within the reach of Hong Kong courts. Hong Kong is a signatory to the Hague Convention on Taking Evidence Abroad in Civil or Commercial Matters and, as such, may use this mechanism to obtain discovery abroad. Although China is not a signatory, it has pledged that following reversion, Hong Kong will continue to honor international agreements to which China is not a party. See THE BASIC LAW OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION OF THE PEOPLE'S REPUBLIC OF CHINA art. 153 (1990) [hereinafter BASIC LAW OF 1990] ("International agreements to which the People's Republic of China is not a party but which are implemented in Hong Kong may continue to be implemented in the Hong Kong Special Administrative Region."). We have no reason to assume that China will renege on its promise. See Dragon Capital Partners L.P. v. Merrill Lynch Capital Servs. Inc., 949 F. Supp. 1123, 1129-30 ("This Court cannot ignore the guarantees and decisions as to Hong Kong's future that have thus far been made in . . . the Basic Law of the Hong Kong Special Administrative Region ("BL") as has been promulgated by the National People's Republic of China.").
Pyrenee rejoins that Hong Kong's observation of the Hague Convention does not guarantee that Hong Kong's own procedural rules permit pretrial discovery of third party records in the United States. It points to Lony v. E.I. Du Pont de Nemours & Co., 886 F.2d 628, 638 (3d Cir. 1989), which held that, despite Germany's formal adherence to the Hague Convention, Germany's own procedural rules severely limited document requests and prevented access to crucial United States evidence. But Wocom has in turn provided authority demonstrating that Hong Kong courts suffer no such constraints, and that they regularly secure third-party discovery from the United States by issuing Letters Rogatory or Letters of Request. See Application of Esses, 101 F.3d 873, 874 (2d Cir. 1996) (granting request from party to Hong Kong proceeding for third-party documents in the United States); see also In re Letters of Request from Supreme Court of Hong Kong, 821 F. Supp. 204, 205, 209 (S.D.N.Y. 1993) (outlining requisites for Letters of Request seeking United States evidence for use in Hong Kong criminal case). See generally 28 U.S.C. § 1782 (statute authorizing United States District Courts to compel document production from party residing in district for use in foreign proceedings). Accordingly, Pyrenee's fear that litigating in Hong Kong will preclude access to third-party evidence located in the United States is unfounded.
1. Hong Kong's Reversion to China Does Not Deprive Pyrenee of all Remedies
Equally indefensible is Pyrenee's ominous supposition that Hong Kong's July 1997 reversion to Chinese sovereignty renders Hong Kong an inadequate forum. The Supreme Court has held that a forum where the defendant is amenable to process is adequate unless the remedy it provides "is so clearly inadequate or unsatisfactory that it is no remedy at all," an exception present only "in rare circumstances." Piper, 454 U.S. at 254 & n.22. Pyrenee therefore faces an uphill battle in light of the fact that several courts have expressly found Hong Kong an adequate forum for fraud and other claims, even in the wake of reversion. See Dragon Capital Partners L.P. v. Merrill Lynch Capital Servs., Inc., 949 F. Supp. 1123 (S.D.N.Y. 1997); Karlitz v. Regent Int'l Hotels, Ltd., 1997 U.S. Dist. LEXIS 2111, 1997 WL 88291, at *2 (S.D.N.Y. Feb. 28, 1997); Capri Trading Corp. v. Bank Bumiputra Malaysia Berhad, 812 F. Supp. 1041, 1044 (N.D. Ca. 1993).
