Can You Sue a Foreign State in Hong Kong? Commercial‑exception to Sovereign Immunity, How to Sue and Enforce (2026)

For decades, the question of whether you could sue a foreign state in Hong Kong had a short and frustrating answer: in most circumstances, no. Hong Kong followed the doctrine of absolute sovereign immunity, shielding foreign states from the jurisdiction of local courts regardless of whether the underlying dispute was commercial or governmental in character. That position changed fundamentally when the PRC Foreign State Immunity Law (FSIL) took effect on 1 January 2024, replacing absolute immunity with a restrictive model that recognises a commercial‑exception to state immunity.

The Hong Kong Judiciary’s announcement on 28 May 2026, reinforcing the city’s push to become a premier hub for international commercial litigation, further signals that claimants, banks, creditors, trading houses, arbitration award‑holders and litigation funders, now have a realistic pathway to sue a foreign government in Hong Kong and, critically, to enforce the resulting judgment or award against commercial assets located in or passing through the jurisdiction.

TL;DR, Can you sue a foreign state in Hong Kong? Yes, in many commercial cases. If your claim arises from a commercial act (a private‑law transaction rather than a core sovereign function), and you can identify commercial assets against which to enforce, Hong Kong courts can and will exercise jurisdiction. Early asset‑tracing, meticulous pleading and a clear enforcement strategy are essential from day one.

Background: How Hong Kong Moved from Absolute to Restrictive Sovereign Immunity

Understanding why the law changed, and the constitutional framework within which it operates, is the starting point for any claimant considering whether to sue a foreign state in Hong Kong.

The Absolute‑Immunity Era

Before 2024, Hong Kong’s position on foreign state immunity was governed by the common law as shaped by PRC state practice. Unlike the United Kingdom (which adopted restrictive immunity through the State Immunity Act 1978) or the United States (which enacted the Foreign Sovereign Immunities Act in 1976), Hong Kong’s courts applied a doctrine of absolute immunity. A foreign state could not be sued in Hong Kong regardless of the nature of the dispute, even if the claim arose from a straightforward commercial contract for the supply of goods or the financing of a sovereign wealth fund’s investment portfolio.

This absolute position was anchored in the Basic Law. Article 19(3) of the Basic Law provides that the courts of Hong Kong shall have no jurisdiction over acts of state such as defence and foreign affairs. The practical effect was that Hong Kong courts, even when presented with plainly commercial disputes, deferred to the executive branch’s certification that immunity should apply. Academic commentary, including scholarship from HKU, has explored how this interaction between judicial restraint and executive certification shaped the boundaries of the rule‑of‑law principle in the SAR’s first quarter‑century.

The PRC Foreign State Immunity Law (FSIL), Effective 1 January 2024

The FSIL, promulgated by the Standing Committee of the National People’s Congress, marked a watershed. For the first time, PRC law, and by extension, the legal framework applicable in Hong Kong, adopted a restrictive approach to foreign state immunity. The FSIL’s central innovation is the commercial‑exception: a foreign state does not enjoy immunity in respect of proceedings arising from commercial activities. The law also codifies exceptions for personal injury and property damage on PRC territory, employment contracts, intellectual‑property disputes and arbitration agreements, but for most cross‑border creditors and trading counterparties, it is the commercial exception that matters.

Because Hong Kong’s legal system operates under “one country, two systems,” the FSIL does not automatically form part of SAR law in the same way as a local ordinance. However, the Hong Kong government confirmed that the SAR would adopt the commercial‑activities exception in line with national policy. Industry observers expect that Hong Kong courts will interpret the commercial exception consistently with international norms, drawing on persuasive authority from UK, US and UN Convention on Jurisdictional Immunities case law.

