Hong Kong Student Law Gazette Fall Issue 2012

Hong Kong Student Law Gazette Fall 2012 · Issue 1

Feature Chief Justice Geoffrey Ma

on Judicial Independence and Rule of Law

Articles Liberalisation of China’s Public Securities Market: Is It Really Over-regulated?

Should Type II Mainland Mothers Be Banned From Giving Birth in Hong Kong?

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LETTER FROM THE EDITOR

Issue of the Hong Kong Student Law Gazette

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his issue marks our first as the Hong Kong Student Law Gazette, following our independence from the Graduate Law Student Association this summer. This transition was made possible by the unwavering support of my fellow Editorial Board members, the CUHK Law Faculty and the Graduate Law Student Association.

Continuing the incredible work of the previous Editorial Board, we have taken the Gazette in an academic direction, bearing in mind our motto “legal scholarship with integrity”. We hope that our fellow students see this as a vehicle to venture beyond the lecture hall and voice their opinions as the next generation of legal practitioners.

The enthusiasm of students – both new and returning – to get involved in the Gazette has been overwhelming. I have personally been inspired by the tireless work of our editors, writers and layout team.

We want to thank Chief Justice Geoffrey Ma Tao-li for granting us his firstever student interview. He welcomed four awestruck law students into his office, even introducing us to the current Non-Permanent Judge at the Court of Final Appeal, Lord Hoffman! Whatever “storms” Hong Kong’s rule of law may face, he is a voice of reason committed to fair administration of justice in Hong Kong.

We have also been privileged to receive Clifford Chance’s support for our Fall 2012 issue. This has allowed us to continue to publish the Gazette in print and set up an online platform in the near future.

Time is rolling around to exam season and application frenzy, but the advice of the Chief Justice is worth remembering: hard work, take interest in what you do, and don’t take anything for granted.

Best of luck, everyone!

Editor-in-Chief

HKSLG · Fall 2012 · Issue 1

TABLE OF CONTENTS

Hong Kong 4

Awareness

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Feature 13

P4.Impact of the New Companies Ordinance 2012 on Auditing Practices P5.Unauthorised Building Works 101 P6.The Issue of Land Resumption in Hong Kong P7.Forum Shopping Under ‘One Country, Two Systems’ P8.Aiming an Arrow of Democracy at CY Leung

Table of Contents

Interview with Chief Justice Geoffrey Ma

Opinion

P9.Should Type II Mainland Mothers Be Banned From Giving Birth in Hong Kong?

P11.A Mixed Test for Determining Consent in Rape: Is It Possible?

P12. 國民教育：融合還是洗腦？

China 17

Awareness

P17.Diaoyu Islands Dispute: China and Japan’s Unfinished Business P18.Macau’s Junket System: The Dark Side P19.Liberalisation of China’s Public Securities Market: Is It Really Over-regulated?

P21. ICC Arbitral Awards Rendered in China

Opinion

International 23

Awareness

P23.Protect This House – It’s Special P24.Supreme Court of Israel: the New Peacekeeper of the Promised Land P25.Compulsory Licence: Developing Countries Strike Back?

Opinion

P26.Indignation at Cartoons: Is There a ‘Limit’ on the Freedom of Expression?

Student Events 29

P27.Recent Trend in Abortion Laws: The ‘Pro-Life’ Movement Weakens

P22. ‘Social Stability’ Cannot P28. Is 50 years Enough? – Copyright Protection Justify the Abuse of Human Rights in the EU in China

HKSLG · Fall 2012 · Issue 1

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EDITORIAL BOARD

Editorial Board

Vivien Li

Aaron Mak

Isaac Yung

Jason Shamdas

Mavis Lam

Stacey Shen

Sidney Lam

Suzy Su

Layout Team

Stacey Shen

Additional Thanks (in alphabetical order) CUHK Law Faculty Clifford Chance LLP Graduate Law Students Association The Hon. Chief Justice Geoffrey Ma Tao-li Mr. Alan Gibb Dean Christopher Gane HKSLG 路 Fall 2012 路 Issue 1

Prof. David Donald Mr. Esmond Lee Ms. Eunice Chau Ms. Eva Chan Prof. Eva Pils Ms. Eva Wong Ms. Florence Wong Ms. Irene Tsui

Ms. Jeannie Kow Ms. Joyce Wong Mr. Kevin Ng Ms. Louise Mitchell Ms. Sarina Wong Prof. Stephen Hall Mr. Steven Brian Gallagher Mr. Vincent Chan

HONG KONG

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Impact of the New Companies Ordinance 2012 on Auditing Practices Alex Yiu

S

ections 123 and 126 of the current Companies Ordinance (Cap 32) require all companies incorporated in Hong Kong to draw up audited financial statements that give a “true and fair view” of the financial position of the company. Although this “true and fair view” was intended to be of paramount importance, the concept is not defined in the Companies Ordinance.

The Hong Kong Institute of Certified Public Accountants (HKICPA) is responsible for ensuring the financial statements comply with the Hong Kong Financial Reporting Standards (HKFRSs).

As the HKFRSs itself is not legally enforceable in Hong Kong, the courts would in turn look for guidance in accordance with the standard practices of professional accountants. This approach is not free from criticism. The fact that the Enron scandal occurred despite financial statements giving a “true and fair view” has led many to question whether such statements are ‘watchdogs’ for adequate financial disclosure.

In the course of rewriting the new Companies Ordinance 2012, Hong Kong was inundated with debates from practitioners from various sectors. The most noticeable issue was whether compliance with the HKFRSs should be a legal requirement.

The new Companies Bill was finally passed on 7 July 2012 and gazetted on 10 August 2012. In response to the public’s concern regarding corporate governance issues, a newly introduced section,

“Part 9 – Accounts and Audit”, has been dedicated to regulation of Hong Kong accounting practice within companies.

First and foremost, in addition to requiring financial statements to give a “true and fair view” of the financial position and performance of the reporting entity, the financial statements must also comply with applicable accounting standards.

Accounting standards have been explicitly defined by the new Ordinance as “statements of standard accounting practice issued or specified by a body prescribed by the Regulation”. Hence, the HKFRSs have been given statutory backing and are now legally enforceable.

Also, the new Ordinance expands an auditor’s right to require information from a wider range of persons, such as an officer of the reporting entity’s subsidiaries. Any such person who fails to provide the requested information or explanation to the company’s auditor will commit a criminal offence.

An additional liability has also been imposed on auditors. Under the new Ordinance, auditors will commit a criminal offence if they “knowingly or recklessly” cause the omission of a statement in the auditor’s report where (1) they are of the opinion that the financial statements of the company are not in agreement with the auditing records in any material respect, or (2) they have failed to obtain all necessary and material information or explanations for the purpose of the audit.

Despite the disappointment felt by accounting practitioners over their new potential criminal liability, they understand that regulations require vigilant scrutiny to

maintain Hong Kong’s position as a leading capital market. Keith Pogson, President of the HKICPA, reinforced that “the accounting profession has much to be proud of and, whatever the outcome of this issue, it was always clear that we will continue to play our vital role as the guardians of Hong Kong’s financial system”.

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HONG KONG

Unauthorised Building Works 101 Amy Chan

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n 19 April 2011, the Office of the Ombudsman released a report on the 10-year enforcement regime on removing unauthorised building works (UBWs) in New Territories Exempted Houses. The report doubted the effectiveness of the regime and suggested improvements. What embarrassed the Government were later discoveries of UBWs in properties belonging to high-ranking officials, including the former Chief Executive Donald Tsang Yam-kuen. The problem of UBWs was brought to greater public attention during this year’s Chief Executive election.

Henry Tang Ying-yen, one of the candidates, was widely criticised for his notorious illegal basement in his Kowloon Tong property and his public approval ratings subsequently plummeted. In light of such controversies, it is important to consider the laws on UBWs. 1. What are UBWs? Under the Buildings Ordinance (Cap 123), any additions or alterations to buildings without prior approval from the Buildings Department or Lands Department are considered UBWs. Commonly found UBWs are supporting frames for air-conditioners, subdivision of flats, and structural alterations.

2. What are the consequences of UBWs? Both the Buildings Department and Lands Department may take enforcement action against UBWs. Under section 24 of the Buildings Ordinance, the Buildings Department may issue a statutory order, HKSLG · Fall 2012 · Issue 1

requiring the property owner to remove any illegal or dangerous structures within a specified period. Failure to comply with such an order may cause the UBW to be demolished by the Buildings Department at the owner’s expense. Depending on the exact charge, under section 40 of the Buildings Ordinance, any person who is convicted of noncompliance will be liable for a fine ranging from HK$50,000 to HK$200,000, a maximum imprisonment of one year and a further fine of HK$5,000 to HK$20,000 for each subsequent day of order violation.

3. Since April 2011, a new enforcement policy with wider scope against UBWs came into effect. What is this?

Besides UBWs that constitute obvious hazards to public safety, the Buildings Department extended the coverage of actionable UBWs to include work on rooftops, podiums, yards, and lanes of buildings, irrespective of their risk to public safety or whether they are newly constructed.

4. On 28 June 2011, the Development Bureau announced enforcement strategies against UBWs in New Territories Exempted Houses coupled with a reporting scheme. What is this?

