This time, our guest is Ali Burney, a Hong Kong-based Foreign Registered Lawyer whose practice areas include the complex world of economic sanctions and export controls. Ali is a Partner in Steptoe & Johnson, an international law firm headquartered in Washington. He speaks with our Senior Partner Colin Cohen about the ongoing tensions between the United States and China, the challenges of advising clients in the current political climate, and Hong Kong’s enduring importance as a major financial centre. (Note: this recording was made on 10 December 2021, ie before appointees at various US federal agencies, as discussed at 14:30 of the podcast, were confirmed.)
Host: Colin Cohen
Director: Niall Donnelly
Producer and VO: Thomas Latter
[00:00:41] Colin Cohen: Welcome to Law & More. I'm absolutely delighted that you're able to join us today. And what's been keeping you busy this week?
[00:00:50] Ali Burney: Given what I do, China's been keeping us busy specifically, ongoing US-China tensions in the export control and sanctioned space. So, we represent Chinese individuals and companies that have been added to the so-called US entity list, which is an export control list. But also on the sanction side as well.
So that keeps us going and then some of our other clients are involved in Afghanistan, which also has its own sanctions risks.
[00:01:16] Colin Cohen: Sounds intriguing, I'll have to come back to that. But just to help our listeners, and you are a lawyer from the United States of America, and as I have been informed, that you were admitted to practice in the district of Columbia. Not to be confused with Washington State, but that swampy area around Washington. And also you are admitted to the New York Bar.
I'm interested as to what brought you out to Hong Kong and what got you here?
[00:01:45] Ali Burney: Like many people in Hong Kong, the story is probably not as straightforward or as planned as we would like to imagine. I started out in Washington DC with my legal career. With, not a US law firm, but actually an English law firm. And stayed with that firm for on and off 15 years and moved to Singapore. And I was their Southeast Asia head office. Around 2018-2019, our group which was practising specializing pattern, the US law that was based in Asia. We decided to join a Washington firm that was opening a Hong Kong office, but it had been in Beijing.
And so we left our prior firm and joined the new firm and open, the Hong Kong office.
[00:02:25] Colin Cohen: So that's what brought you to Hong Kong, seems that you arrived at an absolutely perfect time.
[00:02:30] Ali Burney: It does seem that we timed it right. And I would love to say that, we could have predicted everything that happened. We didn't, but we did know that given the trajectory of events The area of law we practice would be in need in this region. And we continue to believe that Hong Kong is a regional practice area. So Hong Kong is not just practising Hong Kong or China. You can cover the entire region and it is Asia is a global city and we feel strongly about that.
So we were going to choose between Singapore and Hong Kong and ultimately. Knowing all the facts we decided to go with Hong Kong and we're quite happy with that choice.
[00:03:05] Colin Cohen: Just to sort of help everyone who's listening. So some people might be confused over what is known as a foreign registered lawyer practising in Hong Kong.
So can you just help us out and explain simply exactly what is meant by that term?
[00:03:22] Ali Burney: What Hong Kong allows foreign practitioners to do, which is a great testament to the openness of the city. Is that we can come here and practice our own law. So I can come here and advise Hong Kong clients or regional clients on US law. What I cannot do is practice any Hong Kong law or give any advice on Hong Kong law or in fact any of our associates. So it's a very clear and simple delineation, and it works for us because there are great practitioners in Hong Kong that can do the Hong Kong part of the work.
[00:03:54] Colin Cohen: You're being very kind because I think we worked together, that's how I got to know you. We worked together on a few matters, giving advice as to Hong Kong law, which had an international dimension. So it is a very useful relationship and Hong Kong does have not only American lawyers, Italian, German Chinese as well. Indeed, we have a foreign registered lawyer working with us. Who's admitted in German law and English law practices. Now perhaps we've spoken a little bit about your practice areas. And one of the interesting areas which I read on your CV is you're specializing in economic sanctions, and what derives from that. Perhaps you can sort of again, tell us exactly what this entails, and the type of clients who you would be acting for.
