Hong Kong Lawyer

JULY 2018

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THE OFFICIAL JOURNAL OF THE LAW SOCIETY OF HONG KONG 香港律師會會刊 HONG KONG LAWYER www.hk-lawyer.org Hong Kong Lawyer 香港律師 The official journal of The Law Society of Hong Kong (incorporated with limited liability) 香港律師會 (以有限法律責任形式成立) 會刊 www.hk-lawyer.org Editorial Board 編輯委員會 Chairman 主席 Huen Wong 王桂壎 Nick Chan 陳曉峰 Peter CH Chan 陳志軒 Heidi KP Chu 朱潔冰 Julianne P Doe 杜珠聯 Elliot Fung 馮以德 Steven Brian Gallagher Warren P Ganesh 莊偉倫 Julienne Jen 任文慧 Karen Lam 藍嘉妍 Byron TW Leung 梁東華 Michelle KM Tsang 曾憲薇 Adamas KS Wong 黃嘉晟 Tony YH Yen 嚴元浩 THE COUNCIL OF THE LAW SOCIETY OF HONG KONG 香港律師會理事會 President 會長 Melissa K Pang 彭韻僖 Vice Presidents 副會長 Amirali B Nasir 黎雅明 Brian W Gilchrist 喬柏仁 CM Chan 陳澤銘 Council Members 理事會成員 Thomas ST So 蘇紹聰 Stephen WS Hung 熊運信 Billy WY Ma 馬華潤 Cecilia KW Wong 黃吳潔華 Denis G Brock 白樂德 Nick Chan 陳曉峰 Serina KS Chan 陳潔心 Warren P Ganesh 莊偉倫 Simon SC Lai 黎壽昌 Roden ML Tong 湯文龍 Robert C Rhoda 羅睿德 Jonathan Ross 羅彰南 Pierre TH Chan 陳達顯 Eric TM Cheung 張達明 Karen Lam 藍嘉妍 Careen HY Wong 黄巧欣 Secretary General 秘書長 Heidi KP Chu 朱潔冰 Law Society's Contact: www.hklawsoc.org.hk 與律師會聯繫 Tel: +852 2846 0500 Annual Subscription 全年訂閱: HK$3,696 © Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Hong Kong Lawyer can accept no responsibility for loss. Thomson Reuters Hong Kong Limited 16/F, Cityplaza 3, Taikoo Shing, Hong Kong Tel: +852 2847 2088 www.thomsonreuters.com ISSN 1025-9554 4 EDITOR'S NOTE 6 PRESIDENT'S MESSAGE 8 CONTRIBUTORS 10 FROM THE COUNCIL TABLE 12 FROM THE SECRETARIAT 14 COVER STORY Face to Face with Ip Shing Hing JP Roll of Honour Inductee Peter Sit Roll of Honour Inductee Vincent Liang JP Roll of Honour Inductee Prof. Michael Wilkinson Honorary Member 26 LAW SOCIETY NEWS 編者的話 會長的話 投 稿 者 理事會議題 律師會秘書處資訊 封面專題 專 訪 葉成慶 榮譽名冊入選者 薛建平 榮譽名冊入選者 梁雲生 榮譽名冊入選者 Prof. Michael Wilkinson 榮譽會員 律師會新聞 14 COVER STORY Inside your July issue 七月期刊內容 July 2018 • DATA PRIVACY 資料私隱 www.hk-lawyer.org 35 • July 2018 The GDPR: Extending the Long Arm of the Law /Freepik By Kyle Wombolt and Anita Phillips, Herbert Smith Freehills What does the GDPR regulate? The GDPR came into force on 25 May 2018 and prescribes how companies and organisations (controllers) should process "personal data" (being any information that enables an individual to be identified). Companies and organisations handling or processing personal data may only do so in a legitimate, fair and transparent way, informing data subjects about their processing activities and gaining consent where required. There are limits on the retention of personal data, as well as reporting requirements in the case of certain data breaches (a cyber-attack being an obvious example). The GDPR anticipates that companies will implement new systems and processes to protect personal data, and conduct impact assessments in certain situations. Data transfers present a further compliance issue, as companies subject to the GDPR are required to ensure that personal data is protected and consents sought when that data is transferred to a third party. Extra-territoriality and the GDPR The GDPR replaces the EU Data Protection Directive. Application of the Directive was anchored to the location of data processing and it attracted criticism as a result. It allowed organisations processing the personal data of individuals in the EU to avoid compliance with the Directive by locating their business (and often their servers) outside of the EU. The GDPR takes a different approach, taking into account not only the location of the processing but also the location of the individual whose personal data is being processed. This marks a significant expansion of the territorial scope of the Directive. As such, it is likely to transform data protection inside and outside the EU. The GDPR will be binding on organisations outside the EU if they process personal data: • in the context of an establishment of a controller or a processor in the EU; • relating to the offer of goods or services to individuals in the EU (eg via a website offering delivery to the EU); or • relating to the monitoring of the behaviour of individuals in the EU (eg by using cookies to track an individual's activity on the internet). This will impact businesses and firms in Hong Kong provided one of the above requirements is satisfied. The legislation has potentially very wide application, although we don't yet have any guidance on how this drafting will be interpreted in practice. The extra-territoriality test In the context of an establishment According to the recitals to the GDPR, establishment "implies the effective and real exercise of activity through stable arrangements. The legal form of such arrangements, whether through a branch or a subsidiary with a legal personality, is not the determining factor in that respect." The presence of a single representative may be sufficient according to European Court of Justice case law. In Weltimmo v NAIH (C-230/14), a case concerning the Directive, Weltimmo – which was incorporated in Slovakia – was considered to be established in Hungary by virtue of the use of a website in Hungarian, which advertised Hungarian properties, use of a local agent, and use of a Hungarian postal address and bank account. Offering