Starting Monday, a new law comes into effect in Hong Kong granting Chinese courts the power to enforce rulings in commercial disputes, further blurring the lines between the legal systems of Hong Kong and mainland China.
The legislation, based on an agreement signed between China’s supreme people’s court and the Hong Kong government in 2019, aims to streamline civil and commercial litigation processes by minimizing the need for re-litigation, particularly in cases with connections to mainland China.
While proponents argue that the law enhances judicial efficiency, critics fear its implications for Hong Kong’s status as a global business center. Historically, international companies have favored Hong Kong due to its proximity to mainland China coupled with the assurance of robust legal protections under its independent legal framework, rooted in English common law.
Andrew Collier, managing director at Orient Capital Research, expressed concerns about the ordinance, suggesting it further diminishes the distinctions between Hong Kong’s legal system and that of mainland China.
The backdrop of these legal developments is shaped by the fallout from the 2019 extradition bill protests, which sparked a pro-democracy movement leading to widespread arrests and the subsequent imposition of a national security law by Beijing. Critics argue that the national security law has been used to suppress dissent and undermine Hong Kong’s autonomy.
While China’s performance in civil and commercial law matters has shown improvement, uncertainties persist, exacerbated by recent political developments. Kevin Yam, a senior fellow at Georgetown University’s Center for Asian Law, highlighted the backdrop of uncertainty created by the national security law, citing concerns about personal safety and asset security in Hong Kong.
The new ordinance also raises questions about Hong Kong’s role as a global wealth management hub. Concerns about arbitrary confiscation of assets by mainland authorities have prompted some wealthy individuals and asset managers to reconsider their investments and operations in Hong Kong.
Nick Chan, chair of the legal committee of the Hong Kong General Chamber of Commerce, sought to reassure law-abiding businesses, suggesting that individuals engaging in financial misconduct had more to lose under the new legal framework.
The law covers civil and commercial matters with certain exceptions, and it facilitates the enforcement of judgments both in Hong Kong and mainland China, marking another step in the convergence of legal systems between the two regions.