Property owners of UBWs completed before 28 June 2011 that do not constitute obvious hazards may report to the Buildings Department from 1 April 2012 and appoint qualified personnel to conduct safety inspections for

certification purposes. Once the UBWs are reported, the Buildings Department will not require immediate removal unless they pose an imminent threat. The Buildings Department will categorise the UBWs reported, conduct objective risk assessments, and formulate progressive enforcement plans accordingly.

Despite the Heung Yee Kuk representatives’ protest, the Government seems to be determined to fight UBWs in the New Territories. In her response to Heung Yee Kuk in May 2012, Carrie Lam, former Secretary for Development, said, “as long as the Government is acting in accordance with the law and in a fair and equitable manner, we are not going to be deterred by threats or protest actions. We will do whatever is right for Hong Kong”. Nonetheless, “whatever is right for Hong Kong” remains a controversial debate between the Government and the public.

HONG KONG

Wallace Chan

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hen the Government resumes land in Hong Kong, compensation is based on the present value of the land only. There is no consideration of the potential development of the land. This principle is stated in the Lands Resumption Ordinance (Cap 124) section 12(c): “no compensation shall be given in respect of any expectancy or probability of the grant or renewal or continuance, by the Government or by any person, of any licence, permission, lease or permit whatsoever”.

For instance, if farmland in the New Territories is resumed, compensation is awarded only for its value as a piece of farmland. No additional compensation will be given for any expectation that the agricultural land may be changed to residential use with a grant from the Government.

However, such an approach departs from market reality. In the open market, purchasers are prepared to pay a premium in the

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The Issue of Land Resumption in Hong Kong

expectation that the Government will one day grant permission for the modification of agricultural land to non-agricultural use. The ‘market price’ therefore is well above the compensation awarded by the Government.

This open market approach has been explicitly rejected by the Court of Final Appeal. In Director of Buildings and Lands v Yin Shuen Enterprises Ltd & Nam Chun Investment Co Ltd [2003] 2 HKC 490, the Court upheld the strict statutory meaning of section 12(c). The CFA further confirmed that the potential development of land should not be a factor in calculating consideration, even if this expectation is included in the ‘market price’. The Court took the position that the open market approach is not always the correct valuation method to apply, even though it generally is a fair measure for compensation.

The Court provided several reasons explaining why the ‘market price’

exceeds the present value of the land and the Government should not be obliged to pay the difference. First, there are purchasers in the open market who are willing to pay a premium for the land hoping that its illegal use will continue.

Second, the premium is essentially a speculative price with the expectation that the Government may resume the land soon. Third, nearly all land is held on Government leases with specific terms on their legal use. Since the lessee is bound by these terms, the potential development of the land belongs to the Government (the lessor) and not the lessee. Changing the utilisation of the land is solely at the Government’s discretion. The lessee has never been entitled to exploit this.

As a result, compensation should be paid based on the present value of the land, reinforcing why no additional compensation should be given for a mere expectation.

Despite Article 105 of the Basic Law, which provides for the right to “real value” compensation for “lawful deprivation of property”, the Court did not interpret this article to be equivalent with the open market approach. Furthermore, the Court did not attempt to define the true meaning of “real value”. If the open market approach is not the only approach, what other mechanism can be used which is also objective, certain, responsive, and reflect the land’s “real value”? It may be that section 12(c) is inconsistent with the Basic Law and it is conceivable that similar challenges may be raised in the Hong Kong courts in the future.

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HONG KONG

Forum Selection Under ‘One Country, Two Systems’ Cynthia Or

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ith the ongoing patent infringement disputes between Apple and Samsung in jurisdictions across the globe, Apple’s earlier loss over trademark infringements in China has faded into oblivion.

In May 2011, Apple sued Proview Group and its affiliates for breach of contract because Proview failed to transfer the trademark ownership of the name “iPad” to Apple. The contract between the parties provided for both the application of Hong Kong law and the exclusive jurisdiction of Hong Kong courts in any contractual disputes.

The exclusive jurisdiction clause proved to be favourable to Apple because, unlike the Guangdong courts which have repeatedly ruled against Apple, the Hong Kong courts granted an interlocutory injunction in Apple’s favour.

Apple is not alone – many foreign companies are increasingly inclined to nominate Hong Kong as the exclusive dispute resolution jurisdiction when striking a deal with China-based companies.

This strategy is known as ‘ex-ante forum selection’. By inserting

HKSLG · Fall 2012 · Issue 1

forum selection clauses into the sales and agreement contracts, companies can increase the probability of a favourable result in the event of a dispute.

In particular, Hong Kong is an attractive forum for intellectual property (IP) litigation because of its sophisticated and transparent legal system as well as its reputation as an international financial centre. More importantly, subject to certain restrictions, judgments rendered by Hong Kong courts are now recognised and enforceable in the Mainland pursuant to The Arrangement on Reciprocal Recognition and Enforcement of Judgment in Civil and Commercial Matters (the “Arrangement”) promulgated in 2006.

Yet, there are still considerable limitations of Hong Kong as a forum to protect IP owners’ legal rights in China, despite the Hong Kong Arrangement 2006.

Pursuant to the Arrangement, Chinese courts may refuse recognition and enforcement of Hong Kong rulings if doing so would violate ‘social and public interest’ of the Mainland. There is an inherent

risk that this discretion may be invoked quite arbitrarily, as there is no objective measure of ‘social and public interest’. Furthermore, only judgments related to commercial contracts, and judgments that award damages will be recognised or enforced. In other words, contracts that are not commercial in nature, or rulings requiring injunctive relief may not be recognised or enforced in China. Hence, Apple’s injunction against Proview granted

by Hong Kong courts was only applicable to Proview’s property in Hong Kong.

On the surface, it appears that Hong Kong has benefitted from the ‘one country, two systems’ doctrine as a litigation forum.

Its strong tradition of judicial independence, rule of law and the special legal relationship with China under the Arrangement have been particularly appealing to foreign IP owners. However, in reality with complicated rules regarding conflicts of law, the level of legal protection offered in Hong Kong compared to other litigation forums might be often idealised.

HONG KONG

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Aiming an Arrow of Democracy at CY Leung James Ng

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hile CY Leung was weathering the public outrage cast upon his newly elected cabinet and himself, Albert Ho Chun-yan, the then-Chairman of the Democratic Party, sought to initiate the Region’s first election petition to dethrone Leung. Ho argued that Leung’s conduct during the Chief Executive debate in March violated section 26(2) of the Elections (Corrupt and Illegal Conduct) Ordinance (ECICO) (Cap 554) and that Leung was not legally elected.

Section 26(2) mandates that a candidate is prohibited from publishing a materially false or misleading statement of fact about himself or any other candidate(s). Ho’s allegations were based on Leung’s misrepresentation in the series of exchanges during the debate with Henry Tang regarding the latter’s Unauthorised Building Works (UBWs). On this ground, Ho claimed that Leung implied he did not possess any UBWs – a fact later rebutted by Ming Pao’s discovery several months after the election.

Ho’s case was undeniably valiant, but the basis of his claim contained technical flaws. Section 26(2) principally governs explicit statements published or announced by a candidate, and not mere implications as suggested by Ho. Adopting this interpretation, Leung would only be held accountable for illegality if he claimed during the debate, unequivocally and explicitly, that he did not possess any UBWs. Additionally, the arguments during the debate, interpreted from the mind of a reasonable and ordinary person, are simply blows exchanged

between two competing parties.

The dialogue itself would not induce the reasonable man to believe that Leung had tried to hide or deny the existence of UBWs at any of his properties.

Indeed, at the Court of First Instance, Justice Johnson Lam refused to grant leave for Ho’s petition.

Since Ho’s argument is primarily based on the implications in Leung’s statements during the televised debate, the learned judge was correct in rejecting the petition by ruling that section 26(2) only applies to the true meaning of a statement and not the implications of the statement. None of the words exchanged expressly addressed the existence or legality of the structures owned by Leung, hence there was no breach of section 26(2).

Ho sought to bring his case directly to the Court of Final Appeal.

This was dismissed on 13 November 2012 based on the same line of reasoning in Justice Lam’s decision at First Instance. Much to Leung’s delight, the judiciary has averted the threat of his removal. Ho’s efforts, albeit persistent, simply failed to provide reasonable and arguable grounds. Leung, in accordance with his previous promise to the public, accepted responsibility for his UBWs and apologised to the people of Hong Kong for his “carelessness”. Whether or not our Chief Executive’s explanations are enough to redeem himself as a reliable leader is still questionable and can only be answered over time.

HKSLG · Fall 2012 · Issue 1

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HONG KONG

Should Type II Mainland Mothers Be Banned From Giving Birth in Hong Kong?

Jeffrey Liu

In June 2012, CUHK students embarked on original research into the Mainland Mothers issue as part of their ‘The Individual, The Community and The Law’ project. Jeffrey Liu shares the group’s findings.

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n July 2001, the CFA ruled in Director of Immigration v Chong Fung Yuen [2001] 2 HKLRD 533 that Chinese citizens born in Hong Kong are entitled to permanent right of abode irrespective of the parents’ residency status. Since then, there has been a growing trend of Mainland women coming to Hong Kong just to give birth, and then returning to the Mainland shortly after. The majority of these women are not spouses of Hong Kong permanent residents. They are classified as ‘Type II’ mothers or ‘shuangfei’ (‘double negative’).

