Lack of clarity in China's state secrets law creates transparency woes in HK
Lawyers say knowing what information can and cannot be seen by third parties is creating corporate transparency problems for HK
What is the link between student examination papers, harvest results and accountants' working papers? They are all considered state secrets under mainland secrecy laws.
Legal experts said such laws had a wider and vaguer definition than similar legislation overseas and that was creating corporate transparency problems in Hong Kong.
The Securities and Futures Commission last week sought a court order to determine if accounting giant Ernst & Young could claim that Chinese state secret laws prevented it from handing over accounting working papers regarding the planned listing of Standard Water, a mainland wastewater treatment firm in 2009.
The SFC two weeks earlier also ordered High China Precision Automation to suspend trading after the firm claimed state secrecy prevented it from giving information to its former auditor KPMG.
Anthony Poon, a partner of Baker & McKenzie, whose practice covers state secret laws in China, said that according to Protection of State Secrets Law, nobody can leak information that may threaten national security or the national interest. Penalties for doing so range from heavy fines, imprisonment or the death sentence.
"As such, accounting firms or listed companies need to comply with this mainland law if what they have on hand are state secrets," Poon said.
The Hong Kong High Court on September 11 will rule on whether Ernst & Young can use state secrets as a reason not to give records to the SFC. Poon said this would be a landmark ruling in this area of the law.