This position is best explained in Dragon Capital Partners. First, the court observed that Hong Kong "is a sister common law jurisdiction with procedures akin to our own." 949 F. Supp. at 1129 (internal quotations omitted). The plaintiff had access to satisfactory remedies in Hong Kong because its commodity fraud claims could be raised there as "causes of action for fraud, deceit or misrepresentation." Id. In any event, the court explained, the Supreme Court holds that "'the possibility of a change in substantive law should ordinarily not be given conclusive or even substantial weight in the forum non conveniens inquiry.'" Id. at 1131 (quoting Piper, 454 U.S. at 246). Addressing Hong Kong's imminent reversion, the court eloquently and persuasively assuaged the plaintiff's fears:
This Court cannot ignore the guarantees and decisions as to Hong Kong's future that have thus far been made in both the Sino-British Joint Declaration on the Future of Hong Kong ("JD") and the Basic Law of the Hong Kong Special Administrative Region ("BL") as has been promulgated by the National People's Congress of the People's Republic of China. Under these declarations, the capitalist system and way of life is to be maintained for 50 years, (JL, Art. 3(5), (12); Annex I, Art. I; BL, Art. 5), rights and obligations valid under the laws currently in force in Hong Kong will continue to be valid and recognized, (BL, Art. 160), Hong Kong is to enjoy executive, legislative and independent judicial power, (JL, Art. 3(3); Annex I, Art. I; BL, Art. 2), Hong Kong laws, including the common law, rules of equity, statutory law and customary law, are to be maintained following the hand-over, (JL, Art. 3(3); Annex I, Art. II; BL, Art. 8), and with the exception that the Court of Final Appeal will replace the United Kingdom Privy Council, the judicial system is to be maintained and recognized as independent. . . . If these declarations are honored, and there is no reason to suspect otherwise at this point, then the parties to this action will have their rights and obligations recognized as valid after the Chinese takeover.
949 F. Supp. at 1129-30. Consequently, the court dismissed the lawsuit to Hong Kong, both on forum non conveniens grounds and in deference to proceedings already initiated there.
In contrast to this thoroughly researched and well-reasoned exegesis on reversion's impact on the Hong Kong's legal system, Pyrenee produces a case refusing dismissal to Hong Kong based solely on what appears to be judicial hysteria. See Nowak v. Tak How Investments, Ltd., 899 F. Supp. 25, 34 (D. Mass. 1995) ("Furthermore, the uncertain future of the Hong Kong legal system, given the island's reversion to Chinese sovereignty in less than two years, counsels heavily in favor of [United States] jurisdiction . . . ."), aff'd, 94 F.3d 708 (1st Cir. 1996) ("Given the likelihood that the Nowaks would face great obstacles in Hong Kong due to possible political instability . . . efficiency concerns require a Massachusetts forum."). Neither court cites any authority for these conclusory assertions, and as a result they are entitled to little weight. Moreover, current reports confirm that, three months after reversion, such dire predictions have not come to pass. Liz Sly, Hong Kong's Honeymoon Continues, CHI. TRIB., Oct. 8, 1997, § 1, at 3 ("'Many say the first 100 days [of an administration] set the tone for the future. I am pleased to say that . . . it appears that Hong Kong is staying the course in terms of remaining a free and open society.'") (quoting United States Commerce Secretary William Daley).
The shortcomings of Pyrenee's judicial authority are not remedied by its expert, Joseph Dellapenna, Professor of Law at Villanova University, whose affidavit consists of conjecture that China will radically alter Hong Kong's legal system in the near future. Professor Dellapenna first recounts his qualifications as an expert in Chinese law and legal matters, then engages in an extended explanation of Chinese legal history and the various inadequacies that plague the system today, including Chinese judges' politicization and lack of formal training or familiarity with a common law legal system. Pl. Resp. Ex.5, PP 1-27. Where the affidavit fails is in its rank speculation that China's legal system will become Hong Kong's legal system. Dellapenna claims that "there is good reason to believe that sooner rather than later the patterns already found on the mainland of China will prevail in Hong Kong as well." Id. P 28. But the following paragraphs largely point to various Chinese actions that have nothing to do with Hong Kong's legal system. Id. PP 29-37. Dellapenna recites only four changes relevant to the judiciary: (1) making four of the five judges on Hong Kong's Court of Final Appeal Chinese, which will "severely limit the influence of experienced common law judges"; (2) requiring the Chief Justice to be Chinese; (3) moving final review to Beijing; and (4) subjecting judicial appointments to Beijing approval. Id. P 31, 36. The first, third and fourth concerns, however, are rebutted by Wocom's expert, and second does not make Hong Kong's remedies "clearly inadequate or unsatisfactory." See Piper, 454 U.S. 235 at 254 & n.22.
