How to prepare for raids in China and Hong Kong

The search and seizure powers of the Procuratorates and PSBs are primarily found in the PRC Criminal Procedure Law (CPL).

Article 134 of the CPL authorizes investigators from these criminal investigative agencies to conduct searches of the “person, belongings, residence and other relevant places” of criminal suspects. This may include the suspect's place of employment.

Generally, a search warrant must be shown before such a search is undertaken, otherwise a party can refuse to be searched. However, unlike Hong Kong, in the PRC the relevant search warrants are generally issued by the investigative agency itself. The criminal investigative agencies may also conduct searches without a warrant in emergency cases where an arrest or detention is being made.

Article 139 of the CPL, together with relevant procedural rules, authorizes investigators of these agencies to seal or seize any property or documents found during a search that may be used as evidence to prove the innocence or guilt of the suspect of a crime.

The investigators are obliged to provide the party searched with a list of the seized items, and to have that list signed or stamped by the producing party.

The conduct of raids at private companies' or individuals' premises by the PRC criminal investigative agencies to date has been relatively rare. Raids have been more commonly used by the AICs in investigations of commercial bribery.

Power to compel the production of evidence

Pursuant to Article 122 of the CPL, the criminal investigative agencies are empowered to summon witnesses to provide information.

Powers of arrest

The investigative agencies have a number of measures available to them to restrict the liberty of suspects in criminal corruption investigations, including powers to require residential surveillance, bail pending trial, short-term detention (for interrogation), and for serious cases, arrest and pre-trial detention.

These powers, particularly the power to detain a suspect pending trial, are broader powers than the equivalents available to the Independent Commission Against Corruption (ICAC) in Hong Kong and represent a serious, and real, risk for companies operating in the PRC and their employees.

The criminal investigative agencies may detain a suspect, without formal arrest, for a maximum period of 37 days. The detention period may be shorter depending on the circumstances of the case.

The arrest of a suspect must be approved by the Procuratorates and executed by the relevant PSB. The criteria to be applied by the Procuratorates when considering an application for arrest are set out in the CPL, and include whether there is evidence to support the facts of the alleged crime and whether the suspect may be sentenced to imprisonment. Following a suspect's arrest, the suspect is often further detained, pending trial.

The suspect has the right to be heard in connection with their proposed detention or arrest. However in practice, there is often little that a suspect can do to resist being detained or subject to other restrictions of their liberty.

Hong Kong

Key investigative agency

The principal agency responsible for investigating alleged corruption offences in Hong Kong is the ICAC.

The ICAC's key powers are found in the Independent Commission Against Corruption Ordinance (Cap. 204) (ICACO) and the Prevention of Bribery Ordinance (Cap. 201) (POBO). These powers are generally subject to the oversight of the Hong Kong courts.

Powers of search and seizure

The ICAC's power to conduct “raids” is made up of two powers: the power to enter and search premises; and the power to seize items from those premises.

Pursuant to sections 17 of the POBO and 10B of the ICACO, the ICAC may obtain a warrant to enter and search premises upon satisfying a court that there is reasonable cause to believe that the premises contain evidence relevant to, among other things, an offence under the POBO.

An ICAC officer may also enter and search premises if the search is conducted:

• pursuant to a warrant issued by the Commissioner of the ICAC directly, in circumstances where the Commissioner reasonably believes (among other things) that applying to the court for a warrant would seriously impede the investigation; or
• without a warrant, but in circumstances where an ICAC officer has reason to believe that a person to be arrested is on the premises.

Pursuant to section 10C of the ICACO, upon entering premises, a duly authorized ICAC officer is empowered to seize and detain anything which he or she has reason to believe to be or to contain evidence of, among other things, an offence under the POBO. The ICAC must issue the searched party with a record of all seized documents and items.

A company does not have the right to insist that its legal counsel be present during an ICAC raid. However, companies should nonetheless seek to have their legal counsel present and, to the extent possible, have the search delayed until legal counsel arrives. If the ICAC refuses to wait, the company should continue to co-operate with the raid.

Obstructing or resisting an ICAC officer in the conduct of a search, or otherwise in the execution of the officer's duty, is a criminal offence punishable by imprisonment.

Power to compel the production of evidence

In addition to the powers of search and seizure, the ICAC is empowered to compulsorily require the production of certain evidence.

Section 14 of the POBO empowers the Commissioner of the ICAC to, upon obtaining a court order, issue a notice in writing (Section 14 Notice) requiring:

• a suspect under investigation to furnish to the ICAC certain information regarding their property holdings, expenditures and liabilities; and
• any other person whom the Commissioner believes to be acquainted with any facts relevant the ICAC's investigation to:
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  • furnish all information in their possession respecting the matters specified in the notice;
  • answer orally on oath any questions related to those matters; and/or
  • provide any documents in their possession or control that, in the opinion of the investigating officer, may be relevant to the investigation or associated proceedings.

