudulent misrepresentation and/ or breach of contract.
Consequently, the plaintiff invoked the Admiralty jurisdiction of the High Court and arrested HUA TIAN LONG in Hong Kong. At that time, HUA TIAN LONG had been sent from Guangzhou to Hong Kong to raise the Ukrainian tug, Neftegaz 67, from the sea bed after it had been sunk in a collision with a Chinese bulk carrier some weeks earlier. This incident also had several ramifications in terms of criminalization of seafarers, which was written about in one of our previous articles.
GSB applied for a stay and/or a dismissal of the action on the ground that the vessel was ultimately owned by the Central People’s Government (CPG) of the People’s Republic of China (PRC) and thus enjoyed sovereign and/or crown immunity. The defendant claimed that the Hong Kong courts did not have jurisdiction over it.
Crown Immunity for Government Agencies in a Historical and Shipping Context – 2 cases
Wallem Shipping (Hong Kong) Ltd. and Telfair Shipping Corporation v. Owners of the Ship “Philippine Admiral” (“The Philippine Admiral”)
[1976] 1 Lloyd’s Rep. 234
The influential case of the ‘PHILIPPINE ADMIRAL’ is useful in placing HUA TIAN LONG in its shipping and historical context. The case was decided by the Judicial Committee of the Privy Council on appeal from the Supreme Court of Hong Kong. The case concerned a ship, the ‘PHILIPPINE ADMIRAL’, which had been granted to the Liberation Steamship Co. Inc. under a treaty of 1956 where Japan undertook to pay reparations to the Republic of the Philippines for damage which was done during the Second World War. The ship was granted as a part of the reparations which were made up mostly of capital goods and services. To administer the reparations scheme, a Reparations Commission was established to ensure that the reparations were used to benefit the Filipino people and to ensure that no goods supplied to private enterprises would be leased, sold or disposed of in any way other than to Filipino citizens who would then continue to use the goods for their intended purpose. The Reparations Commission retained title to the PHILIPPINE ADMIRAL until it had been fully paid for. Liberation chartered the ship to Telfair in 1972, at this time the ship was being repaired in Hong Kong by Wallem. Liberation and Telfair disagreed over who should pay for the repairs and Telfair claimed in rem against Liberation for damages for breach of the charter party. Wallem claimed in rem for the necessary disbursement while the ship was being repaired.
The Reparation Commission became concerned that its interests were in danger and passed a resolution to repossession of the PHILIPPINE ADMIRAL. It also applied to set aside the writs in both actions and presented claims to sovereign immunity on behalf of the Philippine Government.
It was held that:
i)in relation to a claim for immunity on the ground that a foreign sovereign has been impleaded, there were no special rules applicable to ships;
ii)to support a claim for immunity in the case of a vessel, there must be such interest (whether proprietary, possessory or other) that the claimant can fairly claim also the exercise of dominion over the vessel
iii)on the evidence, the defendants’ right to possession was not illusory
iv)however immunity would not be granted in respect of vessels not destined for public use
v)the evidence did not support the conclusion that the vessel was destined for public use; and
vi)were it necessary to decide the point, there was no evidence which would justify an inference that the defendants had waived any immunity they might have had.
The key points were iv and v and in particular the statement by Higgins J. that ‘the vessel is a trading vessel and has been used as such for years. It seems to me that something more was required to justify the claim to immunity than a mere possibility that she might hereafter be used for public purposes… although she was repossessed for the protection of the Government’s interests; the overwhelming balance of probability is that she will be used for trading.
Trendtex Trading Corporation v Central Bank of Nigeria [1977] 2 WLR 356
This case involved the Central Bank of Nigeria which had been incorporated in 1958 by Nigerian Statute as a central bank modeled on the Bank of England. It’s role was to issue legal tender and to act as banker and financial adviser to the Government of Nigeria. It’s affairs were under considerable Governmental control.
In 1975, the Central Bank issued an irrevocable letter of credit for over $14,000,000 in favour of the Plaintiff, a Swiss company , to pay for 240,000 tons of cement which the plaintiff had sold to an English Company. The cement was to be shipped to Nigeria where it was meant to be used to build government barracks. The cement was shipped to Nigeria but there was congestion in the port of discharge and the Central Bank declined to pay for the price of the cement and demurrage.
The Swiss company claimed against the Cetnral Bank for payments due in respect of the bank’s breaches and repudiation of the latter of credit. The bank made an application to set aside the writ and stay further proceedings in the action on the ground that the bank was a department of the State of Nigeria and therefore immune from suit.
It was held, by Lord Denning, that:
i)The bank had been created as a separate legal entity with no clear expression of intent that it should have governmental status. It was not an ‘emanation, arm, alter ego or department’ of the State of Nigeria, therefore it was not entitled to immunity from suit.
ii) Even if the bank were part of the Government of Nigeria, by that time International Law did not recognize immunity from suit for a government department in respect of ordinary commercial transactions. Immunity from suit would only be recognized for acts of a governmental nature.
Important Questions of Law which were raised in HUA TIAN LONG
- Can PRC state entities claim Sovereign Immunity in Hong Kong?
Sovereign Immunity means that a state cannot intervene in the affairs of another state and cannot claim jurisdiction over that state. The maxim “equals have no authority over one another” is embodied in the concept of Sovereign Immunity.
