Extra-territoriality for securities, corporate and competition regulators’ powers is a growing trend: international players beware.
In 2022 the UK Competition and Markets Authority (CMA) served s.26 document production notices under the UK competition legislation on UK subsidiaries of German entities, VW and BMW. The notices required document production from the UK subsidiary and the German parent company as part of the same business “undertaking”. That is the statutorily defined target of the CMA’s powers and it transcends individual corporate personality and geographical jurisdiction.
The German parent companies challenged the notices, asserting s.26 does is not extraterritorial and cannot compel production information and documents held by a foreign company.
The High Court held that CMA’s interpretation of s.26 was “aggressively extraterritorial” and undermined “comity”. However, in January 2024 the Court of Appeal held the s.26 power to have extraterritorial effect, CMA v VA AG & BMW AG.
New amendments under s.155 of Australia’s Competition and Consumer Act 2010 have conferred power on the Competition and Consumer Commission to serve similar notices outside Australia.
Here in Hong Kong, in late 2023, the Court of Final Appeal, to the surprise of the Securities and Futures Commission (SFC) itself, re-interpreted Order 11 of Hong Kong’s Court Rules to allow the SFC to serve substantive proceedings for group investor remedies out of Hong Kong without the need to obtain the Court’s leave: SFC v Subotic [2023] HKCFA 32.
Returning to Australia, the Federal Court Rules have been amended to allow service of claims out of Australia without leave where the legislation creating the right of claim expressly or impliedly extends to conduct outside Australia or confers jurisdiction on persons outside Australia. Precisely the same result achieved by judicial re-interpretation in SFC v Subotic.
Players in the international markets beware. The authorities are coming for you.
Edward Alder appeared throughout the proceedings in SFC v Subotic.
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