As with search warrants, the ICAC is required to satisfy a court of certain matters before a Section 14 Notice can be issued, namely, that there are reasonable grounds for suspecting that an offence under POBO has been committed and, if the notice is proposed to be issued to a person other than the suspect, that the proposed recipient has or may reasonably have access to information likely to be relevant to the investigation or associated proceedings.

When issued with a Section 14 Notice, a recipient (whether a suspect or a witness) is compelled to provide the information sought: the privilege against self-incrimination does not apply. However, there are limitations on how the information provided can then be used.

Generally, information provided pursuant to a Section 14 Notice may not be put to any “direct use” against the individual who provided it. For example, it cannot be used as evidence against the person who provided the information, should they later face prosecution. There is a limited exception to this general rule for information provided pursuant to a Section 14 Notice by an accused person, which may be used as evidence of a “prior inconsistent statement” if the accused is later called as a witness in his own defense.

Information provided pursuant to a Section 14 Notice may however be put to a “derivative use”, for example to develop new lines of enquiry, to identify sources of independent evidence, or to assist in formulating applications for search warrants (A v The Commissioner of the ICAC (2012) 15 HKCFAR 362).

Failure to comply with a Section 14 Notice without reasonable excuse will constitute an offence, punishable with a fine and imprisonment.

Powers of arrest

The ICAC has wide powers of arrest. Under section 10 of the ICACO, an ICAC officer may arrest a person without a warrant if he or she reasonably suspects that the person is guilty of an offence under the ICACO, the POBO, or certain other corruption offences.

Generally, a person arrested by the ICAC may be detained for the purposes of further inquiries for up to 48 hours before they are required to be released or bought before a magistrate.

Additional powers of arrest are given to the ICAC under section 10AA of the ICACO, the Criminal Procedure Ordinance (Cap. 221) and the Magistrates Ordinance (Cap. 227).

Legal professional privilege

A key difference in the conduct of corruption investigations in Hong Kong and China is the availability of legal professional privilege.

In Hong Kong, subject to relatively limited exceptions, the ICAC is generally not permitted to require the production of information subject to legal professional privilege. This protection applies to confidential communications:

• between a lawyer and client exchanged for the dominant purpose of giving or receiving legal advice; and
• between a lawyer and client, or between either of them and a third party, exchanged at a time when litigation was pending or in reasonable contemplation, for the dominant purpose of such litigation.

In contrast, PRC law does not recognize any concept of legal professional privilege of the kind found in common law jurisdictions. Some information may be protected from production to investigative authorities pursuant to the PRC Lawyer's Law, which (among other things) requires external counsel to keep certain client information confidential. This obligation extends to any information that the client has requested be kept confidential, subject to exceptions. In practice, the exceptions to this rule are interpreted broadly and can frequently swallow the rule.

The effect of this law is that communications with legal advisers and records of legal advice have the greatest prospect of being protected from disclosure if they are held by legal counsel, and the client has requested that counsel keep them confidential. A formal confidentiality agreement would help evidence such a request.

Golden rules

A corruption investigation can be highly disruptive to a company's business, particularly when investigative agencies use coercive measures such as raids and the compulsory production of evidence to progress their investigations. Companies and individuals often have limited abilities to resist these measures, particularly in China, where investigative processes are not subject to the same judicial oversight as in Hong Kong.

To minimize disruption, while ensuring compliance with legal obligations and the maintenance of a productive relationship with investigative agencies, companies should consider the following:

Before an investigation

• To best prepare for a possible investigation, companies should consider identifying in advance a core team to be responsible for managing the company's involvement in any investigation. That team, together with any potential points of contact for investigators (e.g. reception), should be provided training on how to respond to an investigation and, in particular, a raid.

During an investigation

• Given companies' limited ability to resist a corruption investigation, the best strategy will often be to cooperate. In this context, it is important to maintain a courteous relationship with the investigators and be polite at all times.
• If a raid is conducted at the company's premises, contact legal counsel immediately and, to the extent possible, request that the search be delayed until legal counsel arrives.
• The extent to which investigators will be willing to accommodate a company's requests during a raid will depend on the nature of the investigation and the investigative agency. If permitted, it is best to accompany investigators throughout the raid, and to keep a record of all questions, answers and documents provided. It is also best to obtain legal advice before signing any records of the raid, but this may not always be possible.
• In respect of legal professional privilege:
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  • in China: involve external legal counsel as early as possible, to maximize the protection of legal advice under the Lawyer's Law;
  • in Hong Kong: identify potentially privileged information promptly, and request that the investigative officers seal such information prior to seizure and not review it until any privilege claims are resolved.
• Finally, it is important to maintain the confidentiality of the investigation. Disclosing the details of an investigation, or otherwise prejudicing the investigation, can constitute a criminal offence.

Kyle Wombolt and Marissa Thompson, Herbert Smith Freehills, Hong Kong