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The recent judgment of the Hong Kong Court of Appeal (“CA”) discusses external work-related engagements by employees and the dangers of accepting payments for such engagements without an employer’s permission. It shows the limited scope of the “reasonable excuse” defence when facing bribery charges for accepting secret payments.

Recent developments

Stephen Chan, a former TVB general manager and host of the television programme “Be My Guest”, and Edthancy Tseng, Chan’s former assistant, faced bribery charges for receiving a secret payment of HK$112,000 for Chan’s performance on “Be My Guest” in Olympian City, a Hong Kong shopping mall. Chan and Tseng’s defence of “reasonable excuse” was accepted by the trial judge as Chan had previously received secret payments for external work engagements without TVB’s permission. On 26 October 2015, the CA held in HKSAR v. Chan Chi Wan Stephen and Tseng Pei Kun1 (“Stephen Chan Appeal”) that Chan and Tseng failed to establish the “reasonable excuse” defence. The CA’s main findings include:

  1. The trial judge had erred in ruling that since TVB had granted Chan permission to take up outside jobs numerous times, he would have been given the green light had he applied in this case.
  2. Chan’s previous work engagements were unrelated to TVB’s business while his performance in Olympian City was related to TVB’s business.
  3. Chan ought to have applied for approval from TVB before accepting the secret payment.
  4. Evidence from Chan’s supervisor showed that had Chan applied for permission to receive payment for an external work engagement that is related to TVB’s business, TVB would never have given such permission.

Implications for corporate clients

Companies may have written policies as to the acceptance of certain types of advantages and guidelines as to potential conflicts of interest. Often, if such policies allow employees to accept token gifts, the permitted value of these gifts will be specified. However, these policies may not deal with external work-related engagements. Employees and directors of corporate employers may from time to time be offered opportunities for external work-related engagements. Similarly, companies may engage consultants who are employees or members of another corporation. The Stephen Chan Appeal highlights the potential danger of paid external work-related engagements without a principal’s authorisation. Where permission has not been expressly obtained, the case shows that past practice is not sufficient to avail of the defence of “reasonable excuse” as each situation will be highly fact specific.

Private sector bribery in Hong Kong

Section 9 of the Prevention of Bribery Ordinance (“POBO”) criminalises bribery involving employees or agents of a company in Hong Kong – this is also known as private sector bribery. A recap of the key points of section 9:

  1. It is an offence for any person, without lawful authority or reasonable excuse, to offer any advantage to any agent as an inducement to or reward for or otherwise on account of that agent’s doing or not doing something in respect of the principal’s affairs or business.
  2. Agents are prohibited, without lawful authority or reasonable excuse, from soliciting or accepting any advantage as an inducement to or reward for or otherwise on account of his or her doing or not doing something in respect of the principal’s affairs or business.
  3. “Advantage” includes anything that is of value such as money, gifts, commission, employment, services or favours.
  4. An agent is a person acting for, or employed by, the principal.
  5. The main defence is the principal’s permission for acceptance of the advantage. The other defence is to have “reasonable excuse”, which was the issue in contention in the Stephen Chan Appeal. It is not a defence to claim that an advantage accepted or offered is customary in any profession, trade, vocation or calling.

Actions to consider

We recommend that clients take the following steps:

  1. Review employment terms and conditions on external work-related or non-work-related engagements.
  2. Review corporate policies on accepting external work engagements and corresponding procedures for seeking prior approval.
  3. Obtain proof from external consultants of their principals’ permission for taking on paid external related engagements.
  4. Seek legal advice on internal policies in relation to gifts, payments and other advantages.
  5. Conduct regular training for employees and agents on anti-bribery best practices, and internal policies regarding the acceptance of advantages, external work engagements and corresponding procedures.

Conclusion

The Stephen Chan Appeal is a good reminder for good practices in business dealings, and to avoid any potential conflict of interest. Corporate employers should provide clear guidelines and tighten internal controls on external work engagements. Furthermore, the law regarding the application of the “reasonable excuse” defence and the relationship with the principal’s affairs or business is not yet settled. We will monitor developments in this area, as it is likely that the defendants will appeal to the Hong Kong Court of Final Appeal. ——————— 1 香港特別行政區對陳志雲及叢培崑, CACC 92/2013, CACC 183/2014 (available in Chinese only).

Author

Cynthia Tang is the head of the Dispute Resolution Group for the Firm’s Hong Kong and China offices. She has over 25 years of experience in Hong Kong and Asia. Chambers Asia Pacific, PLC Which Lawyer? and Asia Pacific Legal 500 have ranked her as one of the leading lawyers in the Financial Services/Regulatory field for 5 consecutive years. She previously served on a number of committees in the Securities and Futures Commission and is currently appointed by the Hong Kong Government as a Member of the Standing Committee on Company Law Reform and Disciplinary Panel A of the Hong Kong Institute of Certified Public Accountants. She is also a China-Appointed Attesting Officer.

Author

Mini vandePol was appointed as the Chair of Baker McKenzie's Global Compliance & Investigations Group on 1 September 2014, after successfully completing five years as the Asia Pacific Regional Chair of the Dispute Resolution Practice Group. In this role, she leads a global team of more than 900 compliance and investigations practitioners in Asia Pacific, EMEA, Latin America and North America. Ms. vandePol's work engagements focus on anti-bribery and corruption investigations and risk management and mitigation in China, India and other parts of Asia in a variety of industries. Ms. vandePol and her team are responsible for the Global Overview of Anti-Bribery Laws (2nd Edition 2016) and is the editor of the very popular Global Attorney-Client Privilege Handbook (2nd edition 2014). She has written a number of articles in journals and other publications both in Australia, India and elsewhere in Asia Pacific on topics ranging from corporate compliance investigations and enforcement, fraud risk, international trade and sanctions compliance, and ethical business practices. She is also a highly sought after media spokesperson and has made several appearances in business media in Hong Kong, India, Australia and the US.

Author

Author

Bryan Ng is a partner in Baker McKenzie's Hong Kong office and a member of the Firm's Dispute Resolution Group. He has written articles and delivered trainings and seminars on topical issues including regulatory enforcement matters. Mr. Ng’s practice focuses on disputes related to financial services, regulatory investigations, commercial disputes, and insolvency-related matters. He advises and represents clients from the financial industry in regulatory investigations and disciplinary proceedings. Mr. Ng also represents clients in arbitration and court proceedings, including shareholders' disputes and judicial review.

Author

Susan Kendall is a partner in Baker McKenzie's Hong Kong office. She practices mostly on matters relating to commercial litigation. Susan is listed as a leading lawyer in dispute resolution by Chambers Asia Pacific. She is an accredited mediator with the Hong Kong Mediation Council and is admitted as a solicitor in Hong Kong, as well as in England & Wales. Susan is a member of the Law Society of Hong Kong and the Law Society of England & Wales.

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