Jurisdiction - Hong Kong
Reports and Analysis
Hong Kong – Recent Anti-Corruption Developments.

30 July, 2012

 

Legal News & Analysis – Asia Pacific – Hong Kong – Regulatory & Compliance

 

Overview
 
In many ways, Hong Kong is the model jurisdiction for anti-corruption reform. In the early 1970s, close connections between law enforcement agencies and organised crime syndicates meant that Hong Kong was generally regarded as one of the most corrupt cities in the world. Bribery and extortion were part of everyday life. All that began to change in February 1974 with the establishment of the Independent Commission Against Corruption (“ICAC”). Within three years, the ICAC had broken up several major corruption syndicates and had prosecuted 247 government officials, including 143 police officers.
 
Today, nearly forty years on, the ICAC is one of the best known of all anti-corruption entities. It is also one of the best resourced, with a staff of over 1,300 and an annual budget of nearly US$100 million. The ICAC deals with approximately 3,000 complaints a year. About two-thirds of these reports concern private-sector corruption. The ICAC has adopted a three-pronged approach to tackling corruption: deterrence, prevention and education. Although these three prongs are considered to be equally important, the approach focuses mainly on enforcement, with a majority of the ICAC’s resources devoted to its Operations Department and in turn, the investigation of corruption complaints.
 
The ICAC has proved very effective in tackling corruption. This is due not only to the strength and quality of its resources, but also the solid statutory framework within which it operates. It has significant powers of investigation, including powers of arrest, detention, search and seizure, together with broad powers to obtain information (including from banks and tax authorities). The ICAC also has well-developed processes which enable the public to easily report any suspicious activities, and it maintains a high media profile to send out the message to the public that reporting of corruption leads to swift and effective action.
 
As a result of the ongoing efforts of the ICAC, Hong Kong is now seen by many as one of the cleanest cities in the world. This perception has, however, been put under the spotlight in recent months by a number of very high profile corruption investigations involving senior politicians and businessmen, which are described below.
 
Recent domestic corruption cases
 
Donald Tsang Yam-kuen and Henry Tang
 
In perhaps the highest profile investigation of the year, the ICAC is investigating whether Donald Tsang Yam-kuen, the Chief Executive of HKSAR, violated anti-bribery laws by accepting free holidays and apartments from local business tycoons. The investigation created a scandal on the eve of elections for a new Chief Executive of HKSAR. The election was also blighted by allegations of corruption and abuse of power by Henry Tang, an unsuccessful candidate for the Chief Executiveship. Both matters are yet to be resolved.
 
Raymond and Thomas Kwok
 
In March 2012, the ICAC arrested Raymond and Thomas Kwok, co-chairmen and controlling shareholders of Sun Hung Kai Properties, a listed property development company, on suspicion of corruption. The brothers are part of one of the richest families in Hong Kong and are reported to be jointly worth in excess of US$18 billion. Sun Hung Kai owns some of Hong Kong’s largest properties including the iconic International Commerce Centre.
 
At the same time, Rafael Hui, the former Chief Secretary for Administration in the Hong Kong government and an advisor to Sun Hung Kai, was also arrested.
 
The brothers have publicly denied any wrongdoing and no charges have yet been brought. The investigation is reportedly the largest in the ICAC’s history and has captured media attention across the world.
 
 
There has been an increasing concern in Hong Kong about the ties between government and big business. The recent investigations are seen by many as a first move to rein in the perceived powers of the elite wealthy Hong Kong families.
 
TVB General Manager, Stephen Chan
 
In June and July of 2011, Stephen Chan, the General Manager of TVB, along with two others, was tried on various private-sector bribery charges. Chan was alleged to have, among other things, wrongfully concealed a HK$112,000 payment that he received from a major shopping arcade for hosting a talk show program for a 2009 Chinese New Year countdown event on TVB, one of Hong Kong’s largest television broadcasters.
 
The district court dismissed all charges against Mr. Chan and his fellow defendants on the grounds that Chan was paid to host the gala as a celebrity and that he did not receive payments in his capacity as an agent of TVB. The decision is under appeal.

 

Trends in anti-corruption enforcement

 
Hong Kong is classified as low risk for corruption according to the Transparency International Corruption Perceptions Index. However, recent scandals involving the office of the Chief Executive and other high profile businesses have clouded that reputation. Given the high priority of protecting Hong Kong’s reputation as a business centre of high integrity, we are
likely to see the ICAC continue to investigate and prosecute corruption aggressively.
 
 

For further information, please contact:

 

Mark Johnson, Partner, Herbert Smith

mark.johnson@herbertsmith.com  

 

Leave a Reply

You must be logged in to post a comment.