By Min Lee
The Associated Press
HONG KONG (AP) — China’s possible intervention in a Hong Kong lawsuit is sparking concerns that Beijing may compromise the high degree of automony promised to Hong Kong and its courts when the former British colony returned to Chinese rule in 1997.
The legal dispute stems from conflicting Chinese and Hong Kong practices on sovereign immunity.
In May 2008, an American distressed debt fund that bought about $102 million in debt carried by the Congo government sued in Hong Kong. The Congo government claimed immunity as a foreign state. The Chinese government, which says it consistently follows the principle of absolute immunity, sided with Congo — and informed the Hong Kong courts of its position. Hong Kong’s Secretary for Justice sent lawyers to take part in oral arguments, urging the courts to follow China’s lead.
While a lower court ruled in December 2008 that Hong Kong had no jurisdiction in the case, an appeals court overturned that decision in February, ruling that in line with international law, the territory follows restrictive immunity, which does not cover the business affairs of sovereign nations.
The Congo government appealed to the Court of Final Appeal, and in late June, asked it to seek legal guidance from Beijing. If the request is granted, it would be the first time Hong Kong courts have sought a mainland legal interpretation. Congo’s request was not widely reported until it came up during a procedural hearing July 19.
Beijing has a direct political and financial interest in the case. In its lawsuit, the debt fund, FG Hemisphere Associates LLC, has also targeted three Hong Kong incorporated subsidiaries of state-owned China Railway Group Ltd. that owe the Congo administration about $221 million for mining rights. FG wants those entry fees to cover the debt that it is owed.
Peter Grossman, one of the two co-founders of FG Hemisphere Associates, which has since been renamed FG Capital Management Ltd., said in an e-mail that he can’t comment on ongoing litigation.
It’s not the first time Hong Kong has invoked immunity for one of Beijing’s African allies. In March 2009, the Hong Kong government said Zimbabwean first lady Grace Mugabe enjoyed diplomatic immunity from prosecution on allegations that she attacked a British photographer while visiting the city.
Hong Kong Human Rights Monitor Director Law Yuk-kai said the case compromised Hong Kong’s separate administrative status.
“It’s unacceptable for the Secretary for Justice to intervene based on sheer sovereign status and ask us to ignore customary international law so China can do a favor for its business partner and benefit itself at the same time,” said Law.
The territory’s Department of Justice said in a statement that the case “involves important issues of state immunity that attract great public importance.” They did not elaborate on this comment.
When Beijing took over this former British colony in 1997, it created something of a political anomaly.
Mindful of fears that it would govern Hong Kong with a heavy hand, China granted the thriving financial center a special administrative status.
While Beijing is the ruler, the Hong Kong government and local courts are kept separate from the mainland hierarchy. Hong Kong’s Court of Final Appeal is supposed to have the last say in all local cases.
In practice, however, Chinese sovereignty has often trumped Hong Kong autonomy. In 1999, the Hong Kong government asked for a Chinese ruling that forced the Court of Final Appeal to reverse a decision on residency rights that officials said would overwhelm the territory with mainland immigrants.
University of Hong Kong legal scholar Albert Chen said the lawsuit was a constitutional test case. The Hong Kong constitution says its courts must defer to China on matters of foreign affairs. But whether the case qualifies as a “foreign affair” is one of the key issues that the Court of Final Appeal will have to address. Oral arguments will be heard in March 2011.
Reached by phone on Thursday, Congo’s ambassador to China, Charles Mumbala, asked a reporter to send questions by fax. They didn’t respond by July 23. The Chinese foreign ministry’s Hong Kong office also didn’t respond to a letter faxed seeking comment. ♦