Strain on resources The public is concerned that such sudden influx of babies has and will continue to strain Hong Kong’s resources. There has been particular concern over the shortage of medical and obstetric services, education resources and social welfare.

Consequently, the Government has proposed an absolute ban on Mainland Mothers giving birth in Hong Kong. This was announced against a backdrop of rising social friction between Hong Kong locals and their northern compatriots.

Empirical data undermines the Government’s assumptions on Mainland Mothers However, concerns of an overburdened education system due HKSLG · Fall 2012 · Issue 1

to a sudden spike in enrolment of Type II children are not supported by statistics provided by the Education Authority. If Type II babies were remaining in Hong Kong, one would expect to see a corresponding spike in school enrolment. However, when comparing annual birth rates with subsequent enrolment in kindergarten and primary schools, it is apparent the enrolment figures are significantly lower. This indicates that considerable portions of children born in Hong Kong are actually not staying in Hong Kong.

income of Mainland parents far exceeded those of the average Hong Kong resident, with 40% earning over RMB1 million and 60% earning over RMB500,000.

More importantly, all interviewees’ salaries far exceeded the threshold for Comprehensive Social Security Assistance, which stipulates yearly income to be below HK$24,000 per person. Clearly, the data does not support the concern of an eminent crisis.

Interviews conducted with Mainland Mothers

A common assumption held by the Hong Kong Government is that Mainland Mothers give birth in Hong Kong to enable their children access to benefits which permanent residents enjoy. However, the real reason instigating Mainland Mothers’ decisions to have babies in Hong Kong might rest on two policies currently enacted in China.

As part of the study, interviews were conducted with Mainland Mothers at China Travel Service Centres, where Mainland parents apply for travel permits for their new-borns. The survey sample consisted of 100 Mainland Mothers, and revealed that the annual

Exploiting a legal loophole in Mainland China

HONG KONG Since 1971, the PRC has enforced the One Child Policy, which restricts married urban couples to only one child. Exemptions are made for rural couples and ethnic minorities. This policy is maintained at the municipal level, imposing fines that vary among provinces. To bypass this stringent policy, many have opted to give birth outside of the Mainland.

Hong Kong has become the predominant destination due to its close proximity to China and the difference in legislations concerning childbirth.

Secondly, China maintains a Household Registration System, also known as hukou. The purpose of the hukou is to manage human migration and resource distribution between urban and rural China. The hukou is not directly connected to the One Child Policy, but there is a close connection in practice. Babies who are born in violation of the One Child Policy are unable to obtain a hukou. These children will not be able to enter public high schools and are barred from sitting university entrance exams. They will effectively be unemployed and unable to marry. Therefore, violating the One Child Policy goes far beyond a single fine, and has detrimental consequences on the child’s future.

Solutions Hong Kong now faces an immediate crisis. Critically, there is a shortage of obstetric and hospital services.

The existing legal framework may

not be adequate to address the problem. The Hong Kong legal community therefore provides two proposals to address this issue.

First, members of the Legislative Council and academic scholars are in favour of amending the Basic Law. Certain academics prefer to add a permanent residency requirement on the part of the parents to supplement Article 24 (2)(1), which would prevent future Type II children from obtaining the right of abode. However, there is hesitation in amending the Basic Law as it could potentially open the floodgates to further modifications.

Proposing constitutional amendments also involves a lengthy process entailing a vote in the Legislative Council and further approvals from the NPCSC. This time consuming method does not seem to be a responsive solution. Furthermore, virtually no other country in the world deals with immigration and residency rights within their constitution. The Basic Law is supposedly our legal system’s ultimate source of empowerment and it should remain certain; it is not the answer for social issues like Type II babies.

The second proposal is to implement administrative measures.

Suggestions include enacting policies that give priority to Hong Kong residents when seeking maternity services, charging Mainland Mothers higher hospital fees, and maintaining a quota system.

The quota system was implemented to restrict the total number of Mainland Mothers allowed to give birth in Hong Kong each year. The current practice of the Hong Kong Hospital Authority is to assign randomly. This procedure should be refined and executed through definite and stable government policies. Prices in public hospitals can be raised which will lead

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to either a decline in demand, or an increase in overall revenue. As an alternative, the Hong Kong Government should provide local women with subsidies to ensure availability of obstetric services for local mothers. This would seem to be a more viable option as it can be easily introduced and modified.

Conclusion This article suggests that the strain on welfare resources posed

by Mainland Mothers is actually an unfounded bias. The majority of Mainland women give birth in Hong Kong to circumvent the One Child Policy and have more children, thereby exploiting a loophole in the law. An outright prohibition of Mainland women giving birth in Hong Kong could sour the city’s relationship with the Mainland. If a ban were to be instituted, it can only be temporary as it is not a feasible long-term solution. In addition, Hong Kong has an aging population and declining birth rates. To sustain the city’s development, initiatives to attract talent and pursue stable population growth should be employed.

Type II babies ought to be considered as part of Hong Kong’s growth, and policies instituted to encourage them to contribute back to society. Administrative policies, if implemented correctly, can provide relief for this current crisis, and might very well become a long-term opportunity.

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HONG KONG

A Mixed Test for Determining Consent in Rape: Is It Possible?

Mavis Lam

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n 17 September 2012, the Law Reform Commission of Hong Kong released the “Rape and Other Non-consensual Sexual Offences” consultation paper. One of their recommendations was to impose a mixed test on the issue of consent in rape. They proposed to expand the traditional subjective approach that originated from DPP v Morgan [1976] AC 182, and include an objective component to assess the reasonability of the accused’s belief of the victim’s consent.

In Morgan, the House of Lords held that an accused would not be guilty of rape if, at the time of intercourse, the accused genuinely believed the complainant was consenting. The consultation paper suggests to successfully convict an accused of rape, the prosecution must prove that the complainant did not consent and the accused did not reasonably believe the complainant consented. Not only does the belief have to be genuine to satisfy the Morgan principle, it also has to be objectively reasonable having regard to all the circumstances. This recommendation seems overly idealistic and poses great challenges for implementation.

Primarily, measuring the defendant’s purely subjective belief about consent against an objective and socially acceptable level of reasonableness in all the circumstances is challenging, if not impossible.

What constitutes reasonable consent is dependent upon different factors, such as one’s gender, HKSLG · Fall 2012 · Issue 1

culture, religion, personal acceptance, etc. In addition, what one infers to be a non-consensual reaction may not be perceived as such by another in the heat of the moment. Purporting to determine consent through an objective standpoint would risk being unfair to the accused.

The second problem rests with stereotyped victims. Consider the case of a complainant who falls within a common stereotype (i.e. one being provocatively dressed).

According to a survey in 2000 by the Association Concerning Sexual Violence against Women, 30% of people believed that women provoke rape by their appearance, dress and behaviour. Similar prevailing forms of stereotypes could very well cause prejudice in court proceedings. The contextual nature of the mixed test therefore hastens

the demise of the Commission’s initial intention for greater objectivity.

The third complication is exhibited in jury tasks and judicial directions.

Palmer v R [1971] AC 814 states that the judge is obliged to give appropriate directions to the jury on the issue of “genuine belief ” as to consent if there is evidence or foundation arising on this matter.

Failure to do so would render directions inaccurate and consequently, the jury’s verdict unsafe. With the Commission’s proposed expansion to include an objective component in determining consent in rape, it is unclear in the consultation paper how judges are to evaluate “genuine belief ” claims which prima facie appear unreasonable to a rightminded person, but potentially sincere from the perspective of the accused. It is possible that a judge could, on the basis of objective irrationality, refuse to give directions on “genuine belief ” as to consent and thereby deprive the jury of being thoroughly apprised of the principles governing the mens rea of rape.

The proposed mixed test could make ‘consent’ more complicated than it needs to be. The introduction of an objective component, unless further clarified, runs the risk of adding complexity and unnecessary confusion to both the jury’s task and judicial directions.

HONG KONG

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國民教育：融合還是洗腦？ Yao Yao

德

育及國民教育科自建議 推出以來一直飽受爭 議。今年6月政府派發的《中 國模式：國情專題教學手冊》 更將矛盾推上風口浪尖。手冊 部分內容被市民質疑為“一面 倒唱好中國國情”。在群眾強 烈批評下，行政長官梁振英終 於在10月8日同意國教委員會 的建議，擱置國教科課程指 引。

國，卻對重要民生民主問題避 重就輕，未有客觀平衡功過， 對多黨制無開放心態……用這 樣不夠全面的書去教還未有獨 立思考能力和全面知識體系的 中小學生，確實令人無法苟 同。難怪會有港民認為“政府 的計劃走得有點快”。 不僅如此，香港民眾有他們特 有的政治觀點，即愛國與愛黨 是兩碼事，公民有權利和義務 督促政府。這使他們在這個議 題上看得更清楚，所以自然不 贊同政府推行所謂的“愛國教 育”。而且香港社會相對民 主，大眾難以接受任何對思想 自由的不合理限制，故此產生 了“洗腦”一說。 筆者認為，國民教育本身的價 值不該被完全否定，但應尋找 更合適的方式推行。

國民教育本身其實是有着深刻 內在價值的。作為一種增強 國家凝聚力的重要手段，推 行國民教育基本上是國際慣 例。“1870年到1970年的百年 間，在憲法中明訂國家有義務 提供國民教育的個案從43個增 到139個”。在中國大陸，推 行國教也有確切的法律依據： 《中華人民共和國憲法》第24 條規定：……國家提倡……在 人民中進行愛國主義、集體主 義和國際主義、共產主義的教 育……

