Conflicts between domestic disclosure obligations and foreign illegality – a Hong Kong law perspective - .PDF file.
A matter making headlines has been the Securities and Futures Commission’s (SFC) proceedings in the Hong Kong courts seeking an order to compel Ernst & Young (E&Y) to disclose certain accounting records and other documents in compliance with SFC investigation notices. E&Y opposes this order for reasons including that Mainland Chinese law, including state secrets law, prohibits it from complying with the investigation notices. In the US, the Securities and Exchange Commission has started similar proceedings against the Mainland affiliates of the ‘Big Four’ accounting firms and BDO.
Judgment in the SFC proceedings will likely be of general relevance to practitioners and their clients, not just auditors or those with potential exposure to Mainland state secrets. The SFC proceedings are but a particular instance of a more general conflict of laws issue: namely, to what extent should a domestic court or regulator be entitled to compel a person to disclose documents where that disclosure would or could involve a contravention of a foreign law or expose that person to civil, criminal or other liability in a foreign jurisdiction (in short, ‘foreign illegality’)?
This article explores this issue from the perspective of various disclosure obligations that may arise under Hong Kong law…
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