I am honoured and delighted to speak at this important conference on business ethics.

It is sometimes said that law and ethics have different purposes: the law (particularly the criminal law) seeks to impose minimum standards of behaviour; whereas ethics relates to higher standards of morality. For example, a person who watches a child crawl over a cliff may commit no offence, even he could easily have saved the child; but we would certainly not regard his behaviour as ethical.

Nevertheless, enough has been written about the enforcement of morals, and the morality of the law, to demonstrate the complementary nature of law and ethics. This afternoon, I do not propose to dwell on the philosophical side of this debate, but I hope to demonstrate how, in practice, our legal system does foster ethical business conduct.

I propose to do so by reference, firstly, to three fundamental elements of the legal system itself and, secondly, to three specific areas of the law.

Elements of the legal system

First, let me highlight three elements of the SAR's legal system that help to foster ethical conduct. These are the rule of law, the independence of the Judiciary, and the protection of human rights.

The rule of law has been central to Hong Kong's economic and social success, and encompasses several vital principles. One is that laws operate separately from the political system; they are published and are accessible; and they provide a degree of certainty and predictability as to how disputes are to be resolved. A second principle is that everyone, no matter how high, is subject to the law, and that a person can only be punished for conduct that is a breach of the law. A third principle is that of equality before the law: no one gets better or worse treatment under the law because of his or her status, wealth, race and so on.

For the business community in particular, the rule of law is crucial. Without it, there is no protection against corruption, nepotism or expropriation. Only under the rule of law are businessmen guaranteed the level playing field and the competitive environment which they need. The Government, on the other hand, derives its authority from law. Only through the rigorous adherence to the rule of law can the Administration govern. It cannot govern by any other means.

Without the rule of law, many business deals would be dependent on influence, corruption or favours. How could there be ethical business conduct in such an environment?

The independence of the Judiciary is another cornerstone of our legal system that promotes ethical behaviour. This independence ensures that, when judges determine disputes, they are free from all types of pressure, including pressure that powerful businessmen, and businessmen with powerful friends, could bring to bear.

In the SAR, judicial independence is secured by provisions in the Basic Law to the following effect -

* The courts of the Hong Kong Special Administrative Region shall exercise power independently, free from any interference. Members of the judiciary shall be immune from legal action in the performance of their judicial functions.

* A judge may only be removed from office for inability to discharge his or her duties, or for misbehaviour, by the Chief Executive on the recommendation of a judicial tribunal and, in the case of judges of the Court of Final Appeal and the Chief Justice of the High Court, after the endorsement of the Legislative Council.

* Judges shall be appointed by the Chief Executive on the recommendation of an independent commission and, in the case of the most senior judges, after the endorsement of the Legislative Council.

* Serving judges may all remain in employment and retain their seniority with pay, allowances, benefits and conditions of service no less favourable than before.

The integrity and impartiality of our judges is, I believe, beyond doubt. This not only promotes respect for the law, but also creates a benchmark for all of us to aspire to in our own daily lives. In my view, respect for the law, and for the Judiciary, help to underpin ethical conduct generally.

The third element of our legal system that is of enormous importance is the protection of human rights.

Chapter III of the Basic Law guarantees a long list of fundamental rights, including equality before the law; freedom of speech, of association and of demonstration; and the right to vote and stand for election. In addition to these specific guarantees, the Basic Law states that the provisions of the International Covenant on Civil and Political Rights, and the International Covenant on Economic, Social and Cultural Rights, as applied to Hong Kong shall remain in force, and that restrictions on rights and freedoms shall not contravene them.

The fact that these rights are set out in the Basic Law is significant for two reasons. First, the rights become fully justiciable, and not simply moral aspirations or international norms. Secondly, by being in the Basic Law, the rights are elevated to constitutional rights, which cannot be restricted at the whim of the executive or legislature.

By giving such legal pre-eminence to human rights, the Basic Law demonstrates the highest commitment to the principles of freedom, equality and justice that are enshrined in those rights. Our constitution, and legal system, thereby send the clearest signal to the community that ethical conduct is to be encouraged.

Specific areas of the law

I turn now to consider three specific areas of the law that foster ethical business conduct.

I said at the outset that the law is sometimes regarded as setting minimum standards of behaviour. But even if there is some truth in this, the community's view as to what is the minimum acceptable behaviour develops over time. Increasingly, we are seeing higher minimum standards being set. This is particularly true in the business world where, in recent year, many regulatory agencies have been established to oversee the activities of various sectors, and where conduct such as insider dealing and money-laundering is now subject to legislative control.

The three areas of the law that I wish to highlight are anti-corruption legislation, the control of unfair contract terms, and anti-discrimination laws.

In a way, these three areas of the law illustrate what I have just said about the community's attitude to what is and is not acceptable behaviour. Its intolerance of corruption goes back further in time. The Prevention of Bribery Ordinance was enacted in 1971, amidst a groundswell of outrage about corruption by many public officials. Legislation in respect of unfair contract terms is more recent. And anti-discrimination legislation only came into force last year, along with the establishment of the Equal Opportunities Commission. I have no doubt that, in the years to come, ethical conduct in the private sector will be further reinforced by legislation on other areas of concern.

Looking at the Prevention of Bribery Ordinance itself, there are two points of particular interest. The first is that, although the Ordinance is mainly aimed at ensuring clean government, members of the business community are at risk of liability under the Ordinance in various ways. They commit an offence, for example if they offer an advantage to an official as an inducement to or reward for certain conduct by the official in his capacity as public servant. And inducements to, or rewards for favours by, an agent in the private sector may in certain situations render criminally liable both the agent and the person benefiting the agent. Ethical conduct in the business world is therefore encouraged by this legislation.