比，35.1%人增強了對國家的 歸屬感；64.5%人加深了對國 家的認識及瞭解。而這並非全 為“教育”的功勞，受訪者了 解國家信息的渠道除了歷史教 科書及學校，也包括媒體與互 联网等等。 據香港基本法第6章第137條， 學校可自行設定推廣活動，應 試教育並非唯一出路：公益活 動、科技比賽、歷史講座、學 習交流、影視作品、採風介紹 等活動都可讓學生全面瞭解祖 國。例如學校可組織學生觀看 奧運會中國及香港隊的賽事， 讓學生自發產生認同及民族自 豪感，無疑比學習“國教科 目”更為深刻有效。 多樣化的非官方形式不僅避免 讓國民教育淪為政治工具， 也更適合香港的文化教育環 境。

事實上香港自回歸以來，對國 家的歸屬感已在逐步加深。 香港公民教育委員會2011年 的調查報告顯示，與5年前相

但不適當的舉措卻會導致國民 教育的內在價值被湮沒，甚至 無法實現。反觀香港民眾對 教材的質疑、對官方的抵抗， 實有理可依：手冊旨在介紹中 HKSLG · Fall 2012 · Issue 1

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FEATURE

Interview with Chief Justice Geoffrey Ma

Vivien Li

Isaac Yung

T

he Honorable Mr Justice Geoffrey Ma Tao-li was appointed Chief Justice of the Court of Final Appeal on 1 September 2010. His office hints at the many influences in his life – autographs of US Supreme Court Justices involved in Brown v Board of Education, signed editions of To Kill A Mockingbird, and photographs of his family. On the morning of 29 October 2012, four CUHK students were welcomed into his office to ask the Chief Justice for his thoughts on the following topics.

On challenges independence

to

judicial

This is in many ways a hypothetical question, because there are no threats to judicial independence as far as I can see. I’ve been in the judiciary now for close to 11 years.

At no stage during that time have I perceived any threats to judicial independence – in other words, any outside forces influencing the judiciary in a way which can be perceived as a threat to independence.

On the interpretation in Ng Ka Ling v Director of Immigration under Article 158 of the Basic Law That was, of course, a significant event that continues to be controversial among lawyers and other people in Hong Kong. There are a number of ways of looking at it.

It was not a threat to judicial independence in the sense that there were outside influences or people acting unlawfully or improperly. What the Standing Committee did under Article 158 was held in a subsequent case, Lau Kong Yung v Director of Immigration, to be perfectly legitimate.

HKSLG · Fall 2012 · Issue 1

FEATURE Article 158 is there, and it has to be applied when judges think it is appropriate to be applied. Of course, judges have, as a matter of interpretation, to determine whether Article 158 applies in any given case. That is perfectly within their remit. What is not permissible is to ignore laws.

There is no procedure set out in the Basic Law which states that only the courts can refer to the National People’s Congress (NPC), as the courts did in the Congo case. The NPC can of its own initiative issue an interpretation. There’s nothing to say that a general member of the public, the Government or anybody else can or cannot refer to the NPC. In Lau Kong Yung there was no question raised about the legality of the Government referring it to the NPC.

“...I’ve been in the judiciary now for close to 11 years.

At no stage during that time have I perceived any threats to judicial independence...”

It was the result and what the Government did which many people thought was unsatisfactory.

Having gone through the courts and losing in the Court of Final Appeal, they then initiated the request for an interpretation from the NPC. The Government said at the time (and I think it is hoped it will be true) that it is not something that they are going to use often at all. I think if you use Article 158 to seek an interpretation every time you don’t like a court decision it undermines the authority of the courts.

Many people may regard that as undermining the rule of law.

On the future of ‘one country, two systems’ We’re moving away now from 1997 – we’re 15 years into 50 years – but people are obviously concerned about the future, and rightly so. People want to be assured that Hong Kong will carry on the way it is.

I see one of my principal responsibilities is to ensure that the common law system and the administration of justice is a good system. It is only by showing that a system works for the community, continues to deliver what it is expected to do, and also demonstrating this to the wider world, the Central People’s Government or NPC, can we ensure its survival.

There’s nothing in the Basic Law that says, “by 2047 there must be a convergence of legal systems”.

It’s difficult to see a convergence.

At the moment the way our law works and the way the law works in the Mainland are quite different.

On former Secretary of Justice, Elsie Leung’s, recent criticism of the judiciary Ms Leung says that she was only giving her opinion.

“…only by showing that a system works for the community… can we ensure its survival”.

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But it really makes no difference as far as judges are concerned, because judges are not going to be influenced by outsiders from whatever political party or walk of life. They will simply adhere to their oath of office and faithfully apply the law.

On Non-Permanent Judge (formerly, Permanent Judge) of the CFA, Justice Kemal Bokhary’s recent statements on rule of law If he’s referring to something really bad that is about to happen like “Hong Kong judges should start being an obedient judiciary”, then I’ve never heard of it. But he’s not.

He’s talking about Article 158.

“Article 158 is there, and it has to be applied when judges think it is appropriate to be applied”.

Difficult issues can arise when you are dealing with Article 158 but it’s just something the courts have to deal with as a matter of law. So if all he’s talking about is that you have got to be careful when judges are asked to apply Article 158, then I don’t disagree. I don’t put it in terms of “a storm of unprecedented ferocity”. Personally, I think that’s just being a bit overdramatic.

But, of course, what she says causes controversy because it comes from her. Some people interpret what she says as putting pressure on judges whether by the Central People’s Government or anyone else and they fear that sort of thing.

I don’t know what she meant because I haven’t spoken to her.

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FEATURE

On Hong Kong’s written bill of rights I think that having rights written out makes it absolutely clear what the rights are. Having them set out puts some form there, so that they can be latched onto when it comes to a legal challenge.

The law is not there for the benefit of lawyers. It’s actually for the people, and when the people can see what those rights are in summary form, that benefits them. I think our written bill of rights has led to people in Hong Kong being much more aware of their rights than they were before 1997.

On whether the Bill of Rights Ordinance politicises the courts Politics are bound to be involved when you’re talking about rights.

For example, the ‘right to march’ covers Falun Gong, people marching against the Government, June 4th – these are all political. So to that extent, the courts have to deal with political matters. But the court is not interested in what the politics are. The courts are only, or can only be, interested in the legal rights that arise from it.

A lot of commentators say that the reason there are a lot of cases in the courts involving political matters is because there’s no full democracy in Hong Kong. Judicial review cases can, as I have said, cover cases with political ramifications.

The Hong Kong-Zhuhai-Macao Bridge case was another such case.

However, if no legal questions arise, the court will not deal with the case and leave to issue judicial review proceedings will be refused.

The court is not going to determine whether the Government is right politically. It’s looking at the matter only from a legal point of view.

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On the retirement of judges and filling judicial vacancies The fact of retirement or any one person retiring doesn’t affect the judiciary. It certainly doesn’t affect key concepts like the independence of the judiciary or the rule of law.

The filling of vacancies involves recruitment. It is important that you get the right people to fill the vacancies. So far as I’m concerned, it is better to leave a position vacant than to get people who are not qualified or are not the right people.

The Basic Law itself sets out the criteria for judges. Judges are appointed according to their professional and judicial qualifications. But essentially what it boils down to is that it has to be somebody who’s good enough.

“...judges are not going to be influenced by outsiders from whatever political party or walk of life”.

There are two main qualities to being a judge. One is a sense of fairness. The second is having legal ability. And it’s both – not one or the other. I’ve known judges over the years that are so occupied with the intricacies of the law that they miss out on

other important things. Some cases involve vulnerable people, which require a soft touch, a human touch.

On the courts and Government policy The law is full of grey areas. To just give you one example, there is one principle in judicial review that is always latched onto by applicants – it’s called ‘Wednesbury unreasonableness’. Sometimes, in judicial review cases, the courts are required to look at government policy.

At times, the court must deal with the political, economic or social issues which arise in order to determine the legal issues.

“...the Government can’t always hide behind this label of socio-economic policy...”

Fok Chun Wa v Hospital Authority was a case which involved looking at policy, and ultimately the court said, “this area of socio-economic policy is best left to government.”

However, the rider to that is that the Government can’t always hide behind this label of socio-economic policy. If the socio-economic policy involves blatant discrimination (such as unequal treatment between true equals) or otherwise breaches constitutional provisions, the court will intervene.

FEATURE On being the Chief Justice I have two roles. Judging is actually the better part of it because that is where there are intellectual challenges. I am interested in the law. There is a certain sense of achievement in writing a judgment after hearing arguments, in the same way that there is a sense of achievement if you are a lawyer submitting to the courts and then getting a judgment in your favour.

[Points to a photo in his office] That is Sir Sydney Kentridge, who is still a QC practicing in London.

He acted for a lot of people, like Nelson Mandela and Steve Biko, in the days when anybody who had anything to do with colored South Africans were regarded as suspect.

He is a shining example and we remain friends.

But the other part of my role as the Chief Justice is an administrative one. It’s not just the Court of Final Appeal, but each level of the courts. You have to deal a lot with judges, so you’re dealing with humans. On the whole, it is enjoyable.