[00:04:36] Ali Burney: So US sanctions are a tool of US foreign policy using legal methods. They apply and basically what they say is you can or cannot do business with a certain country or a person or a company. What makes them interesting is that where many countries have sanctions programs, but they generally apply territorially, and apply within known and understood jurisdictional limits. US sanctions apply extraterritorially and go beyond our normal jurisdictional limits. The whole point of them being is to stop non-US persons from doing business with US sanctions targets.
This brings us to why we are here So in Asia many countries, including China and other countries, have relationships with sanctioned countries. And sometimes, those trading relationships are fine and sometimes they get on the other line of US law enforcement. And sometimes as everybody has heard with certain public cases, some of which we worked on the Chinese companies themselves are on the other side. When that is the case, then we step in and we're basically acting as defence counsel for those firms representing them in front of US agencies.
[00:05:49] Colin Cohen: So in essence, to help our listeners, the US imposes sanctions on whoever. And then that particular entity, which is based here in Hong Kong and it's an American entity has to be very careful. If it does take instructions from that particular entity or that particular state.
[00:06:09] Ali Burney: It goes broader than that. Once that entity is targeted, any transactions involving the US financial system, which includes most dollar transactions, are prohibited. So even if there is two non-US entities, one of which is one of the sanctions targets, and they want to engage in trade with each other, but they decide to pay each other or do the transaction in dollars. That is subject to US jurisdiction and therefore can result in penalties if you do engage in a transaction that way. And this is a very common trap that non-US companies fall. And the penalties are heavy. So it's per transaction with maximum penalty can be around $300,000 per transaction or twice the value of the transaction. Whichever is greater statute of limits is 5 to 10 years. You can go back and the penalties can run into the hundreds of millions or billions of dollars.
[00:07:03] Colin Cohen: I also noted from your CV that you advise clients regarding export controls, anti-money laundering. And is there great demand for it here in Hong Kong? In respect of American law coming into Hong Kong in respect to those particular clients here?
[00:07:20] Ali Burney: Yes, so for export controls, a lot of our work is in relation to companies that have already been Enlisted by the US government on the export control sides. The money-laundering side is interesting because the US government, especially the criminal prosecutor uses money laundering wire fraud, bank fraud as a tool to enforce sanctions and export controls and without getting into too much of the details, they don't need to, as long as they can show intent for money laundering. For the predicate crime, they don't need to show criminal intent for the [predator] crime, so they can almost escalate administrative violation into a criminal violation without going through the evidentiary burden or showing willful violations. And they can also use civil asset forfeiture, which is that they just have to show reasonable cause and just grab the assets without actually prosecuting the case on criminal grounds.
[00:08:31] Colin Cohen: Well, that's interesting because the Americans or the great US of A. They seem to have their tentacles all over the place. And that brings me to another sort of topic, which always calls me a little bit of, not concern, I don't really try to understand it. And many of our listeners probably is this foreign corrupt practices act, which is again, legislation in the US, which is another area of your concern. So perhaps you can sort of help us out, can you give us an overview of how this affects businesses of people operating here in Hong Kong.
[00:09:01] Ali Burney: I think this is one of the most well-known of the US extraterritorial laws. it prohibits corrupt payments to foreign government officials. So for example, paying a bribe to a Hong Kong government official or Chinese government official, that would be prohibited. It applies to US companies, but it also applies to what are called US issuers. So, non us companies that are listed on us exchanges are also subject to the FCPA. That covers as you know, a lot of Hong Kong companies that are dual-listed or through various other structures. So they have to comply directly with the FCPA in that regard. And there are all kinds of issues that arise with that with regard to reporting in requirements and books and records, and then criminal prosecutions on the back of that.
[00:09:46] Colin Cohen: I think there's an elephant in this room and I think I should really try and address this. Can you help us? And can you sort of summarizing what's happening between the US and China right now and why, with that concept in mind, sanctions have become such a hot topic?
