Foreign Defendants in Cross-Border Disputes
Challenging the Jurisdiction of a Hong Kong Court

In broad terms, Hong Kong courts only exercise jurisdiction over a prospective defendant upon whom personal service of the writ or other originating process issued by those courts is effected within Hong Kong. Personal service normally requires that the plaintiff leave a copy of the originating process with the defendant. In the case of a defendant who is an individual, the plaintiff may hand a copy of the originating process to the defendant. In the case of a defendant who is a company, the plaintiff may hand a copy of the originating process to an officer of the company or, where the company is incorporated in Hong Kong, leave a copy of the originating process at the registered office of the company.

Basis for Jurisdiction over Foreign Defendants

The jurisdiction of the Hong Kong courts over foreign defendants will depend upon whether the defendant has voluntarily submitted to the jurisdiction of the Hong Kong courts or whether there is a statutory basis for the Hong Kong courts to exercise such jurisdiction. For this purpose, a “foreign defendant” is a defendant upon whom personal service cannot be effected within the territorial jurisdiction of Hong Kong by reason of such defendant being outside of Hong Kong.

Voluntary Submission

In a common scenario, a foreign defendant may voluntarily submit to the jurisdiction of the Hong Kong courts. Contracts may contain a venue or forum clause which provides that the parties to the contract submit to the jurisdiction of the Hong Kong courts. By entering into the contract, each party thereby voluntarily submits to the jurisdiction of the Hong Kong courts.

Statutory Basis

The Rules of the High Court establish a legislative code prescribing all the circumstances in which the Hong Kong Court of First Instance may exercise jurisdiction over a foreign defendant. In broad terms, these circumstances may be divided into 2 groups. One group gives jurisdiction on the basis of the court giving leave to serve out of jurisdiction. The Court of First Instance may give leave, meaning permission, where the claim falls within a prescribed jurisdictional gateway. The other group gives jurisdiction on the basis that other legislation in Hong Kong gives the Hong Kong Court of First Instance the power to hear and determine the claim. Cases within this group are less frequent and may, for example, include certain claims by regulatory bodies.

The Hong Kong courts have no jurisdiction over a foreign defendant where the defendant has not submitted to the jurisdiction of the Hong Kong courts and there is no statutory basis for the court to exercise such jurisdiction.

Jurisdictional Gateways

Except in the case where legislation specifically gives the Hong Kong Court of First Instnace the power to hear and determine the claim, where a plaintiff wishes to sue a foreign defendant, the plaintiff must apply to the Court of First Instance for leave to serve the foreign defendant on the basis that his claim falls within one or more of the gateways. The application is made ex parte, meaning without notice to the prospective defendant. The application must be supported by an affidavit setting out the facts to establish that the plaintiff has a “good arguable case” that his claim falls within a gateway. If the plaintiff can make out such a case, the court will then determine whether it will exercise its discretion to grant leave on the basis of whether the plaintiff’s claim presents a serious issue to be tried.

The most common jurisdictional gateways are set out below. This is not intended as an exhaustive list.

Contracts Made in Hong Kong

The Hong Kong Court of First Instance may exercise jurisdiction on a claim to enforce a contract or to recover damages or obtain other relief in respect of a breach of contract where the contract:

• was made within Hong Kong;
• was made by or through an agent trading or residing within Hong Kong on behalf of a principal trading or residing out of Hong Kong;
• is by its terms, or by implication, governed by Hong Kong law;
• contains a term to the effect that the Court of First Instance will have jurisdiction to hear and determine any action in respect of the contract.

Breach of Contract in Hong Kong

Even where the contract is made outside Hong Kong, the Hong Kong Court of First Instance may assume jurisdiction where the claim is brought in respect of a breach of the contract committed within Hong Kong.

Tort in Hong Kong

Where a claim is founded on a tort and the damage was sustained, or resulted from an act committed, within Hong Kong, the Hong Kong Court of First Instance may assume jurisdiction.

Land in Hong Kong

If the whole of the subject matter of the plaintiff’s claim is land situated in Hong Kong, the Hong Kong Court of First Instance may assume jurisdiction.

Movable Property in Hong Kong

The Hong Kong Court of First Instance may assume jurisdiction in a claim to assert, declare or determine proprietary or possessory rights in or over movable property situated within Hong Kong.

Enforcement of Judgment or Award

The Hong Kong Court of First Instance can exercise its jurisdiction to assist in the enforcement of any judgment or award. In the case of a judgment from a foreign court, once this jurisdiction has been exercised, the court may recognize the foreign judgment. Our article on "Enforcement of Foreign Judgments in Hong Kong" describes the basis upon which judgments from outside Hong Kong may be enforced in Hong Kong.

Good Arguable Case

In applying to court for leave, the plaintiff must support his application with an affidavit. The affidavit must demonstrate that he has a good arguable case that his claim falls under one of the jurisdictional gateways. In this regard, the court will not require proof on balance of probabilities but rather something better than a mere prima facie case. The standard is a good prospect of success, which is higher than a mere serious issue to be tried. The argument in favour of jurisdiction must be stronger than the argument against jurisdiction.

If the plaintiff cannot establish a good arguable case that his claim falls within a jurisdictional gateway, the court will refuse leave.

Serious Issue to be Tried

If however, the plaintiff establishes a good arguable case that his claim falls under a jurisdictional gateway, he must then show that his claim is sufficiently meritorious for the court to exercise its discretion to give leave. In this regard, the court asks whether the plaintiff’s claim presents a serious issue to be tried.

