Uncertainty in Hong Kong’s Legal Environment Raises Business Concerns

Hong Kong, once celebrated as an international business hub underpinned by the rule of law, is now facing a climate of legal uncertainty. This shift is particularly evident in the government’s ambiguous stance on laws, especially concerning the National Security Law (NSL) imposed after the 2019 mass protests.

In the lead-up to the anniversary of the 1989 Tiananmen Square crackdown, Hong Kong officials, including Chief Executive John Lee, repeatedly avoided directly addressing whether commemorating the event would constitute a crime under the NSL. Lee’s responses to press inquiries have been general, emphasizing compliance with the law without specifying the legal status of certain actions.

This lack of clarity extends to the recent detentions of individuals in Hong Kong for seemingly peaceful activities related to the Tiananmen anniversary. Authorities arrested 24 people for “breaching the public peace,” including actions as minimal as holding a candle or flowers, and impounded a car with a license plate referencing the Tiananmen crackdown date.

The ambiguous application of the NSL, which addresses secession, subversion, terrorism, and collusion with foreign forces, has heightened concerns among the business community and legal experts. The vague definition of these offenses under the NSL contributes to a growing atmosphere of legal uncertainty.

Eric Lai, a non-resident fellow at Georgetown Center for Asian Law, suggests that the ambiguity in the application of the law is intentional, allowing authorities greater control. He notes the preventive detentions on June 4 as an example of this tactic, where individuals were hindered from public actions without clear legal grounds.

The American Chamber of Commerce survey earlier this year reflected these concerns, with a significant portion of respondents perceiving a deterioration in the rule of law in Hong Kong. Many businesses are impacted by the NSL, particularly regarding decisions about corporate headquarters and staff retention.

Legal experts, like Lai and Kevin Yam, a former Hong Kong solicitor now based in Australia, warn that the erosion of legal clarity and independence could further diminish business confidence in Hong Kong. This concern is not limited to companies directly involved in political cases but also affects those in non-political commercial and business law.

The impact of the changing legal landscape is already visible in the regional headquarters of foreign companies, which have seen a decline, and in the record vacancy of office spaces in the city. Charles Mok, a former legislator, notes that some businesses might adapt by approaching Hong Kong in a similar way they do business in mainland China, a historically more volatile environment.

While the Hong Kong government maintains that adherence to the law, including the NSL, should prevent legal violations, it has not addressed specific inquiries about the legality of certain protest activities. The ongoing legal ambiguity is likely to continue influencing business decisions and perceptions of Hong Kong as an international business hub.

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