[00:10:04] Ali Burney: There are tensions currently between the US and China and they have manifested themselves in various ways, but putting aside the military, part of it. In the economic sphere, there's the trade tensions, which we see played out in the tariffs and other trade-related disputes that have arisen between the US and China. And then there are the sanctions and export controls. The US government has used economic sanctions to target Hong Kong government officials, as well as certain Xinjiang government officials.
But although these sanctions [are] captured the limelight, the real tool that the US government has used and probably, the most harmful to Chinese economic interest is the export control regulation. Especially the entity list. What that does is when you put a company on the entity list, It restricts their access to any US-origin technology. Most specifically it restricts their access to chips of a certain design. Which has really hobbled, in some instances, certain Chinese companies that have been put on the list. And perhaps that's where we see this tension playing out as the US tries to keep its competitive advantage in technology and R&D perhaps one or two steps ahead of China and China obviously wants to close that gap desperately.
[00:11:28] Colin Cohen: These escalating tensions, does that make your job a little bit more onerous, difficult?
[00:11:34] Ali Burney: That's right, on the one hand, it does create more work for us. As more companies are targeted, they look to firms like us and others to help them. But when it's just an agency decision in the US things can be resolved fairly reasonably, but when you add in political heat. So what we've seen in a new dimension is that while we will be talking with the agency to either get our client off the list, on the backend, there's a lot of senators and congressmen for their own reasons are creating heat. There are newspaper reports being published that make it harder for the agency to reach a favourable conclusion, because they're also worried how that will be viewed in the public, especially in the US public's opinion, right at this stage.
[00:12:17] Colin Cohen: And it sort of brings me to an obvious question. You've got this conflict between the two superpowers.
How do you stay strictly in the middle without offending one side or the other?
[00:12:28] Ali Burney: In some sense being a law firm is easier than say being a lobbying firm or a consulting firm, because we're really just sticking to the legal aspects of it. All of the legislation that's used to target Chinese companies, that legislation also has appeals processes and other due process control. So we don't see it as necessarily acting against the interest of the US by representing our clients and using those legislative and regulatory tools that are provided in system. But due process is what makes our system something that's recognized and hopefully still appreciated.
[00:13:03] Colin Cohen: That's interesting because the clients you're representing, you have to appear in front of a US Department of Justice, The Treasury, The Commerce Bureau. These are well known, challenging bureaus. And from a compliance standpoint, it's going to be not that easy for you.
How do you deal with that personally? Do you worry?
[00:13:23] Ali Burney: Don't have sleepless nights too much these days. Whenever you're representing clients, you have to be very open with them as to how the process works. When you're representing in front of US agencies, it's not a traditional criminal defence process where you hold back all information until they have something. In a lot of cases, it involves information sharing to be able to get off the target list and the clients have to be on board with that. But it's a difficult balancing act and sometimes the agencies willing to cooperate and sometimes they, they want to come down hard. And we don't know all of the things that are going on behind the scenes, even within the agency as to why something will happen. It could be because certain prosecutor thinks this is their case and they want to make a mark, or it could be some other political issue driving.
[00:14:06] Colin Cohen: I'm interested in this. I mean, the scenery, the political arena, every four years, it seems to change from the Republicans to the Democrats. And we now have the Democrats now in power. And yet we had an election for the governor of Virginia has now turned Republican. Does this have an impact upon whoever is in power, making it more difficult for you to deal with the various agencies, represent your clients?
[00:14:32] Ali Burney: It used to be the case that US foreign policy including sanctions policy was fairly stable because even though at the top of each of the agencies would be a political appointee. There was a certain amount of continuity. The last administration added some wildcards and some uncertainty to the practice. And there were some dramatic changes.
For example. Revocation or pulling out of the JCPOA, which was the pact with Iran unilaterally or escalating sanctions against China also unilaterally. So that was a little hiccup, but there's still some political appointees that need to be put through. So the hope is that we'll return to the old ways, which was the bureaucracy and the people that were steering the bureaucratic ships would remain generally the same, but obviously that's not guaranteed.
[00:15:22] Colin Cohen: Let's move to a personal level, I'm always interested. What made you become a lawyer?
