Hong Kong Court Sets High Standard for Crown Immunity Exception
On 8 June 2017, the Hong Kong Court of First Instance (the Court) ruled in TNB Fuel Services Sdn Bhd v. China National Coal Group Corporation that a Chinese state-owned enterprise was not entitled to rely on the doctrine of Crown immunity in proceedings relating to the enforcement of an arbitral award unless this company could demonstrate that it bears almost no independence and acts fully under the control of the Crown.
As examined before, the concept of Crown immunity is a legal doctrine according to which a sovereign power cannot be sued in the courts of its own country. The leading case on this issue in Hong Kong is Hua Tian Long, a 2010 decision in which the Court found that the key criteria to answer the question of whether a company can claim Crown immunity is the control exercised by the central Chinese government over that company. What is crucial in answering this question is that the company must have the ability to exercise independent powers.
In the case at hand, a Malaysian company (TNB Fuel Services Sdn Bhd) sought the enforcement, in Hong Kong, of an arbitral award which it had successfully obtained in 2014 against a Chinese state-owned enterprise, China National Coal Group Corporation (China Coal). China Coal, however, claimed that it could rely on the Crown immunity exception against execution since it was wholly owned by the Chinese government’s State Asset Supervision and Administration Commission.
In light of the decision in Hua Tian Long, the Court held that China Coal could not assert Crown immunity. More precisely, the Court found that any assertion of Crown immunity had to come from the Crown itself (i.e., the Chinese central government). In the case at hand, however, the Court found that the assertion of Crown immunity had been made by China Coal’s general legal counsel, and not by the Chinese central government. Furthermore, the Court also found that pursuant to China Coal’s law of incorporation, the company was entitled to independent autonomy in its business transactions and operations and therefore did not act under the control of the government. For all those reasons, it dismissed China Coal’s Crown immunity claim.