Wocom's expert, Professor Peter Wesley-Smith, is a Professor of Law at the University of Hong Kong and Dean of the University's Faculty of Law. Def. Reply Ex. C P 1. He has co-edited two volumes on the post-1997 regime in Hong Kong. Id. Professor Wesley-Smith explains that Hong Kong's legal system provides for due process of law and other procedural safeguards and will continue to do so after the reversion. Id. P 3. The People's Republic of China and Hong Kong ratified in 1985 the Joint Declaration on the Question of Hong Kong, which states that Hong Kong will retain its basic economic and legal systems for at least fifty years following the July 1997 reversion. Id. P 4. The Basic Law of 1990 specifically maintains the "'principle of trial by jury previously practised in Hong Kong,'" and the "'rights previously enjoyed by parties to criminal and civil proceedings, including expressly the right to a fair trial without delay and the presumption of innocence." Id. P 6 (quoting BASIC LAW OF 1990 arts. 86, 87). These guarantees are "strengthened by the provisions for the maintenance of judicial independence, including security of tenure for judges." Id. P 7; see BASIC LAW OF 1990 art. 92 (judges "shall be chosen on the basis of their judicial and professional qualities and may be recruited from other common law jurisdictions."); id. art. 91 ("the previous system of appointment and removal of members of the judiciary other than judges" will remain in place).
Wesley-Smith points out that the changes Dellapenna anticipates in Hong Kong's judiciary are based on his erroneous reliance on an earlier draft of the Basic Law (a charge Pyrenee never disputes) and out-of-context interpretations. First, the Basic Law as amended in 1990 requires only the Court of Final Appeals' Chief Justice, not four/fifths of the court, to have Chinese citizenship. Def. Reply Ex. C P 5. The remaining judges need not be any particular race or nationality. Id. Second, the 1990 version confirms that "'the power of final adjudication of the [Hong Kong Special Administrative Region] shall be vested in the [Court of Final Appeal] of the Region.'" Id. P 6 (quoting BASIC LAW OF 1990 art. 82). The provision on which Dellapenna relies for his conclusion that Beijing will become the situs for final review relates only to questions of interpretation on the Basic Law, not adjudication. Id. P 6. Pyrenee does not contend that this litigation would require Hong Kong courts to interpret the Basic Law. Finally, Dellapenna's opinion that judicial appointments are subject to Beijing's approval is contradicted by Article 88 of the 1990 Basic Law, which "grants the power of appointment of judges to the Chief Executive 'on the recommendation of an independent commission composed of local judges, persons from the legal profession and eminent persons from other sectors.'" Id. P 7.
Based on Professor's Wesley-Smith's expertise in Hong Kong law and legal systems, his reliance on the most recent version of the Basic Law, and his uncontroverted opinions grounded in legal authority rather than speculation, we are persuaded by his affidavit, which establishes the adequacy of Hong Kong as an alternative forum for this litigation. Furthermore, nothing else in the record supports a conclusion that the remedies in Hong Kong are clearly inadequate or unsatisfactory. Because Pyrenee has failed to contradict Wocom's proof of adequacy, we find this requirement met.
C. The Private and Public Interest Factors Favor Hong Kong
Now that we have found Hong Kong to be an adequate forum for this case, we balance the private and public interest factors to determine whether they favor the United States or Hong Kong. Gulf Oil Co., 330 U.S. 501 at 508; Kamel, 108 F.3d at 803. Normally, the plaintiff's choice of forum receives a great deal of deference. But "because the primary objective of any forum non conveniens inquiry is to ensure that the trial is convenient, a foreign plaintiff's choice of forum deserves less deference." Kamel, 108 F.3d at 803; see Piper, 454 U.S. at 256 ("When the plaintiff is foreign, however, this assumption [of convenience] is much less reasonable . . . . [and] deserves less deference."). With this in mind, we explore and weigh the relevant factors.
Private interest factors considered in ruling on a forum non conveniens motion include: (1) ease of access to sources of proof; (2) the availability of compulsory process for hostile witnesses and the cost of obtaining the attendance of willing witnesses; (3) the possibility of viewing the premises, if appropriate; and (4) all other practical problems that make trial of the case easy, expeditious and inexpensive. Gulf Oil Co., 330 U.S. at 508; Kamel, 108 F.3d at 803; Mora, 1997 WL 102546, at *3. The pertinent public interest factors are: (1) the court's own docket congestion; (2) the preference for having a forum apply law with which it is familiar; (3) the local interest in resolving the controversy; and (4) the unfairness of burdening citizens in an unrelated forum with jury duty. Piper, 454 U.S. at 241 n.6; Kamel, 108 F.3d at 803; Mora, 1997 WL 102546, at *4. A district court has "substantial flexibility" in considering the relative importance of these factors. Wilson v. Humphreys (Cayman) Ltd, 916 F.2d 1239, 1245 (7th Cir. 1990).
