State Actors, Sovereignty And Securing Enforcement In Australia, Hong Kong And Singapore

• Published date: 26 October 2020
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Corporate and Company Law, Arbitration & Dispute Resolution, Sovereign Immunity: Public Sector Government
• Law Firm: Jones Day
• Author: Ms Annie Leeks, Samuel Ngo and Matthew J. Skinner

In Short

The Situation: Through the expansion of sovereign wealth funds, the promotion of domestic industries and the growing commercial activity of state-owned entities, state actors are becoming increasingly involved in the international economy. This blurring of the line between commercial and state actors brings the commercial power of private companies into direct conflict with the sovereignty of states and is an issue of which companies dealing with state actors should be aware.

The Result: With increased interaction between commercial and state actors comes increased disputes between private companies and states/state-owned entities. In such disputes, the private company may have a right, whether under international law or by contractual arrangement, to initiate proceedings against the state. The state, however, may plead immunity from the proceedings under applicable domestic law and, if successful, ultimately render any resulting judgment or award unenforceable or ineffective.

Looking Ahead: The crown and sovereign immunity regimes of the two main dispute hubs in Asia-Pacific'Hong Kong and Singapore'play a significant role in determining the rights aggrieved investors have against states. As another major common law jurisdiction, the approach to sovereign immunity in Australia, including the outcome of the cases currently before the Australian federal courts, is also key to understanding the options available to aggrieved investors in the region.

Background

Heads of state and states themselves enjoy two distinct immunities. Crown immunity precludes heads of state from being bound by their own statutes. The immunity arose from the principle that "a sovereign can do no wrong" and was afforded to monarchs and passed onto the heads of state that replaced them.

Sovereign immunity grants states, and certain state-owned entities, immunity from the jurisdiction of foreign courts. States originally enjoyed absolute sovereign immunity, which applies, without exception, where a defendant proves that it is part of a recognised state. As states became more engaged in foreign trade and adopted a more commercial character, courts in common law jurisdictions including England, Australia and Singapore developed exceptions to sovereign immunity and did not grant immunity from proceedings relating to a state's commercial transactions. This saw the development of the restrictive doctrine of sovereign immunity, according to which immunity is granted to states only where the proceedings in question relate to public acts of states in the exercise of their sovereign authority.

Comparative Analysis of Crown and Sovereign Immunity

Traditionally, absolute immunity protected states from the commencement of any suit against them. Legislators and courts in Asia-Pacific now take a spectrum of approaches to both crown and sovereign immunity.

Immunity from Suit. Crown immunity provides that heads of state are immune from the law and the jurisdiction of the domestic courts in their own state. In Hua Tian Long (No. 2) [2010] 3 HKLRD 611, the Hong Kong Court of First Justice held that the crown immunity of the British Crown was passed onto the People's Republic of China ("PRC") at the handover in 1997. In contrast, Australia abrogated crown immunity with the Judiciary Act 1903 (Cth) and, like Singapore, grants immunity only in specific circumstances, such as acts or omissions by the Government or public officials in the exercise of their duties.

In regards to sovereign immunity, the PRC and Hong Kong currently recognize the absolute form of immunity, whereas Australia and Singapore recognize restrictive immunity.

In The Democratic Republic Congo v FG Hemisphere Associates LLC [2011] 14 HKCFAR 395 ("Congo Case"), the...