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Article exclusively contributed by Johnson Stokes & Master

Jurisdiction for contracts performed outside Hong Kong

By Hong Tran, Registered foreign lawyer, and Sophia Man, Solicitor Employment and Employee Benefits

Despite what people might naturally assume, the jurisdiction of the Labour Tribunal is not confined to contracts of employment performed wholly in Hong Kong. For example, in the case of Tsui Chung Fai v Kwok's Fashion Co Ltd, the Court found that the Labour Tribunal had jurisdiction to hear a claim where the performance of the contract of employment took place wholly in Shanghai.

Kwok's Fashion Co Ltd (the "Employer") was incorporated in Hong Kong and took on Mr Tsui (the "Employee") to work in Shanghai. On termination of the contract, the parties agreed that the Employer would pay the Employee's outstanding entitlements (i.e. arrears of wages, end of year pay and annual leave pay) in eight instalments. The Employer, though, only paid four of the eight instalments and failed to pay the balance.

Therefore, the Employee filed a claim with the Labour Tribunal for his outstanding entitlements. The Presiding Officer found that the Employer had no arguable defence and entered judgment for the Employee because an authorised representative of the Employer did not appear at the hearing. After unsuccessfully applying for review of the Presiding Officer's decision, the Employer sought and was granted leave to appeal by the Court of First Instance.

This was on the ground that the Labour Tribunal did not have jurisdiction to hear a claim where the performance of the contract of employment took place wholly outside Hong Kong. The point was also made that the contract was not an overseas contract as defined in the Contracts for Employment Outside Hong Kong Ordinance (the "CEOHK"). The Employee's claim therefore failed to satisfy paragraph 1(a) below.

The jurisdiction of the Labour Tribunal is set out in the Schedule to Labour Tribunal Ordinance (the "Schedule") and includes jurisdiction over the following matters:

1. A claim for a sum of money which arises from -
(a) the breach of a term, whether express or implied, of a contract of employment, whether for performance in Hong Kong or under a contract to which the [CEOHK] applies;
(b) the failure of a person to comply with the provisions of the Employment Ordinance (Cap 57) or the Apprenticeship Ordinance (Cap 47) ...

The Labour Tribunal's jurisdiction under paragraph 1(a) of the Schedule is limited to two specific types of employment: a contract to be performed in Hong Kong; and an overseas contract that falls within the CEOHK.

A contract for employment to be performed outside Hong Kong will not fall within the CEOHK if the employer is in Hong Kong or carrying on business in Hong Kong. In the present case, it was common ground that, although the contract of employment was performed outside Hong Kong, the Employer was a company incorporated in Hong Kong. Therefore the Employee's claim did not fall within the ambit of paragraph 1(a) of the Schedule.

However, the Employee's claim was for arrears of wages, end of year pay and annual leave pay. These are all benefits protected by the Employment Ordinance, which applies to all contracts of employment, irrespective of whether they are to be performed in or outside Hong Kong. Therefore, the Court found that the Labour Tribunal had jurisdiction under paragraph 1(b) of the Schedule and the Employer's appeal was dismissed.

Q & A on areas of jurisdiction under the Labour Tribunal
Q1 When will the Labour Tribunal not have jurisdiction?
A1 An example of where the Labour Tribunal will not have jurisdiction is if the contract of employment is to be performed outside Hong Kong and the contract does not fall within the CEOHK. The employer will not come under the CEOHK if based in Hong Kong or carrying on business in Hong Kong. Also, a claim must not be covered by any other paragraph of the Schedule (i.e. the claim must not be for failure to comply with the provisions of the Employment Ordinance).

Q2 If the employment contract was concluded in Shanghai, the services of the employee were rendered there and the tax liabilities of the employee are subject to China Tax Law, is it still appropriate for the Hong Kong Labour Tribunal to hear a claim for breach of that contract of employment?
A2 If the claim falls within the jurisdiction of the Hong Kong courts or Labour Tribunal (as per the Schedule discussed above) then Hong Kong will be the natural place to adjudicate the dispute. It is a matter for the discretion of the Hong Kong court whether to decline jurisdiction in favour of a foreign court. The mere fact that the dispute involves examination, interpretation or application of foreign law is not, by itself, something that means the Hong Kong court must decline jurisdiction. The judge in Mr Tsui's case said, "as a matter of fact, civil actions involving issues of foreign law, including PRC law, are not uncommon and the courts of Hong Kong, including the Labour Tribunal, have no difficulty adjudicating these cases.


Taken from Career Times 21 January 2005

(Last review date: 23 August 2013)


Disclaimer: The opinions expressed in this article are those of the contributor

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