The Judiciary’s 28 May 2026 Announcement

On 28 May 2026, the Hong Kong Judiciary announced a suite of measures to strengthen international commercial litigation in the city, including initiatives related to the proposed Hong Kong International Commercial Court (HKICC). While the announcement covers procedural modernisation broadly, its timing and substance reinforce a clear message: Hong Kong is positioning itself as a credible and efficient forum for complex cross‑border disputes, including claims against foreign states and state‑owned enterprises.

Timeline of Key Legislative and Policy Dates

The Commercial‑Exception Test: What Hong Kong Courts Will Look For

The commercial exception to state immunity is the gateway through which most creditors, banks and trading counterparties will seek to sue a foreign state in Hong Kong. Understanding what the test requires, and how to plead and prove it, is the single most important tactical question in this type of litigation.

Core Elements of the Test

Under the restrictive‑immunity framework now applicable in Hong Kong, a foreign state will not enjoy immunity from jurisdiction where the proceedings relate to a commercial activity. The key factors courts will consider include:

• Nature of the act, not its purpose. The critical inquiry is whether the act in question is one that a private person could perform, entering into a contract, borrowing money, purchasing goods, rather than an act that only a sovereign can undertake (enacting legislation, deploying military forces, issuing diplomatic credentials). The commercial nature of the transaction is assessed objectively.
• Connection to the forum. The commercial activity must have a sufficient connection to Hong Kong, for example, the contract was performed in Hong Kong, payment was routed through Hong Kong banks, or goods were delivered through Hong Kong ports.
• Waiver and consent. A foreign state may waive its immunity expressly (through a clause in a contract or arbitration agreement) or impliedly (by submitting to proceedings, filing a counterclaim or taking steps in the action beyond contesting jurisdiction). Arbitration agreements are treated as a form of implied waiver in most restrictive‑immunity regimes.
• Separate legal entity analysis. Where the defendant is a state‑owned enterprise (SOE) or instrumentality rather than the state itself, courts will examine whether the entity has a separate legal personality and is engaged in commercial activity in its own right. SOEs that trade commercially may not benefit from sovereign immunity even if ultimately controlled by a foreign government.

Activities That Qualify as “Commercial” vs Sovereign Acts

The distinction between commercial and sovereign acts is the battleground where most immunity disputes are won or lost. The following classification, drawn from international practice and anticipated to guide Hong Kong courts, provides practical orientation:

Model Pleading Language to Satisfy the Commercial‑Exception Test

When framing a statement of claim, practitioners should include allegations that directly map onto each element of the commercial exception. A well‑pleaded case might include paragraphs along these lines:

1. That the defendant state (or its instrumentality) entered into a contract of a type ordinarily entered into by private commercial parties, describing the contract, the commercial terms and the commercial subject matter.
2. That the nature of the transaction is commercial, not sovereign, identifying that the acts complained of (failure to pay, breach of delivery obligations, repudiation) are acts that any private counterparty could commit.
3. That the commercial activity has a sufficient nexus to Hong Kong, specifying performance obligations, payment routing, asset location or contractual choice of forum.
4. That the defendant has waived immunity, expressly or impliedly, citing the relevant contractual clause, arbitration agreement or procedural step.

Procedural Roadmap: How to Plead and Litigate in Hong Kong to Defeat Sovereign Immunity

Successfully suing a foreign state in Hong Kong requires not only a meritorious commercial claim but also careful procedural execution. Missteps in service, timing or evidence can hand the defendant a jurisdictional exit.