1. The Private Interests Point to Hong Kong
We begin with the private interests. With respect to the first two factors, access to both proof and witnesses will clearly be eased by trial in Hong Kong. The key documents for proving fraud, the Pyrenee account records, are located at Wocom Commodities' offices in Hong Kong. Hung Aff. P 13. And the individuals who can decipher these records, current and former Wocom employees in charge of Pyrenee's account, all reside in Hong Kong.
Hung Aff. P 14. It is Wocom's employees who know whether the company bucketed Pyrenee's trades by conducting them in its own offices, and Wocom's own documents that would have memorialized these activities. Likewise, Wocom employees and internal trading documents will tell whether Wocom engaged in a fraudulent scheme to misrepresent to Pyrenee the price of its CME futures trades, and the company's financial records will reveal whether Wocom "stole the ticks" by keeping the price difference.
We have already rejected Pyrenee's two arguments in favor of convenience -- that the critical evidence of fraud lies in the hands of Wocom's United States-based FCM, and that third-party discovery cannot be compelled by Hong Kong courts. Although Pyrenee may need to obtain CME documents recording the time, date and price of trades for comparison with Wocom's own trading records, the affidavit of Pyrenee expert Charles Seeger III demonstrates that this information is within Pyrenee's reach. Moreover, Hong Kong has the ability to secure extraterritorial evidence through Letters of Request and Letters Rogatory. Finally, while it is true that the CME trades were a significant step in the alleged scheme to defraud, no one disputes these trades. Rather, the dispute is over the conduct of Wocom employees after the trades became fact. Again, the evidence of this conduct is contained either in Wocom's Hong Kong files or in the memories of Wocom's Hong Kong employees.
The difficulty and expense associated with compelling these employees to testify in the United States would prove prohibitively difficult. All of Wocom's Hong Kong employees are likely beyond our powers of compulsory process, see McDonald's Corp. v. Bukele, 960 F. Supp. 1311, 1318 (N.D. Ill. 1997), while a Hong Kong court will have far less difficulty in securing the appearance of its own citizens. Even if these witnesses could be forced to make the journey, a flight from Hong Kong to the United States takes a daunting 18 hours and is extremely expensive. Hung Aff. P 17; see Bukele, 960 F. Supp. at 1318-19 (cost of transporting witnesses from El Salvador prohibitive); Europe & Overseas Commodity Traders, 940 F. Supp. at 538 (cost of transporting witnesses from England prohibitive). On the plaintiff's side, Michael Mak, the key non-Wocom witness who directed all of Pyrenee's trading, is also a Hong Kong citizen. While he may not object to appearing in the United States, he showed his willingness to submit to Hong Kong jurisdiction when he filed suit in 1990 against Wocom. See Bukele, 960 F. Supp. 1311 at 1319-20 (considering plaintiff's suit in El Salvador involving identical parties and similar claims to be proof of its willingness to submit to El Salvadorian jurisdiction). We emphasize that in this fraud case, live testimony is of the utmost importance; "when fraud charges are made, it is desirable that the factfinder have the benefit of demeanor testimony of witnesses." Fustok v. Banque Populaire Suisse, 546 F. Supp. 506, 511 (S.D.N.Y. 1982); see Europe & Overseas Commodity Traders, S.A. v. Banque Paribas London, 940 F. Supp. 528, 538 (S.D.N.Y. 1996) (finding that "live testimony of key witnesses is necessary 'where the plaintiffs alleged that the defendants had conspired to defraud them.'") (quoting Scottish Air Int'l, Inc. v. British Caledonian Group, PLC, 81 F.3d 1224, 1232-33 (2d Cir. 1996)). The first two factors therefore point toward dismissal.
Moving on to the third and fourth factors, the third -- possibility of viewing the premises -- is not an issue. The fourth factor requires a practical evaluation of where trial would be most efficient and economical. All of the principal witnesses, parties and documents are located in Hong and the bulk of the fraud was committed in Hong Kong. Hong Kong courts can compel the attendance of these witnesses and the production of these documents much more easily than this Court. And adequate procedures exist for securing United States documents, if at all necessary. The private interest balance consequently tips in favor of Hong Kong. See Transamerica ICS, Inc. v. Tugu Ins. Co., 588 F. Supp. 1301, 1304 (S.D.N.Y. 1984) ("As a matter of fairness, it would be excessively burdensome to require a Hong Kong defendant to bring its Hong Kong witnesses and exhibits around the world to New York to defend itself in a dispute over what is essentially a Hong Kong transaction.").
