Top Menu

Hong Kong Court Rules on Extraterritorial Limits to the Territory’s Anti-Corruption Law

Today’s post is from Philip Rohlik and Sebastian Ko (both attorneys in the Hong Kong office of Debevoise & Plimpton LLP).

Hong Kong Court Rules on Extraterritorial Limits to the Territory’s Anti-Corruption Law

By Philip Rohlik and Sebastian Ko

Hong Kong has a very strict and successful anti-corruption regime that has made it one of the cleanest jurisdictions in the world.  Hong Kong serves as a model for many other jurisdictions seeking to eradicate corruption and the Hong Kong Independent Commission Against Corruption has been copied in a number of jurisdictions and provides training to anti-corruption police from dozens of countries.  Despite being an international role-model, there has long been a question as to whether and to what extent the Prevention of Bribery Ordinance (POBO) extends beyond the borders of Hong Kong.  In the recent case of HKSAR v. Krieger & Anor. (06/08/2014, FAMC1/2014), the Court of Final Appeal (CFA) (the highest court in Hong Kong) confirmed that the extraterritorial reach of the law is limited.

Anti-Corruption Law in Hong Kong

The POBO dates from the 1970s, when the then-British colony was notoriously corrupt.  The ordinance defines a number of offenses including: giving bribes, receiving bribes, bribing a public servant, specific offenses relating to public tenders and the crime of “possession of unexplained property” by certain high-ranking public servants.  Section 4 prohibits bribing a “public servant.”  “Public servant” is defined to include only Hong Kong public servants.

Hong Kong is not a party to the OECD Convention and the POBO contains no explicit prohibition on bribing foreign officials.  However, bribing a foreign official could still meet the standards of Section 9(2), the offense most applicable to private bribery.  Under Section 9(2) it is an offense to offer an advantage to an “agent” with the intent of encouraging the agent to act against the interest of his or her principal’s affairs.  In the case of bribery of a foreign official, the official would be the agent and the foreign government or instrumentality would be the principal.

Section 4 contains explicit extraterritorial language, making it an offense to offer a bribe to a “public servant” “whether in Hong Kong or elsewhere.”  Section 9 contains no such explicit extraterritorial language.  The question before the court was whether a conspiracy to offer a bribe to a Macau official, in Macau, [1] violated Section 9(2) in a case in which most of the underlying acts of the conspiracy took place in Hong Kong.  The Court of Appeal held that the operative provision of a charge of conspiracy to bribe was Section 9(2) of the POBO through the “making of the offer.”  Since the offer was communicated outside of Hong Kong and the provision did not have extraterritorial application, there was no offense.  The CFA refused to grant leave to appeal against this ruling.

HKSAR v. Krieger

The defendants were two executives of a Macau waste management company that was a joint venture between Hong Kong and Macau companies.  They were also board members of the Hong Kong parent.  They were accused of conspiring with a Macau-based ex-director of the joint venture to offer a bribe to the then-Secretary of Transport and Public Works of Macau.  (The ex-Secretary and the Macau-based ex-director were convicted of bribery in Macau and are serving prison sentences.)  The evidence at trial was that the defendants and their co-conspirator came to agreement on offering the bribe while in Hong Kong.  The wife of the Macau-based co-conspirator had a Hong Kong company, into which the defendants (while in Hong Kong) transferred funds (by means of checks and wire transfers drawn on a Hong Kong bank) to be used to pay a bribe in Macau.  The District Court convicted both men and sentenced each to more than three years imprisonment.  In doing so, the District Court noted that the men could also be seen as “victims” as the ex-Secretary solicited bribes from them and “the jobs of some 500-odd employees” of their joint venture were threatened by the prospect of losing the contracts. [2]

The defendants appealed and the Court of Appeals quashed the convictions.  An important question on appeal was whether the operative act was the agreement between the conspirators to offer the bribe or the offer itself.  Defendants were charged under Section 159A of the Crimes Ordinance allowing multiple individuals to be charged where they have an agreement to commit a crime.  Section 159A does not, however, create a separate offense; Section 9(2) provided the underlying offense.  The court held that, under the POBO, an offer of advantage is not made until it is communicated to the “agent.” [3]  Although the proposal to bribe was hatched in Hong Kong and numerous steps were taken in Hong Kong after the offer was made, the offer was “made” when the then-Secretary received the proposal from the defendants’ Macau-based co-conspirator in Macau.

The court compared Section 9(2) with its public bribery equivalent provision, Section 4(1).  Section 4(1) specifically defines the bribery of a public official as offering an advantage “whether in Hong Kong or elsewhere.”  Section 9 contains no such language.  The Court of Appeal cited the English case of Cox v. Army Council [1963] AC 48, invoking the doctrine of statutory interpretation presuming that criminal offenses are not extraterritorial unless specifically provided in the offense-creating provisions (comparable with the U.S. doctrine of presumption against extraterritoriality). [4] Because it lacks the extraterritorial language, the court held, Section 9(2) is limited to offers made in Hong Kong, regardless of the fact that the defendants were Hong Kong residents and acted mostly in Hong Kong, through Hong Kong companies, ultimately for the benefit of their Hong Kong employer.

The Hong Kong Government applied to the CFA for leave to appeal the Court of Appeal’s decision.  Appeal of the decision in the CFA was not as of right, and the Government and the defendants submitted arguments in an application hearing to test whether an appellate hearing before the CFA’s full bench was merited.  The Government argued that the Court of Appeal took too narrow a view of “offer” as defined in the POBO.  Section 2(2) of which provides that “a person offers an advantage if he, or any other person acting on his behalf, directly or indirectly gives, affords or holds out, or agrees, undertakes or promises to give, afford or hold out, any advantage to or for the benefit of or in trust for any other person.”  The Government, while not disputing the lack of extraterritoriality, argued that Section 2(2)’s definition of “offer” was broad enough to encompass acts short of the communication.  The CFA held that under Section 9(2), the offer had to be made “to any agent,” which can only occur upon communication, regardless of the language of Section 2(2).  The CFA held that the Government’s case was not “reasonably arguable” (the standard for a grant of appeal) and denied a full appellate hearing.

Conclusion

HKSAR v. Krieger clarified the extraterritorial reach of the private bribery offense in the POBO, which had been used to prosecute bribery of foreign officials in Hong Kong.  As the POBO lacks an explicit offense of bribing a foreign official, the use of the private bribery provisions to create one would have been a stretch where the operative conduct occurred outside of Hong Kong.  It should be noted, Section 9(2) will continue to apply to offers made to foreign officials in Hong Kong and, as the Court of Appeal took pains to point out, the prosecution had limited its arguments by focusing on a narrow set of facts at trial.  Finally, prosecutors in Hong Kong, like prosecutors elsewhere, have a number of arrows in their quiver (for example, anti-money laundering laws) to potentially criminalize much of the activity underlying bribery.

The above summary was prepared for general information purposes and does not constitute legal advice and should not be acted on as such.


[1] Hong Kong and Macau are part of the People’s Republic of China (PRC), although they enjoy high autonomy as special administrative regions and are separate jurisdictions.  For most practical purposes, Macau and the PRC are treated as if they were “foreign” jurisdictions under Hong Kong law.

[2] HKSAR v. Krieger & Anor. (Feb. 29, 2012, DCCC316/2010) at ¶¶ 6-7.

[3] HKSAR v. Krieger & Anor. (Dec. 18, 2012, CACC99/2012) at ¶¶ 101-102.

[4] Ibid. at ¶¶ 79 and 96.

Powered by WordPress. Designed by WooThemes