On what he will remember about his legal career I think what will stand out is the privilege I’ve had of meeting various people in the law. People who I’ve got on with, people who have in a way influenced me.

When you’ve met a lot of lawyers, as I have over the years, one thing that stands out among quite a few of them is that they have huge egos, meaning that while they have achieved a lot, they think that they have actually achieved it solely on their own. While it’s largely on their own, it’s not 100% that way.

You are influenced by a lot of people in the right ways, ranging from your own family to people whom you’ve met in the law over the years. It continues to be my privilege to meet people who, even by just one thing they say or do, influence me, and I hope that things I say or do may influence people positively.

On other people who have influenced his career Many people spring to mind. Such as your pupil masters – who teach you the right thing or sometimes even the wrong thing! You learn much from people’s examples. You learn what you shouldn’t be doing from people’s bad examples.

Also, my elder brother, who is a doctor. He’s the one who got me interested and suggested I do law in the first place.

Advice to law students hoping to achieve his success I wouldn’t say I was successful.

But there are two things which I think will hold you in good stead, whether or not you become a lawyer. One is hard work. The second is to take an interest in whatever you do. If you have both, you are going to be a successful lawyer, barring tremendous bad luck.

You won’t know if you have talent for the law until you get into

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practice. But you will have some indication in your studies when you see your grades. I think that if you’re studying law, there’s a lot to be interested in.

And don’t take things for granted.

Don’t expect or hope everything comes for free.

On challenges facing the next generation of lawyers [On the challenge of competition] When I started out in the 1980s there weren’t many lawyers. I was something like number 75 on the Bar List. It coincided with a tremendous property boom in Hong Kong, which meant that all solicitors were making lots of money doing conveyancing. Very junior barristers, like me, had the luck of getting a lot of court work which solicitors had previously done themselves.

Nowadays of course, there are many more law students and many more entering the profession. But even these days, if you are keen on the law and you work hard, you will get success without a doubt.

I think the next generation will be alright because there is a lot of work in Hong Kong and elsewhere, for a good lawyer.

[On helping the community] When people hear of misgivings about the rule of law and what Elsie Leung and Justice Bokhary said, they are often worried about something they may not fully understand. It is up to lawyers, people who truly understand the law, to help people understand.

You are able to explain to people and try to ease their anxieties. That is a challenge for the next generation and future generations of lawyers in Hong Kong – to help the community at large.

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CHINA

Diaoyu Islands Dispute: China and Japan’s Unfinished Business Mercedes Chien

T

he three relevant modes of establishing title to the Diaoyu Islands (the “Islands”) are by cession, occupation, or prescription. Cession is a transfer of title between two State sovereigns accomplished by a treaty.

Occupation is a sovereign taking possession and exercising administration over terra nullius, “land belonging to no one”. Lastly, prescription applies where there is a known previous sovereign to the territory, but another State has possessed it by peaceful means for so long, and without protest from the former State, that the possession becomes valid.

China claims the Islands were known to it since 1372, and possessed as part of Chinese territory since 1534. Administration was recognised when the Islands were used as part of China’s coastal defence system in the 16th century. In fact, both Chinese and Japanese maps from the 18th century showed that the Islands were part of Chinese territory. Therefore, HKSLG · Fall 2012 · Issue 1

China originally asserted sovereignty over the Islands by way of occupation.

Japan first annexed and controlled the Islands in 1895 during the First Sino-Japanese War. In defeat, China formally ceded Taiwan and its islands under the 1895 Treaty of Shimonoseki. The treaty, however, made no mention of ceding the Diaoyu Islands. After World War II, Japan surrendered to the Allies under the terms of the 1945 Potsdam Declaration which stipulated that Japan shall restore all territories stolen from China, as had been prescribed by the 1943 Cairo Declaration. From all accounts, Japan is bound to return the Islands to China under the Potsdam Declaration.

To complicate matters, Japan ceded the Islands to the USA under the 1951 Treaty of Peace, and the USA paid an annual rent to a Japanese settler of the Islands at the time. Interestingly, China did not protest either action, thereby

lending support to Japan’s claim by prescription. However, China asserts that the lack of protest was because the Kuomintang leader, Chiang Kaishek, depended on the USA’s support during the Chinese Civil War and did not want to jeopardise their relations. China’s inability to protest was caused by duress, and therefore it could be argued that there was no true lack of protest from China in order for Japan to make a proper claim by prescription.

Japan’s claim would be further defeated because China promptly protested when the USA returned the Islands to Japan under the 1971 Okinawa Reversion Treaty and has continued to protest Japan’s possession of the Islands since then.

The Diaoyu Islands, therefore, tentatively appear to belong to China.

CHINA

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Macau’s Junket System: The Dark Side Owen Cook

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fter years as a Chinese dominated monopolistic industry, in 1999, the newly established Macau Special Administrative Region (MSAR), embarked on major overhauls to liberalise the gaming sector. A public tendering process was introduced to grant gaming licences to operators aside from the traditional tycoons, such as SJM Holding – a company belonging to the famous Stanley Ho Hung-sun. Liberalisation of casino games stimulated competition and induced a widespread preference for Westernstyled venues and games. By 2007, Macau had surpassed Las Vegas in revenue and by 2011, the region had firmly established itself as the premier gambling capital of the world; generating revenue over five times greater than its American counterpart. As a product of this increased popularity, wealthy Mainland Chinese began to use Macau’s junket system as a tool to bypass China’s stringent capital flow restrictions.

The junket system is an elaborate marketing scheme devised by casinos to extend gambling credit to ‘high rollers’.

Operators would entice ‘high rollers’ (the VIPs) to Macau by offering them privileges, such as reduced borrowing rates and free accommodation. The operators then receive commission from the casinos based on the amount spent by their VIPs, usually tallied through rolling chips privately exchanged from the junkets to the clients. Casinos are hesitant to lend and would often outsource this duty to junket op-

erators. Pursuant to Macau’s Gaming Credit Law (No.5/2004, of June 14), debts are civil obligations enforceable only in the Macanese courts. In the event of non-payment where the debtor resides out of the region, the junkets are considered a resourceful agent for financial help.

This is due to their exclusive network and experience in ascertaining VIP players’ whereabouts and assets.

In China, every resident is allowed only US$50,000 per year of foreign-exchange purchases. The junket system therefore provides an option for those seeking to evade regulations to move money out of the country at greater ease. For example, a ‘high roller’ will travel to Macau with no money in his pocket, borrow from the junkets and later repay their debt through accounts in the Mainland. Any winnings made during the process, denominated in HKD or Macanese pataca (MOP), will no longer be under PRC jurisdiction and can be freely moved, even to offshore institutions.

Macau has recognised an influx of junket operators in the past decade and has introduced new regulations to reduce competition and provide greater protection for gamblers.

For example, No.6 of Article 14 of the Administrative Regulation No. 6/2002 and amendments in Regulation No.27/2009 require junket operators to obtain licensing from the Gaming Inspection and Coordination Bureau before operating.

Westerners often regard the junket system as a money-laundering mechanism. However, many Chinese simply view it as a mechanism for easier capital movement! No matter what the perspectives are, the consensus is that this system risks exposure to illegality and should therefore be closely monitored before atrocities arise.

There is definitely doubt on whether the MSAR can limit the negative influences of their junket operations, given the region’s strong reliance on gambling and affiliation to triads.

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CHINA

Liberalisation of China’s Public Securities Market: Is It Really Over-regulated?

T

he liberalisation of China’s public securities market is a much-debated issue. The West generally views government intervention in the market as a hindrance to economic development.

Conversely, the Chinese Government attribute their miraculous economic success in the last 30 years to the state’s control over the economy and emphasis on stability over rapid growth. The Chinese basically view free capital flow as a threat to their economic and social stability. So, which of the two perspectives is actually correct?

Regulatory barriers

The Chinese securities market is full of regulatory obstacles. An example of direct regulation is the outright prohibition of foreign investment in certain industries.

According to the Catalogue of Industries for Guiding Foreign Investment (2011 Amendment), the Ministry of Commerce has identified 354 “encouraged” industries, 80 “restricted” industries, and 39 “prohibited” industries.

HKSLG · Fall 2012 · Issue 1

Elliot Leung

China has made some progress in liberalising its public securities market. For example, the listing of China-based companies on foreign stock exchanges is now possible.

The introduction of the QFII programme in 2002, the QDII programme in 2006, and the RQFII programme in 2011 permits foreign institutional investors to invest in Renminbi-denominated Chinese security products and allows Chinese institutional investors to invest in overseas securities markets, subject to approval and quotas. However, the market cap of equities held by QFII investors merely accounts for 1.09% of the free-float market cap in the A-share market. This phenomenon can be attributed to the restrictions on renminbi convertibility and tight regulatory procedures.

the State Development and Reform Commission (SDRC), the State Administration of Foreign Exchange (SAFE), and the China Securities Regulatory Commission (CSRC). Despite the active involvement of multiple government units, there is still no unified, convenient procedure for the approval of cross-border investments.

China is not short of regulatory bodies and rules to raise entry barriers into its securities market. Any cross-border capital flow requires the approval from a plethora of government entities including the Ministry of Finance (MOF), the People’s Bank of China (PBOC),

With an increasing amount of capital flowing in and out of the market and more participants in the game, it will be increasingly difficult for the Chinese Government to monitor financial transactions.

