Making Hong Kong companies liable for foreign corruption
| Pages | 126-150 |
| DOI | https://doi.org/10.1108/JFC-01-2014-0002 |
| Date | 05 January 2015 |
| Published date | 05 January 2015 |
| Author | Bryane Michael |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial crime |
Making Hong Kong companies
liable for foreign corruption
Bryane Michael
University of Hong Kong, Hong Kong, Hong Kong
Abstract
Purpose – The purpose of this article is to assess the extent to which Hong Kong’s laws deter its
companies from engaging in corruption and bribery abroad.
Design/methodology/approach – A mix of economics, public administration, management and
legal analysis was used to assess weaknesses in Hong Kong’s laws governing the prohibition of bribe
payments abroad.
Findings – Hong Kong does not explicitly criminalise corporate bribery abroad. Companies – as legal
persons – can not be found guilty of corruption. It is argued that Hong Kong’s Legislative Council
should amend various laws to modernise Hong Kong’s approach to tackling corruption committed by
its companies abroad. The various approaches lawmakers can take towards assigning responsibility
for corruption to companies are presented. The approaches that prosecutors at the Department of
Justice can take to adopt prosecutorial methods like those used in other upper-income jurisdictions and
the ways that Independent Commission Against Corruption (ICAC) can assist in this work are also
described.
Practical implications – This research has practical ndings for Hong Kong’s policymakers, law
rms and companies which operate in Hong Kong. For policymakers, we describe legal changes Hong
Kong’s legislators will likely make in the years ahead and the preferred ways of engaging in such
change. For law rms, we describe the legal changes coming to Hong Kong which legal advisors will
need to advise their clients on. For companies, we describe changes that companies operating in Hong
Kong will likely need to comply with in the future.
Social implications – This paper shows that when Hong Kong adopts best practice in the eld of
corporate criminalisation, Hong Kong’s role in “exporting” corruption will likely fall.
Originality/value – This article describes a set of legal changes which will change the way Hong
Kong treats corruption. The literature tends to glamorise Hong Kong’s anti-corruption work. It is shown
that its law falls far behind other jurisdictions, as well as how “treating companies like people” in the
case of Hong Kong will likely change the way Hong Kong’s prosecutors think about crime and criminal
perpetrators.
Keywords Hong Kong, Anti-corruption, Corporate corruption,
Independent Commission Against Corruption
Paper type Research paper
Introduction
Hong Kong represents an exception among upper-income jurisdictions. Unlike in the
USA, UK or other places, Hong Kong’s law does not criminalise the payment of bribes
abroad. Hong Kong’s companies also – contrary to practice abroad – do not face
prosecution as legal persons. Such a combination of legal loop-holes has created a
situation in which Hong Kong’s companies may, with impunity (at least on the Hong
Kong side), engage in foreign bribery. The directors and employees may still face
criminal liability – particularly abroad where they commit such bribery. However, at
The current issue and full text archive of this journal is available on Emerald Insight at:
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JFC
22,1
126
Journalof Financial Crime
Vol.22 No. 1, 2015
pp.126-150
©Emerald Group Publishing Limited
1359-0790
DOI 10.1108/JFC-01-2014-0002
home, these corporate persons can breathe a metaphorical sigh of relief (of legally
constituted persons could sigh) when faced with an investigation or prosecution by
Hong Kong’s Independent Commission Against Corruption (ICAC). How can Hong
Kong’s legislators make her companies as liable for corruption as their peers in other
upper-income jurisdictions? How can the Hong Kong Department of Justice (DoJ) punish
persons who exist only on paper?
In this short review, we argue that the Prevention of Bribery Ordinance should
explicitly criminalise corruption committed by companies as legal persons. We also
argue that the Hong Kong DoJ should possess the same remedies for dealing with
corruption as their counterparts in the USA and UK. Namely, the DoJ should have the
authority to ne, monitor and require changes in operating procedures of Hong Kong’s
companies. To facilitate the enforcement of the Prevention of Bribery Ordinance’s
(POBO) provisions, the DoJ should have the right to require companies engage in certain
corrective actions in lieu of taking the company to court. Hong Kong companies should,
just like their peers abroad, be liable for the corruption of their partners and afliates
under certain conditions. Our paper consists of nine sections. The rst section uses
economic analysis to assess the extent of the problem, and the likely effects of the
criminalisation of corruption by companies as legal persons. The next four sections
review the theory of prosecuting companies, as legal persons. We compare and contrast
the various approaches taken in a range of jurisdictions, each following its own
jurisprudential tradition. The fth section describes legal approaches to using corporate
partners, suppliers and other afliates as conduits for corruption. The next two sections
describe the remedies that courts can apply in cases of corporate corruption (particularly
corruption committed off-shore). In practice, prosecutors, rather than courts, apply
many of these remedies through various types of plea bargains. The nal section
provides options for Hong Kong’s legislators for making the Hong Kong approach to
ghting corporate corruption abroad more effective.
The economic effects of corporate criminalisation
A series of studies of Hong Kong (and several of its largest trading partners) highlight
the importance of company law, policies and regulations in affecting corruption. Laws
which affect corporate anti-corruption policies matter in the ght against corruption.
Wu (2010) conducts a recent study of anti-corruption policies in companies working in
China and Taiwan – and their effect on reducing bribe paying behaviour. He concludes,
from his statistical analysis, that companies which implemented strong ethics and
anti-corruption programmes participate less in corruption – irrespective of the level of
corruption in the country overall[1]. Company policies “explain” (in the statistical sense
of the word) roughly 70 per cent of corrupt practices in the companies Wu studied. The
overall level of corruption in the country only “explains” about 20 per cent of
company-specic corruption. Legislation (or lack of legislation), which allows for the
prosecution of companies as legal persons and encourages companies to have strong
internal anti-corruption laws, will have important impacts on corruption at home and
abroad.
Corporate policies related to owner/manager liability and accounting policies also
have important impacts on corruption. Wu used regression analysis to assess the extent
to which corporate policies (as measured by the accounting rm PwC, the consulting
company McKinsey & Co. and the brokerage house CLSA) affected the level of
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Foreign
corruption
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