Beijing OKs HK ruling blocking vulture fund suit

AP News
Posted: Aug 26, 2011 8:06 AM
Beijing OKs HK ruling blocking vulture fund suit

Beijing on Friday confirmed a decision that prevents the Democratic Republic of Congo from being sued in Hong Kong courts in a case that raised issues about the Chinese territory's autonomy.

The Standing Committee of China's rubberstamp legislature, the National People's Congress, says Hong Kong, like mainland China, is covered by absolute immunity _ meaning governments cannot be sued, the official Xinhua news agency reported.

The committee's interpretation of Hong Kong's constitution was in line with the June ruling by Hong Kong's Court of Final Appeal, which also requested the interpretation.

The case had raised issues of judicial independence in Hong Kong, which is a special administrative region of China with its own legal and financial system and a high degree of autonomy. There were concerns that the court's first-ever request for Beijing to interpret the ruling threatened China's policy of "One Country, Two Systems" in dealing with Hong Kong.

But legal experts said the ruling will have little impact on Hong Kong's status as a place to do business because it covers only contracts with states and attempts to enforce judgments against them, which are relatively rare.

In the Hong Kong ruling, the court rejected a bid by FG Capital Management Ltd., a so-called vulture fund, to sue the African country.

In 2004, FG bought up debt owed by the Congo government when it defaulted on payments for the construction of hydro power station by a Yugoslav company in the 1980s. FG sued to recover the debts in several jurisdictions around the world, including Hong Kong.

In its lawsuit, FG targeted three Hong Kong incorporated subsidiaries of state-owned China Railway Group Ltd. that owe the Congo administration about $221 million for mining rights. FG wanted those entry fees to cover the debt that it is owed.

A lower court had decided that Hong Kong, in line with the international community, follows restrictive immunity, which does not cover the business affairs of sovereign nations.