The vulture flies to Beijing

Rule of law in Hong Kong rudely shaken ... Sovereign debt case sent by Hong Kong Court of Final Appeal to National People's Congress for resolution ... Legal system on the mainland still an adjunct of the government ... Percy Lo-Kit Chan reports

The Hong Kong Court of Final Appeal has delivered its long awaited judgment involving the "vulture" fund and the Hong Kong debt (recently discussed here).

In brief, the "vulture" was trying to recover a sovereign debt of the Democratic Republic of the Congo that had been assigned to it, by recovering part of the amount from an entity with assets in Hong Kong, which owed a debt to the Congo.

It reads rather like a rather tricky question under s.9 of the Law Amendment Reform (Consolidation) Ordinance (LARCO) - which is s.12 of the Conveyancing Act, 1919 (NSW) and cognate legislation to you down south.

The HKCFA has now split 3:2 in favour of remitting the question of sovereign immunity involved in the issue to the Standing Committee of the National People's Congress.

Under the Basic Law the SCNPC has power to give its "opinion" on the question of jurisdiction and the like of Hong Kong courts.

Chan, and Ribeiro PJJ, and Sir Anthony Mason NPJ agreed that the matter should be referred to the NPC.

Significantly, this is the first time that the court itself has referred a question to the NPC.

As Bokhary PJ noted:

"It has always been known that the day would come when the court has to give a decision on judicial independence. That day has come."

The very extensive judgments which range widely over difficult questions of international law can be found sub nomine Democratic Republic of the Congo and others v FG Hemisthere Associates LLC - [2011] HKCFA 43; FACV000007/2010, 8 June 2011.

The basic question is a fundamental one: does a sovereign body in Hong Kong which engages in a commercial pursuit enjoy only "limited" immunity (the British and Australian position) or "absolute" immunity (what appears to be the PRC position)?

The topic is made more complicated because it would seem that the PRC had some proposed legislation that would have resolved matters as far back as 2002, but for whatever reason it has never been progressed, or promulgated.

Involved, ultimately of course, is the question of "judicial independence" - Hong Kong is part of China albeit a "Special Administrative Region".

Is the question of enforcement of a judgment against another sovereignty entity a matter for the central government, or may a Hong Kong court ultimately resolve it?

Predictably, liberal commentators have been expressing concern about what this reference means for the "rule of law" in Hong Kong.

Many local practitioners are wary of the legal system over the border, most particularly because it still seems to operate as an adjunct to the executive arm of the government with a view to strengthening the development of "Chinese socialism".

On the other hand, the joint judgment of the majority noted (at [181]) the concept of "one country two systems", limiting questions of foreign affairs to the central government.

Is the domination of the executive any the less in developed "democracies" where the it may commit the country to war without a vote or even a full debate in the House of Commons or the House of Representatives?

We will now expectantly await events - the question of the interplay of the central government's authority, and the ultimate independence of the courts of the HKSAR, was bound to arise.

The powerful arguments mounted on both sides show that the ultimate "opinion" of the standing committee will not be an easy one.

Percy Lo-Kit Chan reporting from Hong Kong