Sarah Berkeley, Partner, and Wendy Wong, Managing Associate, Simmons & Simmons

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Sarah Berkeley, Partner, and Wendy Wong, Managing Associate, Simmons & Simmons explain just how the quarantine exemption scheme works and who is eligible.

Last month, Hollywood star Nicole Kidman sparked outrage and intense public debate upon being spotted at a high-end apparel store two days after her arrival in Hong Kong, a city which is known to have some of the strictest quarantine measures in the world.

In response, Hong Kong’s Commerce and Economic Bureau issued a media statement, stating that "the case in discussion has been granted permission to travel to Hong Kong with a quarantine exemption for the purpose of performing designated professional work, taking into account that it is conducive to maintaining the necessary operation and development of Hong Kong's economy".

In a similar vein, the Securities and Futures Commission (SFC) published a Circular to licensed corporations – Exemption for senior executives of licensed corporations on 28 May 2021 and an update on 21 June 2021 in order to exempt certain senior executives of licensed corporations from some of the compulsory quarantine arrangements. The SFC hoped that the relaxed measures could help maintain relatively normal economic activity in the financial markets and retain Hong Kong’s status as an international financial centre during the COVID-19 pandemic.

The key features of the exemption scheme, as set out in the quarantine exemption circulars (Exemption Scheme) are listed below.                                                                                                                                        

Eligibility

Two types of executives are eligible to exemption, subject to a monthly quota per licensed corporation, as summarised below:

  • Returning executives – These are senior executives of a licensed corporation with global or regional roles who are returning to Hong Kong after travelling to foreign places. The foreign trip has to be primarily for the purposes of managing the group entities for which they are responsible.
  • Visiting executives – These are global or regional heads or senior executives of financial institutions that a licensed corporation is affiliated with, who are travelling to Hong Kong. The trip to Hong Kong has to be primarily for the purposes of managing the licensed corporation.

Note: Executives who have stayed in “extremely high risk” or “very high risk” places specified in Group A1 or Group A2 as set out on the Hong Kong Government’s website during the 21 days prior to their arrival in Hong Kong are not eligible for the Exemption Scheme.


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Key considerations

The Exemption Scheme is a welcome attempt to address concerns about Hong Kong’s slower pace of reopening vis-à-vis other major business hubs around the world. However, some concerns are yet to be addressed.

To begin with, the definition of “senior executive” is rather ambiguous - it is unclear whether it requires, for example, a directorship position, given the requirement that the primary purpose of the stated travel has to be related to the management of the licensed corporation or of its group entities.

In addition, the scope of the Exemption Scheme is quite narrow, which raises the question as to the extent to which the Exemption Scheme can serve a material business purpose.

For example, the SFC is likely to reject any application where the nature of the trip is predominately personal (e.g., where the senior executive returns to his/her home country for family visits but arranges some management meetings at the end of the trip); or (ii) the business activities in the itinerary are considered to be non-essential or not for management purposes (e.g. client meetings and, arguably, conferences which could have been conducted virtually).  

Contrary to the widespread international press reportage, even if an application is approved, the exemption is far from a full waiver of the entire quarantine period, i.e., the senior executives are only allowed to leave the designated quarantine hotel or accommodation arranged by the licensed corporation for approved activities set out in the SFC’s pre-approved itinerary, using restricted and compliant “point-to-point transportation”.

The requirements imposed on licensed corporations are equally demanding.

For instance, licensed corporations are responsible for arranging point-to-point transportation, and ensuring compliance with the relevant guidelines which cover, amongst others, strict disinfection and steps to take for other parties such as the driver and the vehicle company. It would be difficult for any licensed corporation to keep track of whether the aforementioned parties are at all times in compliance with such guidelines. Given the regulatory risk arising from a breach, compliance officers and responsible officers may struggle to effectively monitor these requirements. 

Conclusion

Whilst the Exemption Scheme showcases the Hong Kong Government’s efforts to resume normal economic activities, there are challenges when it comes to implementing the quarantine exemption circulars.  The requirements should perhaps be reappraised to provide more flexibility for senior executives when planning their schedules and to ease the burden on licensed corporations in ensuring compliance, so that the Exemption Scheme can benefit a wider group and achieve its intended purpose.


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 Image supplied / Simmons & Simmons

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