The question of a serious issue to be tried goes to the merits of the claim whereas the question of good arguable case goes to whether the claim satisfies a jurisdictional gateway. So, for example, where a plaintiff sues a foreign defendant on the basis of a claim relating to land in Hong Kong, he must show a good arguable case that the claim relates to land in Hong Kong. If he can meet this test, he must then show that the question of the defendant’s liability on the claim presents a serious issue to be tried.

In some cases, the question of whether the plaintiff has a good arguable case under a jurisdictional gateway will require the plaintiff to show a good arguable case on the merits. So, for example, where the plaintiff claims on the basis of a tort committed in Hong Kong, he must show a good arguable case both that there was a tort committed and that the commission of the tort was in Hong Kong to show that he comes within a jurisdictional gateway. As the standard of a good arguable case is higher than the standard of a serious issue to be tried, once the plaintiff establishes a good arguable case that both a tort was committed and the commission took place in Hong Kong, no further enquiry is needed as to whether the claim of a tort having been committed raises a serious issue to be tried.

The requirement for a serious issue to be tried is intended to ensure that a foreign defendant is not subjected to Hong Kong court proceedings where he would be entitled to summary dismissal of those proceedings. A summary dismissal is available where the plaintiff’s claim, taken at face value, shows no reasonable cause of action or is frivolous or vexatious or is an abuse of process.

Service of Process

Once the Hong Kong Court of First Instance grants leave to serve out of jurisdiction, the plaintiff must effect personal service of the writ or other originating process on the foreign defendant. In effecting service, the plaintiff should include the affidavit used to support the application for leave so the defendant can see on what basis leave was given. Upon being served, a defendant may wish to consider whether to defend the proceedings in Hong Kong, to challenge the jurisdiction of the Hong Kong court or to ignore the proceedings. In this final regard, the defendant will wish to consider the extent to which a judgment of the Hong Kong court may be enforced in his own jurisdiction. Each jurisdiction will have its own laws governing enforcement of foreign judgments. Common law jurisdictions may have enforcement regimes similar to that in Hong Kong.

Setting Aside Leave

Where there is a risk that a Hog Kong judgment may be enforced in the defendant’s own jurisdiction, the defendant may challenge the leave given and in so doing seek other ancillary relief. Such other relief may include, for example, discharging an injunction which was issued ex parte at the time leave was given to the serve process.

It is critical that a foreign defendant who wishes to challenge the jurisdiction of the Hong Kong court does not take any step in the Hong Kong proceedings other than to make this challenge. A foreign defendant who seeks the assistance of the Hong Kong court may be regarded as having submitted to jurisdiction if such assistance is unrelated to his challenge to jurisdiction. Once the foreign defendant has submitted to jurisdiction, he can no longer challenge jurisdiction.

In broad terms, there are 3 ways to challenge the Hong Kong court’s jurisdiction. The first is to attack the leave given by the Hong Kong court on the basis that the plaintiff failed to make full and frank disclosure in applying for leave; the second is to attack either the merits of the gateway claim or the substantive claim; the third is to ask the Hong Kong court to exercise its discretion to stay the Hong Kong proceedings on the basis that it is in the best interests and convenience of the parties to the proceedings and witnesses to the proceedings that the proceedings be conducted in a different court.

Material Non-Disclosure

As noted above, a plaintiff applying for leave to serve out of jurisdiction will do so on an ex parte basis. Because the prospective defendant is unrepresented at the hearing of this type of application, he does not have the opportunity to be heard. As the Hong Kong court will therefore have neither the benefit of facts nor arguments that the defendant may put to the court to challenge jurisdiction, the court expects the plaintiff to make full and frank disclosure of all facts and arguments which the defendant may be reasonably be expected to make.

The plaintiff’s duty to make full and frank disclosures requires special care given that the court does not lightly assume jurisdiction over a foreign defendant.

Where the plaintiff fails in his duty to make full and frank disclosure of material facts which the court considers ought to have been put before it to make its decision as to whether to grant leave, the court may set aside leave.

As the court is keen to ensure that plaintiffs comply with their duty to make full and frank disclosure, once it sets aside leave, it will generally refuse to re-grant leave. However, exceptionally, it may do so where, on the basis of full disclosure, it is appropriate for the court to exercise jurisdiction and where the non-disclosure is inadvertent, a matter of poor judgment or without intent to conceal.

Forum Non-Conveniens

Even if the plaintiff has demonstrated a good arguable case for jurisdiction under one of the gateways and a serious issue to be tried on the merits of his claim, a Hong Kong court reserves the discretion under the principle of forum non conveniens to refuse leave on the basis that it is in the interests of all the parties and of justice that proceedings take place in another forum.

In this regard, a defendant must show not only that Hong Kong is not an appropriate forum but some other forum is in fact more appropriate. In assessing which forum is more appropriate, the court will look to the place where the action has the most real and substantial connection, taking into account factors such as convenience, expenses, availability of witnesses, the law governing the relevant transactions, and the place where the parties reside or carry on business.

If the court decides that there is another court outside of Hong Kong which is more appropriate as the forum to determine the plaintiff’s claim, it will normally stay the Hong Kong proceedings unless there are circumstances militating against it. In this latter regard, the plaintiff must show that the other forum will deprive him of personal or juridical advantages so that substantial justice cannot be done. For this purpose, the court looks to see what issues are likely to arise at the trial of the claim.