[00:15:27] Ali Burney: Because I wouldn't be good at trading stocks. My grandfather was a criminal defence lawyer, in what was then, British India. And then he moved to Pakistan and I grew up in his old chambers next to the city courts in Karachi. Maybe I didn't know anything more than that, but that's what I grew up around and I liked it. And so I continued, I wanted to be an American lawyer. But when my grandfather found out that I wasn't going to be a doctor, he said, well if you're going to be a lawyer, you better get an English degree so you can properly practice law. So I took a little diversion and actually qualified as a barrister from [Lincoln] in the UK, and then went back to finish my US degree.
[00:16:07] Colin Cohen: And just backtracking a little bit you spent, I understand, part of your childhood in rural Tennessee, and went to university there. Any memories of that? Or did you gain anything from that experience?
[00:16:21] Ali Burney: It was great, I think I gained such a window into America that when I see other folks that have grown up in the big US cities and they have a view. But growing up in Tennessee you saw what motivated people, I was treated very well. People were very welcoming. I don't have any bad memories of Tennessee, but they had different concerns. they have a different view on life than if you live in Washington or New York or Boston or LA. And I think what it taught me is that you can change people's views, but you have to speak to them in a language that they themselves understand. Which is what Bill Clinton did very well.
[00:16:55] Colin Cohen: And of course Tennessee's in the country, music, the blue mountains and all that area I mean you must have been a great experience being there.
[00:17:02] Ali Burney: I mean, musically it's such a diverse place. It is diverse in its own way. We don't think about it, but great depths apart from what you would think of Tennessee there's Cherokee culture, there's African-American culture, even within the European settlers, there's a big portion of that is what we would call Scots-Irish folk, which are fascinating combination themselves and how they got there. So it's a very interesting place. And that music that you see coming from Tennessee, it doesn't sprout up out of nowhere. It comes from this melting pot in crossways of different cultures that creates it.
[00:17:33] Colin Cohen: Just sort of backtracking a little bit. You did the masters in banking and finance law. And what got you to move into this sort of unique speciality of sanctions, et cetera?
[00:17:44] Ali Burney: Well when I first joined the firm, when I was hired, in July 2001. And I was going to start in September 17th, 2001 in Washington DC. , It was Clifford Chance, I was going to do some kind of banking work, which is great. And I thought that's what I wanted to do. And I land September 10th in Washington, opposite the Pentagon and I don't have a TV. And in the morning I got a call from my sister and obviously, September 11th happens, the whole world has changed. Along with that the dot com bubble also finishes and they say, well, we've got a case ongoing, which has got some interesting sanctions and national security matters. Do you want to help with that as a junior associate. . And that's how my practice started, maybe serendipity is the right word.
[00:18:33] Colin Cohen: And what prompted you just to end up taking out that position in Singapore?
[00:18:38] Ali Burney: Well I think it was probably for a little bit of professional reasons. If you're sitting in Washington, there's a lot of great lawyers in Washington. You can keep on advising clients from a safe distance at your desk, but we saw that the need was here. And I personally, especially when you're giving some harsh news or defending somebody, there's a value in being close to your clients. I think especially, as a US lawyer going to a Chinese company saying you have to comply with US law. That's a tough message to sell, and you can only really do it if they trust you and you can't do it unless you're there and you actually meet them.
[00:19:15] Colin Cohen: Well, you've been in Hong Kong for well over a year. Your family are here with you, enjoying life here?
[00:19:21] Ali Burney: Absolutely I mean, I think, for us, Hong Kong changes every moment. Now the caveat is we have a three-year-old daughter, so we don't travel as much as more mobile folks like yourself. But when we do this in such an ever-changing city, I like where we live where, you can see the mountains, but I also, like crossing the water going into TST, Kowloon. Every time, every different place is kind of a new vision. At one point, I can be standing and feel that I'm in Hill Town. And then I can feel that I'm in London. Or if I go across, it could be like a fishing village in Thailand. It all changes.
