Court of first instance considers auditor’s duty to detect and report irregularities in accounting statements

In Days Impex Ltd v Fung Yu [2017] HKEC 2269, the Court of First Instance refused to strike out a negligence claim brought against an audit firm for failing to detect a substantial fraud at two of its client companies, both of which are now in liquidation. Importantly, the Court held that an auditor’s duty is not as narrow as to be restricted to the provision of information and advice.  Instead, the duty can extend to detecting material irregularities in the client’s accounting statements and reporting any fraud or suspected fraud to the company (and, in some cases, to relevant regulatory or enforcement authorities). Continue reading

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ICC and KLRCA sign MoU to promote dispute resolution in Asia

On 1 November 2017, the Kuala Lumpur Regional Centre for Arbitration (KLRCA) and the International Court of Arbitration of the International Chamber of Commerce (ICC) signed a Memorandum of Understanding (MoU), agreeing to work together to promote dispute resolution in Asia.

The signing of the MoU will further enhance the relationship between the two institutions, on top of their previous collaborations such as the ICC-KLRCA International Arbitration Conference in 2016 and the 1st ICC-KLRCA Vis Pre Moot earlier this year. More collaboration on training and other joint programmes is anticipated as part of the two institutions’ efforts under the MoU to increase the profile of arbitration in the region and to promote and develop Malaysia as an arbitration-friendly seat for arbitration in Asia. The MOU also provides for KLRCA will to provide hearing space to ICC and its users.

There has been a steep increase in cases over recent years in Malaysia administered by the KLRCA. Additionally, the ICC recently announced the establishment of its case management office in Singapore. This MoU can is evidence of the two institutions’ plans to further expand their presence in the Asia region.

In another interesting development, KLRCA will be renamed the “Asian International Arbitration Centre” in 2018, to coincide with its 40th anniversary and as part of the KLRCA’s initiative to be the leading arbitration hub in Asia.

If you have questions or would like further information, please contact Peter Godwin (Managing Partner) of Herbert Smith Freehills’ Kuala Lumpur office or your usual Herbert Smith Freehills contact.

Peter Godwin
Peter Godwin
Managing Partner - Kuala Lumpur
Email | Profile
+60 327775104

 

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Filed under Announcements, South East Asia

Hong Kong and Macao on verge of concluding a mutual service arrangement for civil and commercial proceedings

The Hong Kong Government plans to conclude an arrangement with the Macao Special Administrative Region for the mutual service of judicial documents in civil and commercial cases in December 2017.

The proposed arrangement is designed to overcome existing limitations in the current civil procedure rules (namely the Rules of the High Court (Cap. 4A) and the Rules of the District Court (Cap. 336H)) which has resulted in Hong Kong litigants only being able to rely on private means to effect service on persons in Macao. The proposal will designate authorities in each jurisdiction which will be able to request service by, or perform service for, the counterpart authority. Continue reading

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Filed under Announcements, Hong Kong, Jurisdiction

Hong Kong: who owns employees’ work product

The law recognises that employees may create valuable intellectual property during their employment, ownership of which should ordinarily rest with their employer. The recent case of Acron International Technology Ltd v Chan Yiu Wai [2017] 3 HKLRD 799 demonstrates how the law can protect an employer’s rights in respect of such intellectual property from misappropriation by an employee after the employment relationship ends. Continue reading

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Filed under Employment, Hong Kong

Dawn raids – are you ready?

Click here for a preview

Surprise inspections by governmental authorities are on the rise. Any company in any sector may be on the receiving end and obstructing a lawful raid is a criminal offence.

Therefore, it is essential to be prepared. Front line staff such as Reception and Security, through to the IT team, business units, legal counsel and management, need to know how to react and what information to provide.

Drawing on our experience, we have published a guide to help deal with a raid by any of the key authorities in Hong Kong. It provides step-by-step help with all aspects of a raid, as well as checklists of powers and duties, and a series of “golden rules” to follow. Since the guidance is practical, much of it can be deployed regardless of the jurisdiction and authority in question.

This publication should be a port of call as a dawn raid unfolds, along with our Dawn Raid Hotline. It accompanies our crisis prevention and management app (CrisisPM), which gives high level advice on what to do in a series of emergency situations, including a dawn raid. Details of the Hotline and app can be found in the guide.

We also provide dawn raid and broader crisis prevention and management training.

Please email asia.publications@hsf.com to request a hard copy of the guide (soft copies unavailable).

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Filed under Announcements

Hong Kong Court continues injunction in aid of foreign arbitral proceedings

In Ve Global UK Limited v Charles Allard Jr and Intelita Limited, HCMP1678/2017, 10 October 2017, the Hong Kong Court of First Instance continued injunctions and dismissed the Defendants’ allegation of abuse of process in respect of the Plaintiff’s delay in commencing arbitration proceedings in relation to the underlying dispute after having obtained urgent injunction orders against the Defendants. Continue reading

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Filed under Arbitration, Hong Kong, Interim applications

The role of mediation in the resolution of belt and road disputes

China’s Belt and Road Initiative (BRI) has gained huge momentum of late, with governments, companies and lawyers keen to maximise the many opportunities it presents. The resolution of disputes arising from the BRI is no exception. The sheer complexity and scale of BRI projects is prompting a welcome review of dispute resolution processes, with a view to resolving BRI disputes more quickly and amicably, ideally in a confidential and enforcement-friendly environment. Recent developments suggest that the BRI presents an opportunity for less formal procedures, like mediation, to flourish and enter the mainstream. Indeed, three key BRI jurisdictions – China, Singapore and Hong Kong – have recently promoted mediation in the context of BRI disputes.