goods and services The recitals to the GDPR provide that the following factors are strong indicators of offering goods or services to EU residents: • language – using the language of a Member State where that language is not relevant to customers in the home state (ie. a Chinese web shop with a website available in English, French and German); • currency – using the currency of a Member State where that currency is not generally used in the home state; • delivery – offering delivery to a Member State; or • reference to citizens – referencing EU residents. Monitoring This is described as relating to the tracking of individuals online, including where this is used to take decisions to analyse/ predict personal preferences, behaviours and attitudes (profiling). Examples of monitoring could include: • online behavioural advertising; • travel data of individuals using a city's public transport system (eg tracking via travel cards); • profiling and scoring for the purposes of risk assessment (e.g. for purposes of credit scoring, establishment of insurance premiums, fraud prevention, detection of money-laundering); • location tracking, for example, by mobile apps; and • monitoring of wellness, fitness and health data via wearable devices. Examples of extra-territoriality in practice Scenario 1 Company A is a multi-national organisation with presence in multiple jurisdictions around the globe. It has a shared services centre located in Hong Kong which provides certain support services to group companies, including to the UK group entity. Some of those support services involve the processing of personal data on behalf of the UK entity. Application of Extra-Territoriality The GDPR applies to the processing of personal data in the context of the activities of the UK entity (regardless of whether the processing takes place in the EU or not). Although there is currently no guidance on how this would be interpreted, it is also likely that the GDPR would apply to the UK-related activities of the Hong Kong entity. Scenario 2 Company B is located in the PRC. It does not advertise or market its goods directly in to the EU but its website is also available in English and customers in the UK can order products to be delivered to the UK. Application of extra- territoriality The GDPR applies to the processing of personal data of EU data subjects by Company B where the processing activities are related to the offering of goods or services to EU data subjects. The absence of direct marketing is not relevant if Company B is providing goods and services to EU data subjects. The GDPR would therefore apply to the PRC company's processing of personal data relating to its EU customers. Practical impact of extra-territoriality for non-EU companies One point to note is that the GDPR does not apply if EU national employees working overseas are not physically based in the EU/resident in the EU. The GDPR does not apply to a Hong Kong entity's processing of personal data relating to its employees who are EU nationals resident in Hong Kong. Enforceability 34 www.hk-lawyer.org In our increasingly connected digital society, the services of many organisations are global in nature. But the online world does not respect physical or geographical boundaries and this gives rise to the question of which law is applicable. In the data pro- tection and privacy space, Europe's new General Data Protection Regulation (GDPR) seeks to tackle online transnational data and privacy issues through its extra-territorial application. July 2018 • TECHNOLOGY 科 技 In its 2018-2019 budget, the Hong Kong SAR Government has pledged HK$100 mil- lion to develop the e-sports industry. What is all the hype about e-sports? 38 www.hk-lawyer.org www.hk-lawyer.org 39 • July 2018 Are You Game? E-sports Opportunities and Legal Issues By Eugene Low, Partner, and Arthur Ng, Associate, Hogan Lovells The e-sports industry has blossomed in recent years. It has become one of the spotlight industries in Asia, in particular in places like South Korea and China. "E-sports" typically refers to competitive video or computer gaming. Currently, the popular e-sports game types include MOBA (multi-player online battle arena), first-person shooters and virtual sports games. E-sports must however be contrasted with purely video or computer gaming without a competitive element with another player or team. E-sports are now increasingly being played at a professional level in leagues and tournaments. It will be a medal myriad of opportunities – for game publishers, players, sponsors, event organisers - there is an interesting matrix of legal issues and pitfalls involved. This article looks at some of these legal issues: intellectual property, gaming, employment, and dispute resolution. As with many newly developed technologies and industries, to date there is no one single "e-sports" law around the world. The challenge therefore is, how should one apply existing (and sometimes outdated) legal concepts to this new form of "sports"? Intellectual Property E-sports attract many different forms of IP, including copyright, trademarks, designs, and patents. The copyright aspects include: the codes of the computer program, the visual graphics, such as game characters and backdrops, and the music (as musical works). Whereas the name and other key elements of the game (such as team names) can be protected by trademarks. As game end user licence terms usually exclude commercial use, competition organisers have to obtain rights from the copyright holder of the game to publicly make it available and stream online or broadcast. This may have to extend to obtaining the relevant permissions for music performances and commentary accompanying the e-sports competition. Sub-licensing may also be required if a third-party platform is engaged to provide streaming services. Current estimates are that there are over 200 million of fans following e-sports worldwide (including casual fans and avid fans). Live-streaming of e-sports events is a potential gold mine, considering some of the very lucrative broadcasting deals already happening in the traditional sports world. Patent protection is also something on the agenda. There are already a number of granted e-sports related patents. Designs rights also increasingly come into play, in particular for hardware and accessories (e.g. mouse, keyboard, chair) especially designed for e-sports with an aesthetic appeal to give those devices a "cool" factor. Gaming Gaming laws and regulations very often come into the picture in e-sports. For instance, in Hong Kong, gambling is generally illegal except for certain licensed or exempted activities. "Games of chance" or "games of chance and skill combined" (or even games with prizes which do not involve a substantial degree of skill) fall within the ambit of the Gambling Ordinance. Many e-sports games may, one way of another, involve an element of chance or uncertainty (e.g. drawing cards from a deck or purchasing some randomly generated in-game items). Another legal area to look at is crowd- funding. Many e-sports competitions are funded by a mixture of sponsorship, ticket sales and in-game purchases. The question is whether contribution to the prize pool may constitute crowd- funding. While it may be possible to distinguish these prize pools as a kind of reward-based funding (as opposed to equity/share-based funding), the line is not always easy to draw, especially in jurisdictions where the regulations on crowd-funding are not so clear. Betting with virtual, in-game currencies is also not uncommon. For example, "skin betting" is a popular phenomenon. "Skins" do not offer any game advantage, but are outfits or covers for in-game characters or items that are usually bought and sold for real money. While skins can be legitimately traded, they are also used for illicit betting on anything from e-sports matches to casino games on unregulated platforms. Another e-sports phenomenon which gives rise to gambling concerns is the "loot box" feature which is usually purchased with real money and gives a randomly generated selection of in- event at the 2022 Asian Games in Hangzhou, China. Some major e-sports competitions feature whopping prize pools of over US$20 million and are held at landmark stadiums across the world, such as the Staples Center and the Bird's Nest, with tickets sold out in seconds. Hong Kong is relatively slow to the scene. In August 2017, the Hong Kong Tourism Board organised the first ever e-sport and music festival at the Hong Kong Coliseum. Also in 2017, a company that specialises in gaming hardware was successfully listed on the Hong Kong Stock Exchange. While this industry is booming with game items. There are concerns whether loot boxes create a pay-to-win culture by encouraging users to gamble for the prized items (and in the process getting a lot of unnecessary or unwanted items). These controversies have prompted authorities in various jurisdictions to introduce a tighter control on loot box features. For instance, Mainland China requires game publishers to disclose to users the probability of getting particular items in a loot box. Employment At present, there is little guidance or consistency in most jurisdictions as to whether e-sports competitors are considered professional athletes. Some e-sports players have been able to get athlete immigration visas into certain jurisdictions, but there is no guarantee. Another issue is potential tax implications as to whether e-sports players are subject to tax as sportsmen. For instance, the Inland Revenue Ordinance in Hong Kong has a withholding tax requirement for profits derived from performances in Hong Kong by non-resident sportsmen. Having said that, given the growth of the industry, we expect to see further legislative and regulatory clarification on those issues. Another potential issue is the engagement of underage players in e-sports. These underage players may be tempted into jumping into professional leagues or competitions without proper contract protection. Another issue is whether it is legal to employ these underage players into professional teams in the first place. Raising legal awareness of these issues among e-sports stakeholders is certainly important, and some jurisdictions have gone further by introducing measures such as minimum wage and minimum contract length to protect e-sports players. Disputes Given the rapid growth of the industry, /Freepik.com 34 DATA PRIVACY 38 TECHNOLOGY

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