7 September 2020
In this fifth and final briefing in our series on Hong Kong's National Security Law (NSL) we take a closer look at the provisions of the NSL relating to state secrets and some of the key considerations for companies handling information which may be considered to fall within the scope of state secrets. |
NSL offences in relation to state secrets |
Article 29 of the NSL sets out the offences relating to collusion with foreign parties. Its opening sentence states that: "A person who steals, spies, obtains with payment or unlawfully provides state secrets or intelligence concerning national security for a foreign country or an institution, organisation or individual outside the mainland, Hong Kong and Macao of the PRC shall be guilty of an offence." While this provision creates a new offence under Hong Kong law, it effectively extends to Hong Kong a longstanding approach to the control of information and protection of state secrets which has been a focus of PRC regulation since the establishment of the PRC and is principally embodied in the Law of the People's Republic of China on Guarding State Secrets (PRC State Secrets Law), introduced in 1988 and updated in 2010. |
What is a state secret? |
While the NSL does not provide any definition of what constitutes a state secret for the purposes of establishing an offence under the NSL, we can look to the PRC State Secrets Law for guidance.
Article 2 of the PRC State Secrets Law defines state secrets as "matters that relate to state security and national interests, are specified in accordance with legally defined procedures, and the knowledge of which is restricted to a defined scope of personnel within a defined period of time." Article 9 of the PRC State Secrets Law goes on to define some specific categories of state secrets, namely those relating to: 1. major policy decisions on state affairs 2. national defence and the activities of the armed forces 3. diplomatic activities and activities related to foreign countries 4. national economic and social development 5. science and technology 6. activities for safeguarding state security and the investigation of criminal offences; and 7. other matters determined by the department administering and managing the protection of state secrets. Categories 1,2,3 and 6 relate to government and diplomatic affairs and are unlikely to come into play for most companies operating in China or transacting with Chinese counterparties. Categories 4 and 5, however, effectively extend the definition of state secrets to the commercial sphere. While the PRC State Secrets Law provides a very broad definition of state secrets, ultimate authority for determining state secrets lies with the National Administration for the Protection of State Secrets. Entities (for example, SOEs) can determine and classify state secrets they originate, under guidance set out in the Implementing Regulations which accompanied the 2010 update to the PRC State Secrets Law. Responsibility for the protection of state secrets lies with the originator and there is no liability under PRC law (nor, pursuant to the NSL, under Hong Kong law) for passively receiving unsolicited state secrets and not doing anything with the material (though it is an offence under PRC law to be in possession of a state secret and refuse to explain its source). |
Approach to NSL cases involving state secrets |
Chapter IV of the NSL, which deals with jurisdiction, applicable law and procedure, includes various provisions relating to the treatment of state secrets in the context of NSL cases. The key points are summarised below: · When a trial relating to an NSL offence involves state secrets, all or part of the trial will be closed to the media and the public (though the judgment will be handed down in open court). · High Court proceedings concerning NSL offences can be tried without a jury on the grounds of protection of state secrets, among other things. Such cases require a certificate to be issued by the Secretary for Justice and will be presided over by a panel of three judges. · Authority for determining state secrets in the context of NSL proceedings lies with the Chief Executive. The Hong Kong courts are required to obtain a certificate from the Chief Executive to certify whether relevant evidence involves state secrets when such a question arises in the course of proceedings. This certificate is binding on the courts. |
What are the implications for companies? |
From a general standpoint, compliance risk in relation to state secrets applies particularly to entities engaged in joint ventures or otherwise transacting with SOEs (including with their Hong Kong-based subsidiaries), as well as intermediaries involved in such transactions. For companies that already observe best practice to manage potential risks related to the receipt and handling of state secrets, the new provisions under the NSL should not present any significant additional compliance risk, though it is important to be aware of the potential for criminal lability in Hong Kong and ensure compliance policies and procedures are updated accordingly. Companies likely to come into contact with state secrets should ensure they have in place internal rules and guidance regarding the management of state secrets risk, including setting out a process for dealing with the potential receipt of classified information through official and unofficial sources. Compliance teams should, as a matter of course, ensure that relevant procedures, rules and training are extended to their employees in Hong Kong. Internal compliance policies should make clear that non-public information which may fall within the scope of state secrets should never be sourced through non-official channels and the fact that such information may be sourced through informal networks does not change the nature of the material. Employees in Hong Kong should be made aware that inappropriate procurement and/or passing on of state secrets may now explicitly give rise to criminal liability under Hong Kong law. To see the previous briefings in our NSL series, please click on the links below: Part 1: Key enforcement considerations for businesses As always, please reach out to any of the contact listed below or your usual Herbert Smith Freehills contact if you would like to discuss any of the issues covered in these briefings. |
For further information, please contact:
Jeremy Birch, Herbert Smith Freehills
jeremy.birch@hsf.com