14 November, 2017
What you need to know
A recent decision of the Competition Tribunal has rejected applications by two respondents to an enforcement proceeding seeking to strike out references to statements made by employees during compulsory interviews and to debar the Competition Commission from relying on those interview statements in the proceedings before the Tribunal.
In both applications, the respondents argued that the protections for interviewees against self-incrimination under section 45 of the Competition Ordinance also restricted the use of the material against their employers, the respondents.
In rejecting the applications, the Tribunal held that the beneficiary of statutory protection against self-incrimination under the Ordinance is limited to the person being compelled to attend and answer questions before the Competition Commission.
What you should do
Carefully examine any notice received to identify who is being compelled to attend to give evidence and in what capacity, recognising (from a corporate perspective) that in all likelihood it will be the interviewed employee who will benefit from the protection against self-incrimination rather than the corporate entity.
As with attending any regulatory interview, ensure that attendees are well prepared and, if appropriate, have independent legal representation to advise them.
Background
In this first enforcement action before the Tribunal, the Competition Commission ("Commission") has alleged that five respondents, including Nutanix Hong Kong Limited ("Nutanix") and BT Hong Kong Limited ("BT"), breached the First Conduct Rule under section 6(1) of the Ordinance by bid-rigging in response to an invitation to tender for the supply and installation of an IT server system for the Hong Kong Young Women's Christian Association ("YWCA"). Through the proceeding the Commission is seeking declarations that the First Conduct Rule has been contravened by the respondents and the imposition of a pecuniary penalty under section 93 of the Ordinance.
During its investigation into the alleged contravention of the First Conduct Rule, the Commission issued three notices under section 42 of the Ordinance to two employees of BT and one employee of Nutanix, requiring them to attend before the Commission to answer questions.
The Commission's powers of investigation and the protection against self-incrimination
The Commission's powers of investigation are similar to those of the Securities and Futures Commission, which will be well-known to many in Hong Kong. They include the ability to compel the production of documents and other information under section 41 of the Ordinance, and also to compel the attendance at formal interviews before the Commission under section 42 of the Ordinance to answer questions relating to any matter that the Commission reasonably believes to be relevant to an investigation that it is conducting. It is a criminal offence to fail to comply, without reasonable excuse, with a requirement under section 41 or 42 of the Ordinance.
Section 45 of the Ordinance provides that a person is not excused from answering questions posed by the Commission in the exercise of its statutory powers of investigation on the grounds that to do so might expose the person to criminal proceedings or proceedings by the Commission for the imposition of a pecuniary penalty under section 93 or a financial penalty under section 169 of the Ordinance ("Specified Proceedings").
However, the obligation to answer all such questions is balanced by section 45(2), which imposes restrictions on the use of any statements obtained by compulsion such that they are inadmissible against that person in Specified Proceedings.
It is noteworthy that, unlike the similar protection against self-incrimination under section 187 of the Securities and Futures Ordinance, the protection under section 45 of the Ordinance operates automatically and without the need for a claim to be made by a person prior to his answers or at any stage, and is imposed on all the statements that person made in responding to requests for information or attending a compulsory interview regardless of whether they tend to incriminate him.
The arguments advanced by Nutanix and BT
Nutanix advanced a two-pronged argument and submitted that the interview statements should be inadmissible against it on the basis that (i) the employee was called to attend the interview on behalf of Nutanix, and (ii) the conduct of the interviewee is sought to be attributed to Nutanix.
BT took a different approach and relied solely on attribution. It argued that where the Commission seeks to attribute the conduct of an individual to an undertaking for the purposes of proceedings for the imposition of a pecuniary penalty, section 45 should be construed to restrict the use of compelled evidence from that individual against the undertaking on whose behalf it is to be attributed.
The Tribunal's reasons for rejecting the broad application of the protection against self-incrimination
The Tribunal rejected all the arguments advanced by Nutanix and BT. It considered the wording of the three section 42 notices and concluded that the individuals were the "persons" who were compelled to attend and answer questions before the Commission. It held that it is plain and clear that the "person" who is compelled to answer questions before the Commission in section 45(1) is the same person as the "person" against whom an interview statement is rendered inadmissible in section 45(2) of the Ordinance.
The Tribunal held that the obligation to attend before the Commission and the answers given are personal to each individual, based on the fact that the three section 42 notices (i) were addressed to the individuals by their names and (ii) required the individuals to answer questions before the Commission. As was accepted by Nutanix and BT, if the employees failed to attend or gave false or misleading evidence, it would have been the individuals themselves, not Nutanix or BT, who committed an offence under sections 52 or 53 of the Ordinance.
The Tribunal rejected the attribution argument by drawing a distinction between the circumstances of a section 42 interview and the circumstances of the alleged infringing conduct. It found that it is illogical to apply the attribution argument in circumstances where an employee has left the undertaking since the alleged infringing conduct occurred and has become wholly unconnected with the undertaking at the time of the compulsory interview, or where there is no realistic element of compulsion against the undertaking in the context of an employee entering into a leniency agreement with the Commission in return for giving information.
Furthermore, the Tribunal recognised that the policy object underlying section 45 of the Ordinance is to facilitate investigation of suspected infringing conduct and not to enable self-incriminating evidence to be collected by compulsory means for use in Specified Proceedings against the subject of the compulsion. The Tribunal held that a person has privilege only when he is being asked to incriminate himself, and added that the separate legal personality between an undertaking and the human agent through who it acts logically entails that one cannot self-incriminate the other.
The Tribunal declined to proceed on the basis of an unprincipled and unprecedented expansion of statutory protection against self-incrimination under section 45 of the Ordinance in light of the absence of authority at common law to support that an employee has privilege to refuse to answer questions on the ground that it may incriminate his employer, or that an employer has privilege that enables him to prevent his employee from answering questions on the grounds that it may incriminate the employer.
Comments
This case is important since it is the first time that the scope of protection against self-incrimination in the context of a section 42 interview has been considered. The judgment makes it clear that the beneficiary of statutory protection against self-incrimination is the person who is compelled by notice to attend before the Commission.
While the protection in section 45 operates automatically, the scope of protection is limited in several aspects. First, the Tribunal found that while section 45(2) prohibits direct use of interview statements against the interviewee, it is silent on and thereby inferentially permitting derivative use of those statements. Second, records of interview are inadmissible against the interviewee only in Specified Proceedings but not in criminal proceedings for an offence of providing false or misleading evidence. Third, the restriction on use of a statement terminates if evidence relating to the statement is adduced, or a question relating to it is asked, by that person or on that person's behalf.
For further information, please contact:
James Comber, Partner, Ashurst
james.comber@ashurst.com