2. Hong Kong Harbors the Strongest Public Interest
The first two public interest factors lie in equipoise. With respect to docket congestion, Mak's 1990 action against Wocom demonstrates that litigating in Hong Kong would not involve delays exceeding those here. Mak's complaint in the Hong Kong action was filed in September 1990 and, following a three-month trial, judgment was handed down on June 21, 1994. The Hong Kong court emphasized that the case would have proceeded much faster absent the myriad amendments to Mak's complaint. Judgment at 2. This case was filed in July 1996; we cannot say that its full resolution would take less than four years. While Mak's action did differ in some respects from this suit, it is the best indication we have of comparative court congestion. Based on the evidence before us, we find that the first factor favors neither forum.
As for the preference for having a forum apply law with which it is familiar, neither party contends that this is an issue. While this Court is familiar with the CEA provisions invoked here, Pyrenee does not argue that litigating this case in Hong Kong would force the court there to apply foreign law. Indeed, Pyrenee may assert the same allegations under Hong Kong common law causes of action for fraud, deceit or misrepresentation. See Dragon Capital Partners L.P. v. Merrill Lynch Capital Servs., Inc., 949 F. Supp. 1123, 1129 (S.D.N.Y. 1997). Consequently, the second factor does not point in either direction.
But the third and fourth factors once again favor Hong Kong. Pyrenee asserts that the United States has a greater interest in having this dispute resolved within its borders based solely on the CME trades made in furtherance of Wocom's alleged tick stealing. Harkening back to its argument for subject matter jurisdiction under the "effects test" (which we found unnecessary to address), Pyrenee claims that these trades are presumed to have manipulated United States markets because they used an American exchange as part of a scheme to defraud. It is true that the United States has an interest in ensuring the integrity of its markets and in preventing foreign entities from using American exchanges as a base for conducting fraudulent activities. But even assuming that these trades, which are not alleged to have been illegal themselves, can be presumed to have harmed domestic markets under the "effects test" for subject matter jurisdiction purposes, that does not mean that they create a localized interest so strong that it outweighs the substantial Hong Kong interest in this dispute.
Hong Kong has a much greater interest in policing the fraudulent activities of its own corporations, especially when they allegedly harm one of its own citizen's business ventures. Pyrenee's bucketing claim alleges a fraud that was perpetrated entirely in Hong Kong. Likewise, the price of Pyrenee's CME trades was allegedly misrepresented in Hong Kong, and the profits from these misrepresentations were realized in Hong Kong. In short, we agree with Wocom that "Pyrenee's allegations involve an alleged scheme by a Hong Kong broker to bucket trades and steal ticks in Hong Kong from a company directed by a Hong Kong citizen and resident." Def. Br. at 12. Under these facts, Hong Kong's concrete interest is much stronger than the United States' more abstract interest in a scheme which may or may not have truly affected United States markets.
Along the same lines, it would be grossly unfair to impose jury duty on American citizens in this case, considering that all of the relevant actors and most of the relevant conduct took place in Hong Kong, and that the American interest is at best indirect.
We conclude by pointing out that the Seventh Circuit has already provided us fodder for a forum non conveniens dismissal with its opinion in Mak v. Wocom Commodities, Ltd., a suit comprised of parties and claims nearly identical to those in this case. After dismissing the case for lack of subject matter jurisdiction, the court stated:
Further, Hong Kong would have been a more convenient forum for all parties. Mak relied on Hong Kong jurisdiction in a prior case and could have in this one. We cannot make our judicial system available to those who seek to involve our courts in their foreign problems as they shop here for what they perceive to be a more advantageous forum.
112 F.3d at 291. Although this language is dicta in light of the court's jurisdictional ruling, it serves to underscore our conclusion that this litigation simply does not have sufficient United States connections to warrant the exercise of our jurisdiction.
This Court finds that the proper exercise of its discretion under the doctrine of forum non conveniens requires dismissal. Hong Kong provides an adequate forum for this dispute, and the private and public interest factors point overwhelmingly in favor of litigating this case in Hong Kong. This case is hereby dismissed, without prejudice to Pyrenee's right to refile its claims in Hong Kong.
United States District Court Judge
Dated: October 20, 1997