[00:19:53] Colin Cohen: Let me be a little bit controversial. Quickfire, Singapore or Hong Kong?
[00:19:58] Ali Burney: Well I Each has its own, let me be a lawyer in the response. Each has its own charm I think Singapore and Southeast Asia is wonderful. It's such a diverse place, but I think, weather-wise and living wise, we're really enjoying Hong Kong more.
[00:20:15] Colin Cohen: For our listens. I must have had a most wonderful occasion with you when I invited you along to watch the super bowl.
Well, I invited you along being American, I thought you could explain everything to me. And you did okay, in respect of all of this. While the sports are you into it? Do you miss your US sports whilst you're over here?
[00:20:32] Ali Burney: Well, I do miss football and college football, especially watching it with folks. I wouldn't say I'm into new sports, but I'll raise a controversial topic. I do every now and then follow some cricket,
[00:20:43] Colin Cohen: Really yes, of course, that's your deep, deep roots. And we have got the 2020 world cup on at the moment. And your team is doing quite well, it could be a Pakistan-England final.
[00:20:55] Ali Burney: They love to break my heart, so we'll see about that.
[00:20:58] Colin Cohen: You're a registered foreign lawyer here. Any thoughts about trying to defeat the examiners and becoming locally qualified for the overseas lawyers qualifying exam. Have you given that some thought? Or you're not going down that slippery slope?
[00:21:11] Ali Burney: Talk about sleepless nights. Let me give you a non-answer. The way we're structured is that we are a foreign law firm and unless we change that status, even if I was a Hong Kong qualified lawyer, I wouldn't be able to practice Hong Kong law because of the status of my firm. If in the future we decide to change, certainly the type of interesting cases that you do make me want to practice Hong Kong law.
[00:21:36] Colin Cohen: That's good. Of course, COVID has impacted upon everyone on our travels around the region. If you're able to get on that plane right away, where would you go to apart from going back home?
[00:21:47] Ali Burney: Apart from going back home? Gosh, I'd probably go to Perth.
[00:21:51] Colin Cohen: Right? Australia.
[00:21:53] Ali Burney: Australia.
[00:21:54] Colin Cohen: I think that's an interesting one. Let's look for the future. I mean, we've got the ongoing tensions which we spoke about before between the US and China. They're a source of concern. How do you see this playing out in the long game?
[00:22:06] Ali Burney: So it's very easy to escalate tensions of what we've seen. And it's very hard to deescalate because when two big powers face off against each other to deescalate, there has to be a coordinated dance of who does what first and so there's no loss of face. I think both sides, especially in regard to Hong Kong appears to have decided that the escalation has gone far enough. So we have some kind of detente. So on the US side, we haven't seen any more designations. And on the US side, we haven't seen any more reports to Congress that could cause there to be further escalation. Obviously on the side here we've seen some very carefully worded statements on the when, and how the anti-foreign sanctions law will be implemented. So I think there's a realization that while there were ongoing tensions between China and the US, Hong Kong was a special place where the two countries and systems can interact and they shouldn't mess around with that, this small part of the world too much. Just because of the broader issues.
[00:23:07] Colin Cohen: Right and finally, do you have any thoughts on Hong Kong's future, how it might develop, and continue its status as a global financial centre, your views?
[00:23:18] Ali Burney: Well, I mean, in the next five years I think we'll continue to grow. Obviously, China will be the bigger driver of the financial growth for the financial markets in Hong Kong. But I still see, My vision is that the belt and road stuff or cause arbitration, hong Kong to remain at leading arbitration centre. I think a lot of countries that do have belt and road projects will continue to want to use any Hong Kong-based legal system to arbitrate with Chinese companies. In most respects, is still an easier place to set up and do business than other countries in the region. I know Singapore has made great strides, but still, Hong Kong has a lot of advantages.
[00:23:57] Colin Cohen: Ali, it's been a great pleasure having you on Law & More, and listening to your fascinating insights. Thank you so much for spending time with us.
[00:24:06] Ali Burney: Thank you so much for having me here.