In September 2017, the Singapore International Mediation Centre (SIMC), and the China Council for the Promotion of International Trade China Chamber of International Commerce Mediation Center (CCOIC) agreed to cooperate on assisting businesses to resolve cross-border disputes arising out of the BRI. The two mediation centres will help: (a) Chinese companies investing in Singapore (33% of its investment in BRI countries); (b) Singapore companies investing in China (85% of the total inbound investment from BRI countries); and (c) companies investing in other markets under the BRI.

In tandem, Hong Kong has also signalled its willingness to embrace mediation as an intrinsic BRI dispute resolution tool. The Department of Justice appears keen to develop eBRAM.hk – an online dispute resolution tool tailored to big infrastructure projects under the BRI providing for secure online arbitration and mediation services. Other proposals discussed recently at the Hong Kong government’s Belt and Road Summit include a bespoke BRI arbitral and mediation centre, as well as a harmonised dispute resolution clause for BRI disputes requiring mediation first, then arbitration.

The rate of investment under the BRI – for example, major projects like the US$13bn Malaysian East Coast Rail Link and a US$105m Thai rail contract have just been agreed – may simply outpace development and harmonisation of BRI dispute resolution provisions in underlying contracts. However, these recent statements and discussions in Singapore and Hong Kong represent a further demonstration of the growing popularity of mediation in Asia, and the central role it could play in years to come under the BRI. Continue reading

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Filed under ADR, China, South East Asia

China proposes dedicated “Belt and Road” court

Supreme People’s Court Monitor has published a highly informative article on proposals by the SPC relating to China’s “Belt and Road” initiative.  These include establishing a dedicated court, along the lines of the Singapore International Commercial Court, to hear Belt & Road disputes.  Click here to read the piece.

Our thanks to Susan Finder of SPC Monitor for permission to re-publish.

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Filed under Announcements, China

PRC signs the Hague Convention on Choice of Court Agreements: a step forward in the resolution of cross-border litigation

On 12 September 2017, the People’s Republic of China (PRC) signed the Hague Convention on Choice of Court Agreements (Convention).  The Convention, in force since 1 October 2015, seeks to provide certainty in cross-border litigation by allowing parties to choose the exclusive court in which any disputes arising under a commercial agreement will be resolved.  Courts of member states must accordingly respect exclusive jurisdiction clauses in commercial agreements by staying proceedings in favour of the courts of other member states. They must also recognise and enforce judgments of the courts of other member states, subject to certain limited exceptions.

The PRC needs to ratify the Convention before it becomes a member state and bound by the terms of the Convention.  Once the PRC formally joins the Convention, there will be increased opportunities for the recognition of Chinese court judgments internationally and vice versa. Continue reading

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Filed under Announcements, China, Hong Kong, Jurisdiction

Hong Kong: immigration win for same-sex couple

In a landmark ruling, the Court of Appeal held that the Immigration Department’s visa policy, insofar as it denies same-sex couples eligibility for consideration for a dependant visa, breaches the right to equality enshrined in article 25 of the Basic Law.

The Decision

This case involved an application to the Immigration Department for a dependent’s visa for an individual in a same-sex civil partnership recognised under the Civil Partnership Act 2004 in England. The application had been rejected on the basis that the Immigration Department did not view the applicant as a “spouse” for the purposes of its dependent visa policy.

In the Immigration Department’s view, “spouse” was limited to a husband or wife in a heterosexual and monogamous marriage as defined under section 40 of Hong Kong’s Marriage Ordinance. This interpretation  thereby excludes couples whose same-sex marriage or civil partnership has been legalized under the laws of some other jurisdiction but is not legally recognised in Hong Kong.

The Court of Appeal held that such interpretation breached article 25 of the Basic Law, which provides that “All Hong Kong residents shall be equal before the law”. It followed that the dependent visa policy would be unconstitutional on the basis that it discriminates on the ground of sexual orientation, unless the difference in treatment could be objectively justified.

While it was recognised that courts will generally allow the legislature and/or government decision makers a wide margin of discretion when it comes to matters of socio-economic policy, the court noted that where such a measure discriminates against individuals on grounds such as sexual orientation, there would have to be “very weighty” reasons justifying the policy.

In this case, the Immigration Department failed to satisfy the court that the difference in treatment was objectively justified taking into account its discriminatory effects.

Key takeaways for employers

This decision will be welcomed by employers for whom the inability to secure immigration approval for the same-sex spouses of potential candidates has to date hindered recruiters efforts to secure and retain the best possible talent in the international market.

Gareth Thomas
Gareth Thomas
Partner, Head of Commercial Litigation, Hong Kong
Email | Profile
+852 2101 4025
Gillian McKenzie
Gillian McKenzie
Senior Associate
Email | Profile
+852 2101 4222

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Filed under Employment, Hong Kong