It was held, in this case, that Sovereign Immunity does not apply as PRC and Hong Kong are not two separate states but one, therefore it would be impossible to claim Sovereign Immunity in Hong Kong.
- Since Sovereignty over Hong Kong was handed back to China on 1 July, 1997, is there now any remaining common law doctrine of ‘Crown Immunity’ in Hong Kong? Has Crown Immunity now transferred to the Central People’s Government?
Given Hong Kong’s particular constitutional history, the position of Crown immunity under Hong Kong law had to be considered both pre- and post- July 1, 1997
Pre- 1 july 1997, absent statutory intervention, Hong Kong followed common law principles. The Code of Civil Procedure (Ordinance No 13 of 1873) established that:
“All claims against the Government of the Colony of the same nature as claims within the provisions of ‘The Petitions of Right Act 1860’ may, with the consent of the Governor, be preferred in the Supreme Court in a suit instituted by claimant as plaintiff against ‘The Attorney General’ as defendant”.
Eventually the Civil Procedure Ordinances were replaced by the first editions of the Rules of the Supreme Court and sections 479 and 480 of the Code of Civil Procedure (Ordinance No3 of 1901) became Order XIX, Rules 2 and 3. This meant that a claim could be made against the Crown, subject to the consent of the Governor. In this context “Crown” only referred to “the Government of the Colony”- not the English Crown.
After the enactment of the Crown Proceedings Ordinance, Cap. 300, (‘CPO’) the old statutory regime was repealed. This new Ordinance reflected the 1947 English legislation which came into force on 1 November 1957. Section 3 of the CPO, under the title ‘Right to sue the crown’, reads:
“Where any person has a claim against the Crown after the commencement of this Ordinance and, if this Ordinance had not been passed, the claim might have been enforced, subject to the consent of the Governor, under the Rules of the Supreme Court, or might have been enforced by the proceedings provided by any statute ceasing to have effect in the Colony by virtue of this Ordinance, the claim may be enforced as of right, and without the consent of the Governor, by proceedings taken against the Crown for that purpose in accordance with the provisions of the Ordinance.”
It is important to note that the term ‘Crown’, as used under the CPO only referred to the Crown in terms of the then Colony of Hong Kong not to the British Crown.
As to the post 1 July, 1997 position, the Plaintiff posited that the concept of ‘Crown immunity’ did not form part of the common law of Hong Kong immediately prior to the handover, and thus, according to Article 18 and Article 8 of the Basic Law, did not represent the common law which had previously been in force in Hong Kong
Article 18 reads:
“The laws in force in the Hong Kong Special Administrative Region shall be this Law, the laws previously in force in Hong Kong as provided for in Article 8 of this Law, and the laws enacted by the legislature of the Region”
Article 8 provides:
“the laws previously in force in Hong Kong, that is, the common law, rules of equity, ordinances, subordinate legislation and customary law shall be maintained, except for any that contravene this law and subject to any amendment by the legislature of the Hong Kong Special Administrative Region.”
In short, the plaintiff’s case is that the application of the common law concept of ‘crown immunity’ did not represent the common law in force in Hong Kong at the time of the handover to the PRC since the common law had been modified and amended by the CPO on 1 November, 1957.
The case for the defendant as to the position with regard to ‘Crown Immunity’ was two fold:
- As a matter of constitutional arrangement, the ‘crown immunity’ of the Central People’s Government cannot be taken away by domestic legislation of the Hong Kong SAR by application of the provisions of the CPO.
- As a matter of construction of the CPO, the term “the Crown” does not cover the Central People’s Government.
On the first point, it was noted that the Hong Kong Special Administrative Region (HKSAR) was established under Article 31 of the PRC Constitution as a
“local administrative region” of the PRC enjoying a high degree of autonomy under the direct control of the Central People’s government”
And that Article 81 of the Basic Law establishes the judiciary of Hong Kong so the Courts of the Hong Kong Special Administrative Region are also courts of the PRC- even though they enjoy power of final adjudication with the Special Administrative Region except for the final power of interpretation of the Basic Law. The defence drew an analogy from the common law principle that “the king can do no wrong and cannot be sued in his own courts”. In this case the Central People’s Government would be ‘the Crown’ and hence, the defence drew the conclusion that it could not be sued in the courts of the Hong Kong Special Administrative Region.
On this point, the defendants’ claim to invoke ‘crown immunity’ was upheld thus establishing that the concept of Crown immunity, in its true sense, was never removed from Hong Kong law and continues to exist despite the codification of this law in the form of statute. After the handover the privilege was transferred to the Central People’s Government of the PRC as the new sovereign power.
This was, in this case, an empty victoryfor the defendant as it was also held that the Plaintiff’s claim as to the fact that such crown immunity had been ‘waived’ was also upheld.
- Does Crown immunity apply to commercial transactions by state owned entities?
It was held that crown immunity is available to a PRC entity, even if transactions in question are commercial in nature.Crown immunity does not apply only to functional acts of state it also applies to commercial acts.
Decision
Guangzhou Salvage Bureau was held to be an entity of the Ministry of Communications, which is part of the Central People’s Government. Since this is the case, GSB is entitled to claim immunityfrom suit in Hong Kong courts whether or not the acts in question are commercial transactions.
How does this affect Hong Kong as a Jurisdiction?