The Hua Tian Long (No 3) [China, Hong Kong Special Administrative Region, Court of First Instance.]

JurisdictionHong Kong
CourtCourt of First Instance (Hong Kong)
JudgeStone J

China, Hong Kong Special Administrative Region, Court of First Instance.

(Stone J)

Intraline Resources Sdn Bhd
and
Owners of the Ship or Vessel Hua Tian Long (No 3)1

State immunity Nature and scope Applicability Concept based on equality of States People's Republic of China resuming sovereignty over Hong Kong Special Administrative Region after 1 July 1997 Whether action against organ of Chinese Government in Hong Kong impleading foreign State Whether sovereign immunity having application inter-provincially Basic Law of Hong Kong Special Administrative Region One country, two systems principle Crown immunity Applicability Nature Concept based on inequality of ruler and ruled Crown Proceedings Ordinance enacted in Hong Kong in 1957 Effect on common law doctrine of Crown immunity New constitutional order Crown immunity after 1 July 1997 Whether subsisting Whether defendant owners of vessel Hua Tian Long entitled to assert Crown immunity Whether forming part of Crown of People's Republic of China Whether submitting to Court's jurisdiction Whether waiving right to immunity The law of the Hong Kong Special Administrative Region of the People's Republic of China

Summary:2The facts:The plaintiff entered into an agreement with the defendant owners of the vessel Hua Tian Long to make that vessel available to work on offshore projects for the installation of pipelines and oil platforms. When the vessel was not available at the time required, the plaintiff brought an action against the defendant owners for breach of contract, claiming damages. The vessel was arrested. The defendant owners, the Guangzhou Salvage Bureau (GZS), a State-owned enterprise established in 1989 now owned by the Ministry of Communications (MOC) of the Central People's Government

(CPG) of the People's Republic of China (PRC),3 applied for a stay and/or dismissal of the action. They claimed that the Court lacked jurisdiction since they enjoyed, and had not waived, sovereign and/or Crown immunity

Held:The application was dismissed.

(1) The defendant owners were not entitled to sovereign immunity. The concept of sovereign immunity in public international law reflected the maxim par in parem non habet imperium. It was underpinned by the concepts of comity, equality, independence and dignity of individual States. No State could interfere in the affairs of another State by claiming jurisdiction over that State. Since the vessel was ultimately owned by the CPG of the PRC, which exercised sovereign power over the Hong Kong Special Administrative Region after 1 July 1997, there was no impleading of a foreign sovereign State (paras. 2744).

(2) The action was not barred by Crown immunity.

(a) Crown immunity, represented by the maxim the sovereign can do no wrong, was based on the concept of the inequality of the ruling and the ruled. The Crown was not bound by statute unless expressly named or by necessary implication and at common law enjoyed immunity from suit. A body corporate was part of the Crown if the Crown had control over it. Crown immunity at common law had been curtailed by statute; in England the Crown Proceedings Act 1947 entitled individuals to bring personal claims in contract against the Crown (paras. 4553).

(b) The immunity of the British Crown in Hong Kong courts continued to exist in common law after the enactment of the Crown Proceedings Ordinance in Hong Kong in 1957, which mirrored the Crown Proceedings Act 1947. Crown immunity remained an attribute of the British Crown's sovereignty over her colonies, which included Hong Kong prior to 1 July 1997. This was not altered by the new constitutional order, in which one sovereign was merely replaced by another. On handover the new sovereign power, the PRC, enjoyed the crown immunity hitherto accorded to the British Crown, as opposed to the Colonial Crown. Neither was crown immunity contradicted by the Basic Law, Hong Kong's constitution. Since Crown immunity subsisted, it could be invoked as a matter of Hong Kong law (paras. 5497).

(c) The defendant owners were entitled to assert Crown immunity. On the evidence, the GZS was not a separate legal entity but formed part of the MOC. The MOC was part of the CPG, which was the metaphorical Crown of the PRC. The MOC was responsible for discharging tasks delegated to it by the CPG, which included the State function of marine rescue and salvage. The MOC exercised the control over GZS required for the attribution of Crown immunity. The very nature of the Crown immunity doctrine precluded the analogy with restrictive sovereign immunity whereby immunity was limited to functional acts of State (paras. 98126).

(d) The conduct of GZS, however, amounted to a submission to the jurisdiction of the Hong Kong court and a waiver of its right to claim immunity (paras. 12753).