Step‑by‑Step Litigation Timeline

1. Pre‑action preservation. Before filing, conduct discreet asset‑tracing to identify commercial assets of the foreign state or its instrumentalities within Hong Kong. Consider whether a pre‑action freezing order (Mareva injunction) is needed to prevent dissipation. Engage solicitors with experience in state‑entity asset investigations.
2. Originating process. Issue a writ of summons (or originating summons, depending on the nature of relief sought) in the Court of First Instance of the High Court. The statement of claim must plead the commercial‑exception elements described above with particularity.
3. Service on the foreign state. Service on a foreign state entity requires compliance with specific rules. Under Hong Kong’s Rules of the High Court, service outside the jurisdiction on a state may require leave of the court. In practice, service is often effected through the Ministry of Foreign Affairs of the foreign state or, where available, through the Hague Service Convention or bilateral arrangements. Allow additional time, service on sovereign entities is frequently delayed.
4. Immunity application by the defendant. Expect the foreign state to file a summons to set aside the proceedings on sovereign‑immunity grounds. This is typically the first substantive hearing. The burden of establishing that the exception applies rests on the claimant. Prepare affidavit evidence and, where relevant, expert evidence on the law and practice of the foreign state’s commercial activities.
5. Discovery and evidence. If the immunity challenge fails, the case proceeds to standard High Court case‑management. Pursue disclosure of the defendant’s corporate and transactional records. This is often the stage where the commercial character of the underlying activity is further substantiated.
6. Trial or summary judgment. Depending on the strength of the evidence, consider whether summary judgment under Order 14 is available, particularly where the defendant has no arguable defence to a debt claim arising from a commercial contract.
7. Costs. Costs in Hong Kong follow the event. If the immunity application is dismissed, the claimant should seek costs of the application. If the claimant ultimately succeeds, enforcement of a costs order against a state entity raises its own practical challenges (see enforcement section below).

Key Evidence to Attach to the Immunity‑Challenge Affidavit

The affidavit opposing the state’s immunity application is the most tactically important document in the early stages. It should exhibit:

• The contract or transaction documents demonstrating the commercial nature of the activity
• Evidence of the defendant’s engagement in the commercial market (annual reports, stock‑exchange filings, marketing materials)
• Corporate‑registry extracts showing the defendant’s legal personality and commercial objects
• Banking records or payment instructions evidencing the Hong Kong nexus
• Any waiver clause or arbitration agreement
• Expert evidence, if needed, on the foreign state’s legal framework for commercial entities

Evidence and Pleadings Checklist: Practical Exhibits and Sources

Assembling the right evidence early is critical. The following checklist is designed for in‑house counsel and external solicitors preparing to sue a foreign state in Hong Kong or to resist an immunity motion.

• Executed commercial contracts. Originals or certified copies of all agreements between the claimant and the state or state entity, including any amendments, side letters and termination notices.
• Transactional records. Invoices, purchase orders, delivery receipts, bills of lading and payment confirmations, any document that evidences the private‑law, commercial character of the dealings.
• Correspondence. Emails, letters and meeting minutes in which the state entity negotiated on commercial terms, sought competitive pricing or acknowledged contractual obligations, these demonstrate that the entity was acting as a market participant.
• Corporate records of the state‑owned entity. Certificates of incorporation, memoranda and articles of association, shareholder registers and annual returns from the relevant companies registry. These help establish that the entity has separate legal personality and carries on business for commercial purposes.
• Public disclosures. Published financial statements, credit‑rating reports and bond‑offering memoranda, especially useful where the state entity has accessed international capital markets.
• Bank records. Statements showing the flow of funds through Hong Kong accounts, particularly where proceeds of the commercial activity were received, held or disbursed in Hong Kong.
• Witness statements. Factual statements from individuals involved in the negotiation, execution or performance of the commercial transaction, these bring the documentary record to life.
• Expert evidence. If the state entity’s legal status or the characterisation of its activities under foreign law is contested, a report from a qualified legal expert on the relevant foreign jurisdiction may be necessary.

Preservation tip: Issue litigation‑hold notices to all relevant custodians as soon as a dispute is contemplated. State entities may be slow to preserve documents, or may actively seek to relocate assets. Early engagement of forensic‑accounting and asset‑tracing specialists is strongly recommended.

Red flags to watch for: Sudden restructuring or transfer of assets out of the jurisdiction, changes in the corporate identity of the counterparty, attempts to reclassify the transaction as a sovereign act (e.g., characterising a commercial loan as “state development finance”), or assertions of diplomatic status by personnel of commercial SOEs.

