bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

sponsorType

urlAlias

moreOnThisArticles

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

Regulators and accountants in Hong Kong are facing a challenge of how to handle China's state secrecy laws. The Hong Kong Court of First Instance earlier this month ordered Ernst & Young to explain the basis on which it relies upon "state secrets" as the reason for refusing to hand over accounting records to the Securities and Futures Commission (SFC). The records relate to mainland company Standard Water's listing application in Hong Kong in 2009.
Ernst & Young has an obligation under the Securities and Futures Ordinance (SFO) to provide the records unless it can demonstrate a reasonable excuse for not doing so.
This will be a landmark court decision in Hong Kong as it is the first time that the court has been asked to rule on whether a potential breach of China's state secrets law provides a party with a reasonable excuse for potentially breaching Hong Kong law.
When did China introduce the secrecy law?
The Maintenance of State Secrets Law, which was promulgated in 1988 and amended in 2010, establishes a regime of identifying and protecting Chinese state secrets.
What are state secrets? 
What is a "state secret" is very broadly defined to include any information relating to state security and interests whose disclosure may harm state security or interests in politics, the economy, national defence and foreign affairs, and includes matters such as social development, science and technology.
What would happen if someone breached it?
Depending upon the type of state secret and the seriousness of the breach (ie: whether the disclosure caused loss to the mainland) an offender may be subject to a wide range of criminal penalties, from a fine to imprisonment or even the death penalty.
What agency decides whether something is a state secret?
As a starting point, state secrets are classified as "top secret", "highly secret" and "normal secret". Different categories are subject to different protection periods and measures, they can be determined by government agencies at different levels and may give rise to different criminal penalties for their disclosure.
"Top secret" can be determined by national or provincial government authorities or agencies authorised by them.
"Highly secret" and "normal secret" can be determined by national, provincial or large municipal government authorities or agencies authorised by them
It should be noted that the "authorities" referred to above include not only the state secret bureau and its branches but also other government authorities.
Can listed companies or accounting firms use state secrecy as an excuse not to make a disclosure?
This is the question before the High Court in the action commenced by the SFC against Ernst & Young. The court will determine whether Ernst & Young's reliance on the state secrets law to not disclose the information requested by the SFC provides Ernst & Young with a "reasonable excuse" for what is otherwise a breach of Ernst & Young's obligations under the SFO.
Do overseas markets have similar state secrecy laws?
Yes, other countries have state secrecy laws that are generally aimed at protecting national security.
While some other jurisdictions, such as the US, have faced public criticism for applying their state secrecy laws too broadly, none of their relevant laws appear to be as broad as China's state secrecy law, which includes a non-specific "other matters" category and where the classification of a matter as a state secret does not appear to be open to challenge by a private party.
 


HK High Court set to decide on reach of state secrets law

Business

China Business

Donna Wacker, a partner of Clifford Chance, looks at the issue of mainland secrecy laws and their effect on Hong Kong companies


HK High Court set to decide on reach of state secrets law

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Donna Wacker, a partner of Clifford Chance, looks at the issue of mainland secrecy laws and their effect on Hong Kong companies

Donna Wacker, a partner of Clifford Chance, looks at the issue of mainland secrecy laws and their effect on Hong Kong companies