The following is the text of the judgment of the Court:

INDEX TO JUDGMENT

Pages

Nature of this Application

432

The Factual Background

433

Chronology of the Proceedings to Date

434

Evidence at the Hearing of this Application

435

This Application: the Argument

436

  • (i) Sovereign immunity

436

  • (ii) Modified sovereign immunity

438

  • (iii) Crown immunity

440

  • (a) The concept

440

  • (b) The Hong Kong position

442

  • Pre-1 July 1997

442

  • After 1 July 1997

443

  • Decision on the Crown immunity debate

447

  • (iv) The defendants' additional ground

449

Application of Principle to Fact: the Status of the Defendants

451

Waiver

458

Decision on Waiver/Submission to the Jurisdiction

461

Summary

464

Order

464

Finally

465

JUDGMENT
Nature of this Application

1. This application involves the claimed immunity from suit of an entity of the Central People's Governmentand hence the contention that this court has no jurisdiction over one of the vessels owned by that entity.

2. By summons dated 21 October 2009 the defendants in these proceedings, which on the writ in rem are named as The Owners of the Ship or Vessel Hua Tian Long, but which now have been identified as the Guangzhou Salvage Bureau, have applied for a stay and/or dismissal of this action on the ground that, in the words of the application, the Defendant enjoys, and has not waived, the sovereign and/or Crown immunity and hence this Honourable Court has no jurisdiction over the Defendant.

3. This is a case which has been in existence before the Hong Kong court since the issue on 15 May 2008 of the Admiralty action in rem against The ship or vessel Hua Tian Long of the People's Republic of China flag resulting in the arrest a few days later of that vessel in Hong Kong harbour. How, then, has the present situation arisen?

The Factual Background

4. The principal facts leading to this case are essentially undisputed. This action arises out of an alleged breach of contract on the part of the defendant owners of the Hua Tian Long which vessel, says the plaintiff, failed to honour its commitment under a Memorandum of Agreement entered into by the plaintiff with the Guangdong Salvage Bureau (GZS) to make available this vesselwhich is the largest floating derrick crane-barge based in Asiato work on offshore Malaysian and Vietnamese projects (the Newfield and Talisman projects) for the installation of pipelines and oil platforms.

5. Consequent upon the non-appearance of the Hua Tian Longwhich, it transpires, in the period in question was under charter to China National Overseas Oil Company, which refused to release the vessel for the plaintiff's usethe plaintiff says that it was unable properly to complete the Newfield and Talisman projects, which it had been awarded on 16 January 2007, and hence it now claims damages against defendant owners in the sum of some hundreds of millions of US dollars for fraudulent misrepresentation and/or breach of contract.

6. On 21 April 2008 the plaintiff invoked the Admiralty jurisdiction of the High Court. The writ was nailed to the mast, and the bailiff arrested the Hua Tian Long in Hong Kong waters, this massive lifting barge earlier having been sent from its Guangzhou base to Hong Kong to raise from the sea bed a Ukrainian tug which some weeks earlier had been in collision with a container vessel in the outer reaches of the harbour, and had sunk with tragic loss of life.

7. By order dated 30 April 2008 Reyes J dismissed the defendants' application for setting aside the writ and this action, and for the release of the vessel from arrest.

8. In the skeleton argument of counsel for owners which was placed before Reyes J at this hearing to set aside the arrest, the following appears at paragraph 3 thereof, under the heading Sovereign Immunity:

9. Some five weeks later [sic], on 9 May 2008, GZS ultimately secured the release of the Hua Tian Long by arranging bail bonds to be posted on its behalf by China Merchants' Bank; in the event, the application for bail bond(s) was hotly disputed at hearings both before this court and in the Court of Appeal.

10. At first instance the Order of 9 May 2008 was for the provision of bail in the sum of US $65 million, which sum, consequent upon the admission of fresh evidence, was varied by the Court of Appeal to the sum of US $122,412.000: see [2008] 4 HKLR 719 (first instance) and [2008] 4 HKLR 745 (CA).

11. Having furnished bail and thus securing the release of the vessel by Order of Reyes J on 4 June 2008, the defendants now seek an order granting immunity from suithence the present application commanding this judgment.

Chronology of the Proceedings to Date

12. Whilst a full and highly detailed chronology of this litigation to date has been supplied to the court during the course of this hearing, it may be worth sketching in the principal procedural landmarks, since this information is germane to legal argument as to the sustainability of this application in the context of waiver and submission to the jurisdiction.

13. Subsequent to the issue of the writ in rem on 21 April 2008, and the failure of the application to set aside the writ, the defendants acknowledged service of the writ on 2 May 2008. Thereafter followed the...

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