Enforcement Strategies: A Realistic Playbook for Post‑Judgment and Award Execution in Hong Kong

Obtaining a judgment or award against a foreign state is only half the battle. The practical question that matters most to creditors is: can you enforce against state assets in Hong Kong? The answer depends on whether the assets are commercial in nature and on the enforcement route chosen.

Core Enforcement Routes

1. Registration and enforcement of foreign arbitral awards. If the underlying dispute was resolved by arbitration, an award‑holder may apply to enforce the award in Hong Kong under the Arbitration Ordinance (Cap. 609), which gives effect to the New York Convention. Once leave to enforce is granted, the award has the same force as a Hong Kong court judgment. This is often the most efficient route for creditors holding HKIAC, ICC, SIAC or other institutional awards.
2. Domestic judgment enforcement. A Hong Kong court judgment can be enforced through standard enforcement mechanisms: writs of execution, garnishee orders (now called third‑party debt orders) against bank accounts, charging orders over real property and appointment of a receiver. For a general overview of enforcement mechanics in other common‑law jurisdictions, see this discussion of court‑order enforcement techniques.
3. Interim relief: freezing orders (Mareva injunctions). Hong Kong courts can grant interim freezing orders to prevent the dissipation of assets before judgment or during enforcement proceedings. A freezing order can capture bank balances, receivables and other assets held by the foreign state or its commercial instrumentalities in Hong Kong. Timing is critical, apply without notice (ex parte) where there is evidence of a real risk of dissipation.
4. Attachment of bank accounts and property. Third‑party debt orders can be directed at Hong Kong banks holding accounts of the foreign state or its SOEs. Charging orders can be placed over real property in Hong Kong. The key limitation is that only commercial assets, assets used for or intended to be used for commercial purposes, are amenable to execution. Property used for diplomatic or consular purposes, central‑bank reserves held for monetary‑policy purposes and military assets are generally immune from execution even after judgment.
5. Insolvency proceedings against commercial entities. Where the judgment debtor is a state‑owned company with separate legal personality (as opposed to the state itself), it may be possible to commence winding‑up proceedings under the Companies (Winding Up and Miscellaneous Provisions) Ordinance if the entity is unable to pay its debts. This is an aggressive strategy but can be effective where the SOE has substantial commercial operations and assets in Hong Kong.
6. Practical and diplomatic alternatives. In some cases, the most effective enforcement route is not formal court process but structured negotiation leveraging the judgment or award as a bargaining chip. Sovereign debtors may agree to settlement terms, including structured payment plans or asset‑for‑debt swaps, to avoid the reputational consequences of a publicly‑enforced judgment.

Asset‑Tracing Checklist: Identifying Commercial Assets of a Foreign State in Hong Kong

Claimants seeking to enforce a judgment in Hong Kong should systematically investigate the following categories of state‑connected assets:

• Bank accounts held in the name of the state, its agencies or SOEs with major Hong Kong clearing banks
• Real property registered at the Land Registry (excluding diplomatic premises)
• Shares and securities held through HKEX‑listed entities or CCASS custodians
• Receivables owed by Hong Kong counterparties under ongoing commercial contracts
• Vessels and cargo in Hong Kong waters (particularly relevant for maritime and commodities disputes)
• Intellectual‑property rights registered in Hong Kong (trademarks, patents)

Execution Immunity vs Jurisdictional Immunity

A crucial distinction that practitioners must keep in mind: even after a court has determined that it has jurisdiction over the foreign state (because the commercial exception applies), the state may still invoke execution immunity to protect certain categories of property from enforcement. Execution immunity is narrower in scope under the FSIL framework, but it remains a significant hurdle. Industry observers expect Hong Kong courts to follow international practice and permit execution only against assets used for, or allocated to, commercial purposes, not against central‑bank reserves, diplomatic property or military assets.