Soon enough, the existing regulations will become insufficient.

The weak links The rest of the world has repeatedly stressed the need for China to deregulate its securities market. To maintain a sustainable public securities market, China cannot possibly neglect the broader interests of all stakeholders and open up their market, when it is obvious that the necessary legal infrastructure is currently lacking.

CHINA Many important laws (such as those regulating corporate disclosure and governance, bankruptcy and reorganisation, and securities fraud) are currently underdeveloped, ineffective, unenforced or non-existent. These laws, although peripheral to actual securities transactions, are inseparable components to a healthy and sustainable securities market.

Take the Company Law of the PRC as an example. Although it has provided a formal regulatory guideline for corporate governance and disclosure, Chinese companies rarely practice such rules. Moreover, some types of companies are given preferential treatment which excludes them from complying with certain debt legislations. Specifically, stateowned enterprises (SOEs) are subject to soft budget constraints because they are funded by the government. They frequently receive ‘soft money’ from the government through low-interest loans and commonly benefit from arbitrary debt write-offs. Their board of directors are usually party officials who prioritise political policies over profitability and shareholder interests. The lack of discipline in the management of these companies and the inherent conflict of interest would be detrimental to profits and, ultimately, investor returns.

Another flaw lies in the PRC Enterprise Bankruptcy Law, first enacted in 1986, which provides a liquidation procedure restricted to SOEs. Although the new Enterprise Bankruptcy Law of 2007 attempts to extend coverage to include other legal entities, including foreign-invested enterprises, and provides both liquidation and reorganisation options for distressed companies, this law is still new and the Chinese courts are extremely inexperienced in dealing with such

cases. The absence of an established system for bankruptcy will put debt holders in a vulnerable position in the event that public companies become financially distressed. This type of additional risk further dissuades investors from the Chinese market.

China’s enforcement of the Securities Law on fraudulent activities is so weak that even the CSRC recognises insider trading as a “chronic illness” in the country. The problem of securities fraud committed by Chinese citizens is not confined to within the Chinese border. Recently, many Chinese private companies have engaged in so called “reverse mergers” with overseas public companies, usually from North America.

Through such ventures, Chinese companies were able to bypass the stringent listing procedures required of purely overseas companies in foreign stock exchanges, thus allowing them to raise huge amounts of capital with ease through initial public offerings (IPOs). This, however, is not the fatal issue. The real damage lies in the fact that these companies then engage in market manipulation, accounting fraud, and other illegal activities to reap benefits. When the illegal acts are exposed, the stock prices tumble and the investors suffer. Examples of alleged or convicted fraudulent Chinese companies include Sino-Forest, China Yingxia Inter

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national, China Natural Gas and China Sky One Medical, Inc., among many others.

A balance of interests Is the Chinese securities market over-regulated? On a macro level, the Chinese Government retains control over the source and amount of cross-border capital flow. On a micro level, however, it is highly doubted that the Chinese Government and the legal system have the capacity to ensure the integrity of every company.

China’s pursuit of a socialist market economy will eventually lead to deregulation. However, China should not rush to liberalise the market without paying close attention to its current circumstances and capabilities. Without adequate legal infrastructure to obstruct loopholes in the law, provide incentives for corporate financial discipline and counter the agency problem, liberalisation of the Chinese securities market will only bring unnecessary risks and volatility.

Since economies are now more interconnected due to globalisation, sustaining the balance between liberalisation and proper regulation is no longer only China’s concern.

It is a global issue that demands the attention of overseas investors and foreign governments.

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CHINA

ICC Arbitration Awards Rendered in China Caleb Chan

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ne of the biggest issues with the enforcement of foreignrelated arbitration awards in China is the recognition of foreign arbitration institutions seated in China. Article 16 of the Arbitration Law of the People’s Republic of China requires that an arbitration agreement must include “a designated arbitration commission”.

This article was used to prohibit ad hoc arbitration, but was unclear whether or not awards rendered by a foreign arbitration tribunal in China are enforceable. Article 10 provides that an arbitration commission may be established by the designated administrative region (“Region”) under the Central Government. A narrow interpretation of Article 10, in conjunction with Article 16, would suggest such awards are invalid because foreign arbitration institutions fail to be a “designated arbitration commission” as they are not established by the Region.

Zublin International GmbH v Wuxi Woke General Engineering Rubber Co Ltd [2003] Min Si Ta Zi No.23, was the first major case to shed light in this area. In Zublin, the parties sought the Supreme People’s Court’s (SPC) interpretation on the validity of the arbitration clause: “Arbitration: ICC Rules, Shanghai shall apply”. They concurrently carried out separate arbitration proceedings in the International Chamber of Commerce (ICC) seated in Shanghai. The SPC held the arbitration clause invalid because it failed to comply with Article 16 of the Arbitration Law. Meanwhile, the parties attempted HKSLG · Fall 2012 · Issue 1

to enforce the arbitral award rendered by the ICC at a lower level court. The award was interpreted as a ‘non-domestic’ award. This meant the lower court took a very restrictive reading of Article 10 and deemed the ICC was not an arbitration commission established by the Region. As such, Article 16 could not apply, and instead the courts had to rely upon the New York Convention (NYC), which provided that an award could be set aside if the arbitration clause is invalid. Since the SPC held the arbitration clause to be invalid, the refusal of enforcement is valid under Article V(1) of the NYC. The application of NYC has generated much criticism. First, since China’s accession to the NYC is subject to a reciprocity reservation, the application of the NYC should arise only when the award is made in another state. Secondly, Article V(1)(a) of the NYC states that the governing law should be “the law of the country where the award was made”. The SPC’s reliance on Chinese law to refuse enforcement indicated that the ICC award should be based in China, but this was not the case as it was held to be non-domestic.

In contrast, the Ningbo Intermediate People’s Court in Duferco S.A. v Ningbo Arts & Crafts I/E Co [2008] Yong Zhong Jian Zi No.4 recognised and enforced an ICC award seated in Beijing. In this case, the People’s Court still rendered the decision by relying on the NYC. Had the People’s Court taken a more liberal interpretation of Ar-

ticle 10, awards rendered by ICC seated in China would have been governed by domestic legislation instead of the NYC. The result of which would reduce the confusion surrounding the Court’s misapplication of the NYC. Although cases such as Duferco provide optimism on the enforcement of foreign-related arbitral awards, the application of NYC bequeaths uncertainty to the mechanism for enforcement. For practitioners, it is still recommended that parties use a state recognised arbitration institute, such as the China International Economic and Trade Arbitration Commission, because the current legal regime has yet to clarify the qualifications of foreign institutions seated in China and the applicable law relating to the enforcement of arbitral awards.

CHINA

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‘Social Stability’ Cannot Justify the Abuse of Human Rights in China Louisa Wong

T

o address the issue of human rights as a national goal, China published the National Human Rights Action Plan of China (NHRAPC) (2009-2010). However, the Government not only failed to abide by its plan, but also tacitly accepts torture and illegal detention of human rights defenders. The illegal house arrest and repeated battering of the blind activist, Chen Guangcheng, is a gross violation of his rights to liberty and security of the person, enshrined in the Constitution of the People’s Republic of China (PRC) and the International Covenant on Civil Political Rights (ICCPR). Can this violation of human rights be justified under the guise of ‘social stability’?

A sovereign state, in order to serve the common good, can legitimately make policies it considers required and impose sanctions for violations of the law at its discretion. Chen was perceived as a troublemaker by China’s local officials. In 2005, the “barefoot lawyer” exposed forced abortions and sterilisation practices by the Linyi authorities, who were desperate to meet birth control quotas. Despite domestic and international protests drawing attention to China’s leadership, Chen was sentenced to prison on an allegedly fabricated charge of “intentionally damaging property and gathering crowds to disturb transport order” after a grossly unfair trial. It seems clear that the state is sacrificing rights of certain individuals to support its own policies under the pretext of ‘social stability’. However, ‘social

stability’ should not be maintained at the cost of fundamental rights.

“... The failure to protect individual rights not only engenders injustice to victims of rights violations, but will also prejudice the wider population as it witnesses injustices”.

Although a state can exercise its discretion, it also has a duty to treat individuals with equal respect and dignity, and act according to its constitution. A society is composed of individuals with equal rights. The failure to protect individual rights not only engenders injustice to victims of rights violations, but will also prejudice the wider population as it witnesses injustices. Suppressing their dissatisfaction can only bring a false sense of ‘social stability’. The supreme leadership of the Communist Party of China (CPC) is also entrenched in the PRC Constitution. And yet, when CPC leadership and human rights are in conflict, the former generally prevails. ‘Social stability’, after all, may just be a political tool of the Party. Nevertheless, we must not neglect the fundamental principle of the rule of law, where individuals should only be punished due to a breach of law, and that no man is above the law. Many of the worst abuses against Chen Guangcheng and his family occurred after his release from prison.

As he and his family have not been convicted of any further crimes,

sacrificing their rights to liberty and security to the supposed goal of ‘social stability’ is not only a grave abuse of political power, but also contradicts the PRC’s position as a ‘rule by law’ state.

China on the one hand provides for universal and egalitarian human rights in her Constitution, but on the other hand rejects such notions through its detention of human rights offenders because they offend local officials and therefore are deemed a threat to ‘social stability’. The new NHRAPC (20122015) has recently been issued.

