Hong Kong’s National Security Law – Implications in Business Risk Assessments

On June 30, 2020, the Chinese government enacted Hong Kong’s National Security Law (Chinese | English), which was not officially published until the same time when it became effective, at 11 pm local time, foreclosing any meaningful public input (at least from the HK public) to the new law. Within hours after the publication of the law, several commentators have made an effort to dissect and analyze the new law, such as the note by Professor Donald Clarke, and the videoconferencing sessions organized by Hong Kong Democracy Council. More analyses should become available as the international communities scrutinize and analyze the new law in greater scope and depth.

At a quick glance, the new law imposes several measures that severely restrict or eradicate the autonomy and civil rights previously vested in HK. Without going into great details, and not meant to be complete, I have summarized these measures below.

Note: The English translations used throughout this post are based on here.

Inevitably, the new law will have significant international ramifications, not limited to HK only, evidenced by the sanction legislation passed promptly by US Congress in response to the new law. Notably, the new law is applicable to ANY person on the earth, a/k/a extraterritorial application. (Article 38. See the table above.) That means, for example, a foreigner non-HK resident may be found to have violated the new law by posting on twitter the words, “Fight for Freedom! Stand with Hong Kong!” In such cases, the person may be prosecuted under the new law if he/she is present in HK or China. Or, in a worst-case scenario, if the person resides in a country having an extradition treaty with China, he/she may face the specter of having to defend an extradition request from China.

What is more, the law creates the Office for Safeguarding Nation Security (“OSNS”), which is an agency of the Chinese government, but stationed within HK. This agency has tremendous powers, including “collecting and analyzing intelligence and information concerning national security” (Article 49(3)) and “handling cases concerning offence endangering national security” (Article 49(4)). It can take over jurisdiction from local HK government (Article 55) and send the case to China for prosecution and sentencing according to Chinese laws (Articles 56 & 57). Moreover, any person, be it an institution, organization, or individual must “comply with measures taken by” OSNS (Article 57). And yet, despite the tremendous powers OSNS wields, it is not subject to HK jurisdiction or law enforcement (Article 60). According to Professor Clarke, OSNS is not subject to Chinese law either. No wonder Professor Clarke lamented that the OSNS was “untouchable” and “Gestapol-level stuff”!

Considering its vague and broad scope, the extraterritorial application, the creation of such an unaccountable yet powerful agency as OSNS, and other authoritarian aspects of the new law, the business risks for international communities doing business with HK and China have increased substantially. It is unclear at this point how the new law will be enforced. Also, potential economic gains from the China markets and trades will likely remain an important factor in business risk assessments, which is itself a complicated undertaking. If we have learned anything about global risk assessments from recent events, however, it is that underestimating the risks in the early stage may prove to be unforgiving!