Justice officials have admitted for the first time that they knew a political ally of disgraced Italian ex-premier Silvio Berlusconi was trying to interfere with evidence in a money laundering case.
Secretary for Justice Rimsky Yuen Kwok-keung said last night "significant questions" about the city's rule of law had been raised in the wake of a South China Morning Post investigation into allegations by former Italian senator Sergio De Gregorio.
Yuen's statement came two weeks after the allegations first emerged.
De Gregorio says he asked a senior Hong Kong government official, Duncan Pescod, to stop the transfer to Italy of evidence seized in Hong Kong in 2007 after a request by Italian prosecutors.
Pescod was the city's representative to Europe at the time and was based in Brussels.
In return, De Gregorio promised to help arrange a private audience with Pope Benedict XVI for then chief executive Donald Tsang Yam-kuen.
In his statement, Yuen defended the city's legal system and said it was "in the public interest" to disclose the results of an internal Department of Justice inquiry into the allegations.
But he said the department had "not taken into account any attempt to arrange a meeting with the Pope".
He said: "The entire process in respect of the handling of the letter of request [from Italian prosecutors] has never been compromised in any way, nor have any irrelevant considerations been taken into account."
The statement confirmed that the department was first alerted to De Gregorio's request on October 9, 2007, after Pescod sent an e-mail to Amelia Luk Siu-ping, of its international law division.
Pescod "only informed Ms Luk that Senator Gregorio approached him and made an inquiry in respect of the progress concerning the execution of the letter of request [for the evidence] in Hong Kong", the statement said.
Pescod's e-mail "did not mention anything about any request to meet the Pope".
The next day, Luk replied to Pescod, advising him to "tell his contact in Rome" the matter was before the Hong Kong courts.
A department spokesman said from the time of the initial request for the evidence from Italy in 2006 to the end of challenges in Hong Kong courts in August this year, the department "acted strictly in accordance with the laws of Hong Kong".
However, questions remain over the alleged deal that meant Tsang would be granted an audience with the pope if the transfer of evidence was stalled.
Pescod has previously confirmed he met the senator several times, including at a lunch in Rome in April 2008.
De Gregorio faces an unrelated bribery charge in Italy.
The Hong Kong evidence - totalling more than 16,000 pages - was transferred to Italy two months ago after legal attempts to stop it were exhausted.
The trial, which involves 11 defendants including Berlusconi's son and two Hong Kong business women, Paddy Chan Mei-yiu and Katherine Hsu May-chun, resumed in Milan yesterday.