China’s performance in the area of human rights will continue to be scrutinised by the international community. With China’s upcoming leadership transition, the Government should take the chance to address human rights issues to achieve actual ‘social stability’, and stop sacrificing individual rights for its political agenda.

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INTERNATIONAL

Protect This House – It’s Special James Muirhead

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mbassies play a vital part in international relations by facilitating diplomacy, trade and travel across borders. The Vienna Conventions on Consular Relations and Diplomatic Relations (the VCCR and VCDR, respectively) codify the customary international law protections of embassies. The VCCR and VCDR stress a need for diplomatic immunities and privileges “for the promotion of friendly relations among nations” and for the “efficient performance of the functions of diplomatic missions as representing states”.

In the past year, there have been a series of controversies surrounding the inviolability of diplomatic missions. First, there was the attempted defection of Wang Lijun in Chongqing to the US consulate in February. Then in April, there was the escape of activist Chen Guangcheng to the US embassy in Beijing. Finally, Julian Assange managed to seek refuge from British authorities in the Ecuadorean embassy in London.

The rights and duties of host states Host states have a positive duty to protect diplomats and consular staff and a “special duty to take all HKSLG · Fall 2012 · Issue 1

appropriate steps to protect the premises of the mission against any intrusion or damage”. This involves conducting investigations into attacks, including verbal in extreme cases, on diplomatic missions. Libyan authorities had a duty to protect the US embassy and its staff in Benghazi, but failed to do so. Now, Libyan authorities have a duty to investigate the well-coordinated attacks of 11 September 2012.

Correspondingly, there is a negative duty on host states to avoid entering missions, arresting or impeding diplomats or searching their property without the consent of the head of the mission.

This duty is absolute and applies in cases of emergency or suspicions of criminality.

Asylum The inviolability of diplomatic missions is one reason diplomatic asylum seekers such as Julian Assange and Chen Guangcheng seek refuge in such premises. Regardless of the legality of the asylum seeker’s claim, the host state is prohibited from entering the diplomatic mission without permission from the head of the mission. However, this does not necessarily suggest the asylum seeker can leave the

host country without the government’s permission. In Cold War Hungary, for example, Cardinal Mindszenty found sanctuary in an American mission for 15 years before the Government struck a deal to let him live out the rest of his life in exile.

Remedies for a failure to protect States are allowed to exercise their customary international law rights where the VCDR or VCCR are breached by a host state (e.g. the host state enters the premises without permission). The mission state has a customary right in international law to use countermeasures, such as cutting diplomatic ties.

States can also seek reparations, restitution, compensation, and satisfaction under customary rules of international law. In exceptionally rare cases, individuals may have some recourse to civil actions against the offending state.

Conclusion The VCDR and VCCR are cornerstones of international law and international relations. These laws give a clear framework for the customary rules governing the inviolability of diplomatic premises, without which diplomats could not safely operate.

Recent coordinated attacks this past September on embassies in Cairo, Benghazi, Sanaa and Yemen show that there is a need to re-affirm the legal rights in these conventions.

INTERNATIONAL

24

Supreme Court of Israel: the New Peacekeeper of the Promised Land Matthew Chan

W

ith 45 years of international pressure, politics have achieved little to resolve the feud between Israel and Palestine. Recent decisions from the Supreme Court of Israel, however, might seem to indicate that the Israeli judiciary has an increasingly important role to play in realising the dream for peace in the region.

In 2005, Israel unilaterally disengaged from the Gaza strip in an attempt to improve Palestinians’ freedom of movement and economic activity. Unfortunately, Hamas, a Palestinian political party that is commonly classified as a terrorist organisation, took over the region and launched attacks on Israel. This prompted Israel to renew a decade-long blockade policy over Gaza, which barred Gazans from entering the West Bank in Israel to trade and study.

In Izzat v Minister of Defense [2012] HCJ 495/12, four Gazan women petitioned to the Supreme Court of Israel in January 2012 for permits to travel into the West Bank in order to complete their Masters of Arts degrees at Birzeit University. The group’s studies began in 1999 but were held up as a result of the blockade policy.

They sought a declaration that

the blockade policy violated their freedom of movement, freedom of occupation and right to education.

The Supreme Court dismissed the petition and held that although Israel was responsible for the humanitarian needs of Gazan residents, pursuant to international treaties that bind the warring parties, the Gazan residents were still foreign citizens and were, therefore, not entitled to the Israeli Government’s provision of social welfare, including the right to education.

The Supreme Court also clarified that the blockade policy was intiatied in order to provide security to the region, hence this was a matter solely for the executive branch of the Government. It would amount to a material change of the blockade policy if a committee were to be established in order to grant permits for exceptional cases.

In addition to the blockade policy, the current Israeli Government, led by Benjamin Netanyahu, believes that the Israeli settlement over the West Bank is the realisation of God’s promise. As such, the Israeli government has persistently pushed forward with plans to expand settlements into the West Bank.

In response to Israel’s advancement, Peace Now filed a petition in Yousef Mousa Abdel Razek el-Nabut et al v The Minister of Defense et al [2012] HCJ 8887/06 for an order to dismantle Israel’s outpost in Migron, West Bank. The Supreme Court ruled that the outpost was illegal on the basis that the outpost was built on land privately owned

by Palestinians. Despite the Israeli Government’s initial intransigence with the court’s order, the Supreme Court reaffirmed its ruling in March 2012 and ordered the Israel Defense Forces to dismantle the outpost.

With the Supreme Court unwilling to meddle with politics and the administration resolute to expand its presence in the occupied areas, the Migron case could arguably be construed as an exception, rather than a shift, of the Supreme Court’s position. Nevertheless, achieving peace through international diplomacy remains a distant dream when both the Israeli and Palestinian parties across the political spectrum remain largely divided. Until the matter is resolved, NGOs and the judiciary have an important role to play in achieving peace and stability in the region.

HKSLG · Fall 2012 · Issue 1

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INTERNATIONAL

Compulsory Licence: Developing Countries Strike Back?

William Chan

I

n March 2012, the Indian patent office forced the German pharmaceutical giant, Bayer, to permit local competitors to manufacture its kidney and liver cancer drug, Nexevar. This decision has shocked the pharmaceutical world. Pharmaceutical patents usually permit the monopolisation of drugs for decades, and patent holders rarely issue voluntary licences for competitors’ commercial use before such patents expire. However, under the World Trade Organization’s Agreement of Trade Related Aspects of Intellectual Property (TRIPS), members can also compel a patent holder to licence. This is known as a compulsory licence (CL). In this case, the Indian patent office issued its first-ever CL.

of the CL. CL is perhaps harsh for a drug treating rare chronic disease.

Even the court admitted that a tiered pricing scheme is more suitable, allowing drugs to be priced in accordance with the country’s level of development.

Tug of war in pharmaceutical patents Governments rarely resort to issuing CLs because TRIPS requires them to first negotiate for discounts with pharmaceutical companies. It is only when negotiations are fruitless would a CL be considered.

Also, the Indian court issued a CL partly because Nexevar was not produced in India. Richard Bergström, director general of the European Federation of Pharmaceutical Industries and Associations (EFIPA) has expressed serious concern by saying, “…this means that anyone around the world who imports a medicine can be told, ‘This wasn’t manufactured in my country, therefore I can grant a compulsory licence…” It’s quite upsetting that the Indian court used this argument”.

It is speculated that the Bayer situation developed from a negotiation breakdown. Under the CL, Nexevar’s generic copies will be sold at only 3% of the original price, of which only 6% of the profits will be paid to Bayer as royalties. This is a bitter pill to swallow as it represents a reduction in revenue of over 99%.

Was CL abused?

What has unsettled the industry is not the hefty price Bayer paid, but rather India’s questionable issuance HKSLG · Fall 2012 · Issue 1

Shockwave of the Bayer decision Pharmaceutical companies have compromised quickly to avoid committing Bayer’s mistake.

Roche, a leading drug manufacturer, uncharacteristically abandoned its global single price policy.

Ramifications have also resonated

in China. Two months after the Bayer decision, China refined three incoherent administrative orders into a uniform law in possible anticipation of issuing CLs. Sensing the turning tide, Gilead, a Californian pharmaceutical company, has reportedly offered concessions on its AIDs cocktail treatment to the Chinese Government.

Balancing morality and economy The approaches taken by India and China naturally worry the pharmaceutical industry – profits will plummet if the two most populated countries habitually grant CL. More importantly, abusing the issuance of CL will discourage foreign investment and innovation which may harm long-term global public health.

It has been suggested that governments should subsidise patients with rare diseases like kidney cancer. However, Nexevar’s unreasonable high proft margin (near 97%) suggests that pharmaceutical pricing is borderline immoral. If the right to life encompasses access to food and water, why should medicine differ? Protecting innovation matters, but human lives must take precedence.

Bayer’s case may eventually reach the WTO which could redefine CL’s proper use. Before then, India and China may have significantly reshaped the pharmaceutical landscape.

INTERNATIONAL

Lisa Li

A

n American film, The Innocence of Muslims, was condemned globally by the Muslim world for mocking the Prophet Muhammad.

This triggered worldwide protests from Cairo to Kabul.

Similarly, on 18 September 2012, a French satirical magazine Charlie Hebdo published a set of cartoons featuring Muhammad, including one naked drawing. The publication unnerved French officials. As a precautionary measure, the French Foreign Ministry temporarily shut down French embassies and consulates in 20 countries. Following waves of angry protests, the Arab League was adamant to introduce an anti-blasphemy law into the international legal framework during a UN Security Council meeting.

