Two of the major Chinese policy banks, namely the China Development Bank (CDB) and the Export-Import Bank of China (EIBC), are expected to play an ever more important role in the implementation of China’s ‘Belt and Road Initiative’.

As indicated by Chinese President Xi Jinping, the CDB and the EIBC will be setting up special lending schemes worth billions of US dollars to finance infrastructure construction projects in countries involved in the Belt and Road Initiative.

Large-scale international investments will inevitably give rise to transnational disputes, and many of them will be submitted to international arbitration. Much of the appeal of international arbitration for such disputes lies in the ease of enforcement of arbitral awards under the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which allows enforcement to be sought in many jurisdictions worldwide, where the non-prevailing party has assets. When enforcing arbitral awards against the assets of state-owned or state-controlled entities in the same state’s own courts, the concept of crown immunity may be implicated. This may therefore be a relevant consideration when seeking enforcement against China’s policy banks’ assets in Hong Kong.

The concept of crown immunity is distinguishable from that of sovereign immunity. The principle of sovereign immunity originates from the concept of ‘the equality of sovereigns’, which means the judiciary of one sovereign cannot compel another sovereign to submit to its jurisdiction without its consent.

The principle of sovereign immunity is not applicable as between the Chinese government and its associated entities. With respect to Hong Kong, as the Hong Kong Special Administrative Region (HKSAR) is an inalienable part of the People’s Republic of China, as provided for in Article 1 of the Basic Law of HKSAR, the Chinese government is not a foreign sovereign in relation to Hong Kong.

Jul-Sep 2017 issue

Hong Kong International Arbitration Centre