The second point I would make in respect of the Prevention of Bribery Ordinance is that it demonstrates that it is possible to have effective, and even draconian, anti-corruption laws that are nonetheless consistent with fundamental human rights.

Two provisions in the Ordinance have been unsuccessfully challenged as being inconsistent with the Bill of Rights Ordinance. In the first case, it was alleged that the right to be presumed innocent, which is guaranteed by the Bill of Rights Ordinance, was infringed by section 10(1)(a) of the Prevention of Bribery Ordinance. That section states that if a person, who is or has been a Government servant, maintains a standard of living above that which is commensurate with his present or past official emoluments, he is guilty of an offence, unless he gives a satisfactory explanation to the court as to how he was able to maintain such a standard of living.

This provision imposes a burden on the accused to establish facts, but the Court of Appeal nevertheless found it to be consistent with the presumption of innocence. The court emphasised the importance of striking a right balance between the presumption of innocence and the need of society to combat corruption, which it considered to be a cancerous activity and an evil practice.

In the second case, it was alleged that freedom of expression was infringed by section 30 of the Prevention of Bribery Ordinance. That section makes it an offence for any person, without lawful authority or reasonable excuse, to disclose the identity of any person who is the subject of an investigation, or any details of such an investigation. A local paper had revealed that the ICAC was investigating joint bidding at a land auction, and was prosecuted under section 30 of the Ordinance.

The case went all the way to the Privy Council in London where, on the particular facts of the case, it was held that no offence had been committed. However, the Privy Council noted that freedom of expression may be subject to certain restrictions that are necessary in order to respect the rights or reputations of others, or to protect national security, public order, or public health or morals. It was of the view that section 30 was a necessary restriction on freedom of expression, and was proportionate to attain the aim of protecting the integrity of an ICAC investigation. It was therefore consistent with the Bill of Rights Ordinance.

These cases demonstrate that one can legislate to prohibit unethical conduct in a way which is sufficiently draconian to be effective, and yet in a way which respects fundamental human rights. Unethical conduct can therefore be effectively prohibited by laws which are themselves ethical.

The second areas of law that helps to foster ethical conduct is that relating to unfair contract terms. In the heyday of freedom of contract, businessmen could enforce almost all contractual provisions, regardless of how unfair they might be on the other party. The view was taken that parties to a contract were free to agree whatever terms they saw fit.

In more recent years, it has been increasingly recognised that, in many situations, one of the parties may have no real choice over the terms of the contract. He or she may be presented with standard terms of contract, on a take-it-or-leave-it basis. Or the bargaining strength of the one party may be such that he is able to impose unfair terms on the other.

In Hong Kong, this problem has been tackled through the enactment of the Control of Exemption Clauses Ordinance, and the Unconscionable Contracts Ordinance.

The Control of Exemption Clauses Ordinance came into force in December 1990. This legislation provides that, in certain situations, exemption clauses are enforceable only to the extent that they satisfy a reasonableness test. This test applies to exemption clauses in a businessman's contracts, for example, if those contracts are made with a consumer, or are made on the businessman's standard terms of business.

The Unconscionable Contracts Ordinance came into force in October 1995. It applies to any terms in a consumer contract which the court finds to have been 'unconscionable' at the time when the contract was made. It is, therefore, not limited to exemption clauses, but could apply to any aspect of a consumer contract, including the price of goods or services. Where a court finds a contract to have been unconscionable, it may refuse to enforce the contract, or part of the contract, or may amend it so as to avoid any unconscionable result.

These two Ordinances clearly demonstrate that the law is concerned with fairness in the business world and, in some situations, will not assist contracting parties if they have behaved in an unreasonable or unconscionable manner.

The third specific area I wish to mention is that of discrimination. We now have three anti-discrimination Ordinances, relating to discrimination on the ground of sex and marital status, disability, and family status. These Ordinances are reinforced by the work of the Equal Opportunities Commission, which was established last year.

This legislation particularly affects the business world, since it specifically prohibits discrimination in respect of employment, and in respect of the provision of goods, facilities and services.

The clear purpose of anti-discrimination legislation is to encourage ethical behaviour. In order for it to be effective, it is necessary to educate those affected by it about measures they should take in order to satisfy the legislation. This role is being undertaken by the Equal Opportunities Commissioner. Of particular assistance to businessmen are the Codes of Practice already issued in respect of discrimination on the ground of sex, marital status and disability. These codes give practical advice on such matters as recruitment advertisements, selection criteria, and adjustments to accommodate the needs of the disabled.

If any of you here today would like to know more about these legislation, I am sure the Equal Opportunities Commission would be very happy to assist you.

Conclusion

What conclusions can we draw about the role of law in promoting ethical business conduct?

I expect that there will always be a gap between the standards set by the law and the highest ethical standards. This is only natural. The law cannot compel us all to act like saints.

However, I am sure that the law does play an important part in promoting ethical conduct. As I have tried to show, the way the legal system operates in general, and some particular laws, foster ethical conduct. Moreover, the threshold set by the law is gradually being raised, so that what was legally acceptable a decade ago may no longer be so.

The law is not, of course, the only influence at work in fostering ethical business conduct. In recent years, the business world has become increasingly aware that ethical conduct makes good business sense. It can produce satisfied customers and a good public image - both of which are excellent for business.

But although the law is not the only influence at work in this area, it is gratifying to know that the legal system and the business world are moving in the same direction. Together, they are raising the threshold of what is acceptable, and what is the best practice, in terms of ethical behaviour. That is something we should all warmly welcome.