In a groundbreaking move, China has paved the way for potential lawsuits against foreign states within its jurisdiction, signalling a departure from its long-held belief in the absolute immunity of sovereign states and their assets. This change, brought about by the newly adopted Foreign State Immunity Law, mirrors the stance on “foreign state immunity” that is prevalent in Western countries.
Historically, China has been unwavering in its view that countries and their assets are immune from legal proceedings in foreign courts. In practice, this meant that it never permitted lawsuits against another country or its properties. However, the adoption of the Foreign State Immunity Law by the Standing Committee of the National People’s Congress marks a pivotal change. From next year, this total immunity will be a thing of the past.
Legal analysts opine that this shift was long in the making and is poised to offer enhanced legal safeguards for private enterprises engaged in global commerce, as Beijing strives to rebuild and reinforce business confidence. Starting January 1, 2024, any sovereign nation or the entities acting on its behalf involved in certain territorial infringements or business dealings will be liable to legal action in China.
To provide clarity, the draft law defined “commercial activity” as any transaction, investment related to goods or services, or other business-oriented actions that don’t involve the exercise of sovereign powers. Interestingly, “loans” were also included in the list of activities after extensive deliberation, as reported by the state-managed newspaper, Legal Daily.
This law’s primary objective is dual-pronged: to refine China’s foreign state immunity mechanisms and to specify the jurisdiction Chinese courts will have over civil cases that involve foreign countries and their properties.
Simultaneously, the Standing Committee revised the Civil Procedure Law, empowering embassies to gather evidence in overseas territories when a plaintiff in a Chinese court requires evidence from abroad and the court deems it essential. This amendment, which will be effective from January 1, will be implemented as per domestic regulations. It is anticipated to enhance the protection of China’s sovereignty, security, and developmental pursuits.
James D Fry, an associate professor of law at the University of Hong Kong, highlighted that this new legislation aligns China’s policies with the majority of other countries. As per international law, immunity typically doesn’t cover torts or delicts (violations of the law) committed within the host nation, a point explicitly clarified by Article 9 of the draft law. Moreover, while not explicitly stated, Fry anticipates that this law will also encompass Hong Kong, drawing a parallel to the 2011 Congo judgment. This could potentially fortify Hong Kong’s position as a premier hub for dispute resolution.
The principle that states are immune from the jurisdiction of foreign courts has long been an accepted norm in international law. However, post-World War II, several Western nations, including the US and the UK, started allowing exceptions to this rule to provide more substantial legal protection to businesses involved in global transactions. They transitioned from “absolute immunity” to “restrictive immunity.”
China, along with Russia, resisted this global trend, making it practically impossible to sue a foreign country in domestic courts. Bing Ling, a professor of Chinese law at the University of Sydney, noted that China’s hesitancy stemmed from fears of exposing itself to numerous lawsuits overseas. However, this apprehension might have been misplaced since foreign courts might still impose their restrictive immunity laws against China, regardless of China’s stance.
Interestingly, China had signed the United Nations Convention on Jurisdictional Immunities of States and Their Property in 2005. This convention delineated scenarios wherein a foreign state shouldn’t be immune from another country’s jurisdiction, although China hasn’t ratified it yet.
The advocacy for a review of state immunity laws in China gathered momentum in 2020 when a US state launched a lawsuit against China, attributing it with responsibility for the human and financial toll of Covid-19. The absence of such a law was perceived as a disadvantage for China in handling international lawsuits. Consequently, China’s foreign ministry began drafting a bill, which underwent its first review by the Standing Committee in December of the same year.
According to Ling, China’s active participation in international trade, particularly through initiatives like the Belt and Road, necessitated the protection offered by the restrictive immunity doctrine. With the passage of the Foreign State Immunity Law, China is signaling its alignment with the predominant legal practices of the West.
Recent years have seen China bolstering its legal arsenal to defend its national interests and security. This includes the introduction of the Foreign Relations Law and amendments to the Counter-espionage Law. Ryan Mitchell, an associate professor of law at the Chinese University of Hong Kong, suggests that while the law isn’t entirely motivated by China-US rivalry, it does offer leeway for actions reminiscent of sanctions against foreign states or officials. This could lead to a broad interpretation, enabling lawsuits or penalties in specific scenarios.
In conclusion, China’s decision to embrace a more Westernized legal approach to foreign state immunity symbolizes its evolving stance in the global legal framework, potentially influencing international trade and diplomatic relationships in the years to come.
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