LEHMAN MINIBONDS CRISIS SPURS LEGCO TO USE

C O N F I D E N T I A L SECTION 01 OF 02 HONG KONG 002093

SIPDIS

DEPT FOR EAP/CM

E.O. 12958: DECL: 11/12/2018
TAGS: PGOV ECON HK
SUBJECT: LEHMAN MINIBONDS CRISIS SPURS LEGCO TO USE
SUBPOENA POWERS

REF: HONG KONG 2027

Classified By: Consul General Joe Donovan for reasons 1.4 (b) and (d).

1, (SBU) Summary and comment: Hong Kong's Legislative
Council (LegCo) voted November 12 to convene a Select
Committee to compel testimony to investigate the Lehman
Brothers minibond controversy under its Powers and Privileges
Ordinance. This use of LegCo's most powerful tool of
inquiry, its first since the SARS crisis in 2003, required a
majority of both Geographic Constituency and Functional
Constituency members -- a "bipartisan" coalition of
pan-democratic and pro-establishment forces difficult to
muster in Hong Kong's polarized political environment. The
growing role of LegCo in the public's mind as a "check" on
the Executive, as well as the growing willingness of the
government's putative allies to criticize the Administration,
may mean the law (or its threat) will be invoked more
frequently in the future. The pro-Beijing Democratic Alliance
for the Betterment of Hong Kong's (DAB) last-minute decision
to support the Committee is the strongest indicator to date
the DAB is willing to vote "against" the government if it
sees a political gain in doing so. End summary and comment.


2. (C) The Legislative Council (LegCo) voted November 12 to
invoke its powers under the Legislative Council (Powers and
Privileges) Ordinance (PPO) to convene a Select Committee to
investigate the Lehman Brothers minibond controversy (see
reftel for background). We spoke prior to this vote with
Solicitor General Ian Wingfield (strictly protect) regarding
the scope of the law and the ability of those subpoenaed
under its powers to seek relief from disclosure. We also
discussed LegCo's decision to investigate the minibonds issue
with Legal Functional Constituency representative Margaret
Ng, a senior barrister and member of the Civic Party, which
has backed the probe. The full text of the PPO is available
at www.hklii.org/hk/legis/en/ord/cur/382.txt.


3. (C) The PPO is normally only applicable to the full LegCo,
under the authority of the LegCo President, or one of the
three Standing Committees (Finance, Public Accounts, and
Members' Interests) under the authority of the Chair.
Wingfield told us the full Council has never invoked the PPO.
The Standing Committees' briefs do not cover investigations
into issues like the minibonds or the approval by the Civil
Service of a retired senior official's employment with a real
estate conglomerate with which his office had dealings (the
other recent issue for which an investigation using PPO
powers was considered, but not implemented). Issues such as
these are pursued by convening a Select Committee.


4. (SBU) While convening such a Committee requires a simple
majority vote, empowering it to subpoena witnesses and
evidence under the PPO requires a majority vote in LegCo from
both the 30 Geographic Constituency seats and the 30
Functional Constituency seats, which effectively requires a
"bipartisan" vote of the pan-democratic and
pro-esablishment/pro-Beijing camps. The last time LegCo so
empowered a committee was in the wake of the SRS crisis in

2003. Both the DAB and, perhaps evn more surprisinly, the
pro-business Liberal Paty supported this resolution,
rejecting the govenment and banking sector's contention that
an inqiry with such far-reaching powers could damage Hong
Kong's reputation as a financial center.


5. (C) Once empowered, the Select Committee can compel with
legal force any person to appear and testify and can also
command the submission of any documentary evidence. Failure
to comply with a LegCo subpoena can incur both a fine and
imprisonment, although the law requires the concurrence of
the Secretary of Justice to actually prosecute. A few
exceptions are explicit in the law. The first is a general
carve-out for military or security information, or
information relevant to the responsibilities reserved to the
Central Government under the Basic Law. Only a government
officer authorized to do so by the Chief Executive may
testify on these matters.


6. (C) A second group of exceptions Wingfield likened to
those which would be recognized by a court, such as
attorney-client privilege. Business proprietary information
and information normally covered under bank secrecy laws
might be considered, but would not be reckoned as innately
compelling. Information may be withheld that passes a test
of being both "personal" and "not relevant" to the current
inquiry -- a determination made by either the LegCo President
or the Committee Chair (with the Chair's decision reviewable
by the President).


7. (C) Ng named Public Interest Immunity (PII),which is not

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in the PPO but is recognized in Hong Kong as a Common Law
standard, as an additional exception. Under PII, the
government may argue that the value of providing a particular
document to a PPO-empowered committee is outweighed by damage
to the public interest caused by the disclosure (for example,
revealing law enforcement sources and methods). Should LegCo
reject the government's claim to PII, the government may
apply to the courts.


8. (C) All testimony and evidence given in accordance with
the PPO is automatically "immunized" from use as evidence in
court, with the exception of perjury charges which may be
leveled by the Committee. The PPO also specifically protects
LegCo's administrative staff as well from being called to
testify in legal actions relevant to issues heard under PPO
authority. Therefore, protection from self-incrimination is
not automatic grounds to decline to testify or furnish
evidence. Ng was vague on whether there were absolutely no
grounds to claim this exception, but stressed such an
assertion would be difficult to validate given the immunity
provided in the proceedings. That said, given that LegCo
normally operates open to public observers, Wingfield noted
the immunity granted under PPO may not protect witnesses from
public and media criticism.


9. (C) Wingfield told us that PPO-empowered Select Committees
have tended to be flexible in the application of their
powers, accepting such compromises as being presented with
"relevant" portions of larger documents, or being permitted
to examine, but not retain, some materials. LegCo can also
elect to hear testimony "in camera" (closed session),
although Wingfield noted that, in his experience, LegCo
members were reluctant to do so. Ng cited an example in
which, although LegCo rejected the government's assertion of
PII and the government was readying a court challenge, in the
end the two sides agreed the committee chair alone would be
allowed to view, but not retain, a particular document.


10. (C) For those under subpoena, but not protected by one of
the exceptions noted above, there are two possible routes to
relief from obligation to testify or provide evidence. The
first would be to appeal a decision by the Select Committee
Chair to the LegCo President. (Comment: A dubious course of
action -- empowering a Select Committee requires such broad
support in LegCo that a Presidential decision to then
overrule the Committee would presumably entail substantial
political cost. End comment.) The second would be
litigation. LegCo's "lawful" application of its powers under
PPO is not subject to judicial review, so the plaintiff would
need to argue the Committee's actions were in some way
"unlawful", such as attempting to breach attorney-client
privilege. Given the legal expertise available to LegCo as
an institution and the number of lawyers who are Members,
Wingfield suggested the possibility of LegCo attempting such
an "unlawful" action would be remote.
DONOVAN