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Since then, the NPCSC has rendered its decision on 26 August 2011 (see http://www.info.gov.hk/gia/general/201108/30/P201108300217.htm). It reasoned that “state immunity concerns whether the courts of a state have jurisdiction over foreign states and their properties”, and “directly relates to the state’s foreign relations and international rights and obligations”. Thus, as the issue of sovereign immunity falls within the realm of foreign affairs, the Chinese government has the power to decide on this issue, and Hong Kong courts are bound to follow the PRC practice in adopting the absolute approach. Subsequently on 8 September 2011. the Court of Final Appeal formally disposed of the case by allowing the appeal by the DRC and the CR companies.
Secondly, although the majority of the CFA expressly left open the question whether assets of foreign states are immune from execution in Hong Kong (see para.412 of judgment), commercial parties should note that China adopts an absolute approach not only to a foreign state’s immunity from suit, but also to its immunity from execution. Thus it is very likely that Hong Kong is bound to adopt an absolute approach to immunity from execution as well. Further, the common law only regards a foreign state as capable of waiving its immunity before the courts and not in prior written agreements. Commercial parties should be aware of this risk before entereing entering into contracts with foreign states, particularly when enforcement against assets in Hong Kong is likely.
Whether this state of affairs will change in the long term will depend on when China ratifies the UN Convention on Jurisdictional Immunities of States and Their Property 2004 (which it has already signed) and extends its application to Hong Kong. At present, the Convention still lacks the sufficient number of signatories to come into effect.