Arbitration vs Hong Kong Courts: Decision Matrix

Claimants frequently face a choice: should they pursue their claim through arbitration (typically HKIAC, ICC or SIAC seated in Hong Kong) or through the Hong Kong courts directly? Where a foreign state is the counterparty, the decision carries additional enforcement implications. For a deeper discussion of arbitration hearing preparation and conduct, see our separate guide.

Practical recommendation: Where the contract includes an arbitration clause, commence arbitration, the arbitration agreement itself significantly reduces immunity risk. Where no arbitration clause exists, Hong Kong court proceedings may be the only option, but the claimant must be prepared for a contested immunity motion.

Risks, Defences and Enforcement Friction Points

Claimants should be clear‑eyed about the obstacles that remain, even under the new restrictive‑immunity framework. Common defendant strategies and friction points include:

• Act‑of‑state doctrine. The foreign state may argue that the act in question is an act of state falling within Article 19(3) of the Basic Law, over which Hong Kong courts have no jurisdiction. This is distinct from sovereign immunity and can be raised even where the commercial exception is satisfied.
• Sovereign‑immunity motion at the threshold. Expect a contested interlocutory application. Budget for the costs and time of this preliminary skirmish, it can take 6–12 months to resolve, including any appeal.
• Execution immunity over non‑commercial assets. Central‑bank reserves, diplomatic premises and military assets remain immune from execution. Enforcement is practical only where identifiable commercial assets are present in Hong Kong.
• Diplomatic‑immunity claims. Personnel of the foreign state may assert diplomatic or consular immunity under the Vienna Conventions. This does not protect the state from commercial proceedings but may complicate service and evidence‑gathering.
• Cost and timeline. Litigation against a foreign state is typically more expensive and protracted than standard commercial proceedings. Early indications suggest that a contested immunity application, trial and enforcement in Hong Kong may cost between HK$3 million and HK$15 million in legal fees, depending on complexity, with a total timeline of 2–4 years from filing to enforcement.

Sue a Foreign State in Hong Kong: Your Decision Checklist and Next Steps

Before commencing proceedings, work through the following six‑point checklist to assess whether your claim is viable and enforceable:

1. Locus and standing. Do you have a direct contractual or tortious claim against the foreign state or its commercial instrumentality?
2. Relief sought. Is the relief you need (monetary damages, specific performance, injunctive relief) one that a Hong Kong court can order against a state entity?
3. Asset identification. Have you identified commercial assets in Hong Kong against which a judgment or award can realistically be enforced?
4. Interim relief. Is there a risk of asset dissipation that warrants an urgent freezing‑order application?
5. Evidence. Do you hold, or can you obtain, sufficient documentary and witness evidence to satisfy the commercial‑exception test?
6. Local counsel. Have you engaged experienced Hong Kong commercial‑litigation counsel who can navigate the immunity framework, conduct asset‑tracing and manage the enforcement process? Consult the Global Law Experts lawyer directory to identify qualified practitioners.

The ability to sue a foreign state in Hong Kong is no longer theoretical. The FSIL’s commercial exception, reinforced by Hong Kong’s 2026 institutional reforms, gives creditors a credible and enforceable pathway, provided the claim is prepared with precision, the evidence is assembled early and the enforcement strategy is built into the litigation plan from the outset.

Sources

1. Hogan Lovells, “Hong Kong to adopt landmark change to state immunity”
2. Reed Smith LLP, “Hong Kong to adopt commercial activities exception”
3. Herbert Smith Freehills (HSF Kramer), “A New Era: Foreign State Immunity in the PRC and Hong Kong”
4. A&O Shearman, “Implication of the Foreign State Immunity Law on cross‑border disputes”
5. Hong Kong Department of Justice, Litigation
6. Hong Kong Legal Hub, International Legal Services
7. Clifford Chance, “Sovereign and Crown immunity in Hong Kong”
8. HKU Scholars Hub, “The Court, the Act of State, and the Rule of Law”
9. Timothy Loh LLP, Enforcement of Foreign Judgments in Hong Kong