It depends on the situation. If it's only that there is nothing you can do (because you do not have the ability, for example) then you wouldn't use it. To say your 'hands are tied' means that there is something you can do, but you are prevented in some way. If a patient asks for something, and the family ask for another, then the doctor has a duty to the patient and will tell the family that 'my hands are tied' because, although the doctor may understand and want to help the family, the patient has final say over what happens.

Yes, that is a common English expression. "Sorry, but my hands are tied."