What Do the Panama Papers Teach Us about the Administrative Law of Corporate Governance Reform in Hong Kong?

AuthorBryane Michael, Say H. Goo
Say H. GOO
A complex business environ ment calls for a flexible administrative law for the agencies that
oversee corporations. Nowhere illustrates this m axim better than Ho ng Kong, and its need to
reform corpo rate regulations after the Panama Papers rev elations. We describe how only a
“non-administrative” administrative law can best cope with the challenges facing the
regulation of corporate gove rnance. Such a flexible, results-oriented approach to
administrative law develops new princip les and tests, rather than gives c ivil servants
instructions. Such an approach to corpora te g overnance can facilitate the assessment of
company governance, corporate disclosure, the self-regulation of professional groups like
lawyers and accountants, as well as ensure corporations engage in “legitimate economic
purposes.” We eng age with the li terature, showing why such a flexible app roach to
administrative ru lemaking would mor e likely redu ce some of the governme nt regulation a nd
oversight problems exp osed by the Panama Papers than previous approaches toward drafting
and implementing administrative law (at least in this area).
The Panama Papers revealed serious defects in Hong Kong’s
corporate governance. Particularly, the scandal showed the lapses in
the way Hong Kong’s go vernment regulates and checks its financial
firms and professional services providers.1 While Hong Kong’s
government has failed to conduct (or at least publicly release) a study
looking at the harms of the Panama Papers revelations, the European
Union has.2 At first, the study looks like any other ordinary impact
assessment looking at the tax law, corporate law, and the regulation
of financial institutions. Look more deeply though, and one sees a
1 For the full extent of the way that the Panama Papers shines a light on Hong Kong’s regulation,
see Jane Moir, Panama Papers: What are the Implication s on Hong Kong’s “Anti -Money Laundering”
Credentials?, H.K. LAW. (July 6, 2016), http://www.hk-lawyer.org/content/panama-paper s-what-are-
implications-hong-kong%E2%80%99s-%E2 %80%9Canti-money-laundering%E2%80%99%E2%80%9
THE ECONOMY AND FINANCES OF A SAMPLE OF MEMBER STATES 1-12 (2017), http://www.europarl.eu
ropa.eu/RegData/etudes/STUD/2017/57 2717/IPOL_STU%282017%29572717_EN.pdf .
study about EU administrative law. The study looks at the rules the
EU and its Member States’ ministries of finance should put in place
to deal with the way they (these government bodies) should regulate,
inspect and so forth. In other words, how EU member states’ (and the
EU’s in general) administrative law should change. Administrative
law represents an unloved branch of public law. Yet, as the Panama
Papers revelations show, the way government ministries, agencies,
and even independent bodies invested with public power, regulate
and investigate (or not) strikes at the heart of administrative law.3
The old days of administrative law as fixed, specific rules given to
civil servants and other public officials are numbered.
In this paper, we argue that a new way of thinking about
administrative law is needed to remedy the problems revealed by the
Panama Papers. That new way (not very new for many governments)
involves regulating what public entities do and the goals of their
work, rather than the way they do it. Government increasingly has
and takes responsibility for the conduct of all kinds of groups in
society including companies. Government’s role in influencing
corporate governance shows how and why we need to re-conceive of
administrative law as a law of ends, rather than means. Such law can
encourage groups to assess corporate governance (or not), encourage
disclosure (or not), self-regulate (or not), and even nudge corporate
and other types of law toward focusing on legitimate ends rather than
regulating conduct. Any conception of administrative law as simply
listing an agency’s rights and obligations sorely misses the need for
ambiguity and flexibility in public administration (two features
antithetical to the classic predictability-and-clarity way of
understanding administrative law).4 Remedying the wrongs found in
3 Interestingly, few studies l ook at the administrative law side of corporate governan ce. One of the
more popular studies finds strong norms underlying, what a ppears on the surface, like regular rules and
regulations gov erning the procedural and substantive rights of the regulated. We return t o this th eme
throughout this paper. See Zumbansen Peer, Neither “Public” no r “Private”, “National” nor
“International”: Tran snational Corporate Governance from a Legal Pluralist Perspective, 38 J. L. &
SOCY 50, 75 (2011).
4 Few in the field of public administration would dispute such a statement. The field of
administrative la w though, continues to see adm inistrative action through 19 th century lenses. For an
analysis of the disconnect between the fields of administrative law and public administration, see
Gillian E. Metzger, Administrative Law, Public Administration, an d the Admin istrative Conference of
the United States, 83 GEO. WASH. L. REV. 1517, 153 9 (2015). Like us, Metzger uses financial law to
most clearly illustrate this difference. S ee also Gillian E. Metzger, Through the Looking Glass to a
the Panama Papers will require rules far more results-focused and far
less mechanical than most administrative law.
Each section of this paper illustrates how a more flexible, results-
oriented view o f administrative law (Hong Kong’s in part icular) can
help to remove the poor corporate governance identified by/in the
Panama Papers. The first section presents data covering the major
issues and problems in Hong Kong identified in the Panama Papers.
The second section shows how government rules can encourage t he
practical, useful and accurate measurement of corporate governance
quality. The third section discusses ad ministrative law’s role in
encouraging corporate disclosure. Such a role revolves far more
around encouraging private actors to act (or not) than controlling or
checking companies. The fourth section describes the way
administrative law can channel the incentives of self-regulating
bodies, like lawyers and accountants. The fifth section most
concretely illustrates the issues arising in the previous sections in
the form of a principles-based test for legitimate economic purposes.
Government has certain ends to incentivize often developing
administrative principles or tests to help guide civil servants as they
channel private sector incentives.5 Each of these sections describes a
facet of such incentivisation. The final section concludes.
We ask for the readers’ indulgence as we make our argument
with the following limitations in mind. First and most importantly,
we do not make the case for or against such an approach to
administrative law. We only try to observe the world and draw
conclusions about the approach which would most reduce the
problems identified by the Panama Papers. Our tone reflects the
outcome of that consideration rather than any attempt to sell the
reader on any particular approach. Second, we do not provide a
classical literature review, showing how our understanding of the
form and needs of administrative law have changed over time.6
Shared Reflection: The Evolving Relationship bet ween Administrative Law and Financial Regulation ,
78 LAW & CONTEMP. PROBS. 129, 156 (2015).
5 See, e.g., Vicki C. Jackson, Constitution al Law in an Age of Proportionality, 124 YALE L.J. 2680,
3203 (2015). See also Thomas Poole, Between the Devil and the Deep Blue Sea: Administrative Law in
an Age of Rights (LSE Law Soc’y & Econ., W orking Papers No. 9, 2008), https://papers.ssrn.com/sol3/
papers.cfm?abstract_id=2501426 .
6 We hardly need to provide such a review given the wide-sprea d recognition of the failu re of
classical public admini stration and administrative law a s branches of social science inquiry. Se e

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