This series of events revived an old debate – are there constraints on freedom of expression, and in particular, is the right to criticise a religion subject to limitations?

On 19 September 2012, a Syrian organisation instigated complaints against Charlie Hebdo for inciting hatred. This was the second time that legal action has been brought against the magazine. In 2007, after publishing twelve cartoons featuring Muhammad in its special edition, the magazine was sued for “public insults against a group of people because they belong to a religion”. In one cartoon, the Prophet was greeting suicide bombers in heaven. Another illustration portrayed Muhammad as a terrorist wearing a turban resembling a bomb.

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Indignation at Cartoons: Is There A ‘Limit’ on the Freedom of Expression?

Charlie Hebdo won the court proceedings. Although the court acknowledged the cartoons were “shocking or hurtful to Muslims, there was no deliberate intention to offend them”. It was held that the cartoons should be viewed in the context of criticising religious fundamentalism.

In France, legislation that bans blasphemy was abolished during the French Revolution. The freedom to criticise religious dogma has always been regarded as a triumph of reason and cherished as a legacy of the Enlightenment. In other European countries, blasphemy has gradually been decriminalised as a result of secularisation.

For the Muslim world, however, insulting the Prophet remains unacceptable. The Quran condemns such behaviour for Muslims and non-Muslims alike. In one recent controversy, a Christian teenage girl with learning difficulties was charged with blasphemy after burnt pages of the Quran were found in her bag. The rigid application of anti-blasphemy law in Muslim countries has been sub-

ject to criticism from the Western world.

Yet, despite the supposed sacrosanctity of freedom of expression in the Western world, it is nevertheless not an unqualified right. It is common practice for European societies to forbid certain expressions or types of speech. In France, Germany, Austria and Belgium, denial of the Holocaust is a criminal offence. Many countries also prohibit hate speech, which is often defined as “words which incite hatred against a person or a group of people on the basis of race, gender, ethnicity, religion, sexual orientation and other characters”.

The decision to forbid a type of speech or expression is a product of a country‘s particular historical experience. If a nation enjoys the right to set limits on the freedom of expression according to its own values, it should naturally respect the right of others to do the same.

It is unjust for countries to boast laws that promote the freedom of expression that flagrantly disregard religious sensitivities, while simultaneously limiting expressions that are susceptible to offend its own culture. If blasphemy is seen as a limitation on the freedom of expression by democratic societies, and is thus perceived as a threat to modern civilisation, will the international community accept limitless freedom of expression? This debate continues to push the boundaries of the tolerated limitations on the freedom of expression.

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INTERNATIONAL

Recent Trend in Abortion Laws: The ‘Pro-Life’ Movement Weakens Catherine Leung

The legitimacy of abortion is controversial and there are two major arguments. According to the ‘pro-life’ movement, a foetus is a human on its own. Thus, legalising abortion would deprive them of their fundamental right to life and would be no different to murder. On the contrary, the ‘pro-choice’ movement assumes that a foetus is merely a part of the mother, and is not considered a person until birth; a woman should therefore be allowed absolute control over her own body.

Hong Kong’s standpoint on this issue is similar to its UK and American counterparts, where a ‘pro-choice’ view is generally adopted. Abortion in Hong Kong is legal under section 47A of the Offences against the Person Ordinance (Cap 212), provided that two registered practitioners concur the pregnancy should be terminated because: (a) there is risk of physical or mental harm to the expectant mother, or (b) the child has substantial risk of suffering from a physical or mental defect.

The main question surrounding this controversy has always been whether or not a foetus is a human, and hence entitled to rights.

There are countries that take a substantively different perspective from that of Hong Kong, UK and the USA. The Republic of Ireland, for example, is well known for their emphasis on the ‘pro-life’ movement and their near-absolute HKSLG · Fall 2012 · Issue 1

ban on abortion. Article 40(3) of the Irish Constitution provides that:“the State acknowledges the right to life of the unborn and, with due regard to the equal right to life of the mother, guarantees in its laws to respect, and, as far as practicable, by its laws to defend and vindicate that right”.

This position was officially challenged in A. B. & C. v Ireland [2010] ECHR 2032. In 2005, three Irish women, who had previously travelled to England to have

abortions, applied to the European Court of Human Rights (ECtHR) and claimed that the ambiguous and restrictive Irish laws violated provisions of the European Convention on Human Rights. This case marked a groundbreaking deviation in attitude from the ‘prolife’ movement that has long dominated Irish society. Although the ECtHR eventually ruled that Ireland’s laws were not in conflict of the Convention, they did recognise the lack of accessible procedures in Ireland for women to determine their qualification for lawful abortion. Before considering the wider

issue of legalising abortion, perhaps what Ireland needs now is adequate access to medical resources for women with concerns.

While Ireland’s ‘pro-life’ stance is still strong, there is evidence that a shift in attitude is emerging. The recent death of Savita Halappanavar has reinforced the necessity for Ireland to amend their abortion laws and sparked mass protests within Ireland. Halappanavar was already suffering from a miscarriage when medical staff refused to terminate

her pregnancy. She subsequently died, possibly due to the delay in treatment. While the current laws do attempt to protect women by allowing abortions under lifethreatening circumstances, such circumstances that permit medical intervention is unclear in the statute.

Halappanavar’s case suggests there is a public need for ‘pro-life’ countries to begin considering ‘prochoice’ options. The ECtHR’s concern has now become a dangerous reality and it is time for countries like Ireland to take action.

INTERNATIONAL

28

Is 50 Years Enough?

– Copyright Protection in the EU Rosanna Moeller

Sony, Warner and EMI).

4

9 years ago, The Beatles released “She Loves You” and “I Want to Hold Your Hand”. Both were written by John Lennon and Paul McCartney, but performed by The Beatles collectively. Whilst half of the members of The Beatles are gone, the songs remain protected.

Copyright protection for authors in Europe is granted for 70 years post mortem, calculated from the death of the last joint author. On the other hand, protection for performers under European Law lasts only 50 years, calculated from 1 January of the year following the performance or its fixation. Therefore, copyright protection for George Harrison and Ringo Starr would expire on 31 December 2013. However, the EU Directive 2011/77, currently being adopted into domestic law by Member States, extends the terms of copyright protection for both performers and phonogram producers to 70 years.

Opponents of the existing copyright protection argue that the Directive allows the music label to extend their controlling rights on sound recordings of the past century, particularly the four companies which control 80% of music sales in Europe (namely, Universal,

However, the reasons for the Directive are understandable. First, the music labels invest huge sums in production and marketing, risking financial losses when they promote unsuccessful artists. Second, they are also facing a rapid decline in physical sales, slow growth of online sales revenue and increasing online piracy; this has led to lower employment levels, and less variety of artists and music repertoire.

European policymakers also considered that once copyright protection has expired, performers do not receive further remuneration from the commercial exploitation of their performances. Thus, numerous performers experience a significant income gap in later life as they start their career at a young age and lack alternative regular income.

“Viewed objectively, the financial impact of the Directive is limited indeed...”

However, as the opponents rightly contend, performers usually transfer their exclusive rights, such as the right to distribution, to the record label by contract. Subsequently, record labels receive revenue from the commercial exploitation of the performances from these rights. In addition, opponents allege, as twothirds of all revenue results from sound recordings released in the first four years after publication, the expected revenue generated

by the term extension concerning rights that are not transferred to the record label (such as the right to receive equitable remuneration) will be negligible.

Viewed objectively, the financial impact of the Directive is limited indeed. The music industry itself claims that 88% of all productions are unprofitable. Therefore, such productions cannot reduce the aforementioned issues faced by the music industry or fill the income gap of performers. Moreover, performers who are successful enough to generate money from the commercial exploitation of their performances longer than 50 years do not rely on it since they earned substantial profit right after publication.

Nevertheless the term extension is to be welcomed as it strengthens the rights of performers in other respects. With the extension, copyright protection will generally expire after their death. Thus, they can determine how their performances are used during their lifetime and prohibit its use when it is contrary to their own beliefs.

Furthermore, the reduction in the gap between the protection for performers and authors recognises that the contribution of performers to a song’s success is at least equal to that of the authors.

HKSLG · Fall 2012 · Issue 1

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STUDENT EVENTS

O

ver the semester, the Graduate Law Students Association (GLSA) has organised events for our fellow students. These events aim to provide advice for career planning, networking opportunities, community service involvement and improve our work-life balance.

Most notable was the hosting of the 3rd Annual Hong Kong Human Rights Moot Final, sponsored by Vidler & Co Solicitors. Isaac Yung and Ken Chan (CUHK) faced Anson Wong and Stephanie Wong (HKU) in addressing the subject of social and economic rights. The final round was judged by former Justice of the High Court, Prof.

Anselmo Reyes, Dean Christopher Gane and Prof. Cora Chan. The internal preliminary rounds were judged by Mr. Steven Brian Gallagher.

Back to School Mixer

Boot Camp

HKSLG 路 Fall 2012 路 Issue 1

STUDENT EVENTS

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3rd Annual Hong Kong Human Rights Moot Final

BBQ

Coastal Cleanup with White & Case LLP

HKSLG 路 Fall 2012 路 Issue 1

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