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More tough judicial reforms coming for HK?

Hong Kong appears set for further sensitive legal and judicial reforms, judging by Justice Secretary Teresa Cheng’s comments following her return from a trip to Beijing. The one getting the most attention is the imminent enactment of local laws to implement China’s recently passed Anti-Sanctions Law. This would enable the local government to act against financial institutions responsible for implementing sanctions by other governments against people or institutions here.

If passed, the new legislation would place international business groups, particularly banks, in a bind. Cheng, who is herself a victim of US sanctions that prevent her from operating a bank account at international financial institutions in the city – i.e., all of them – says the anti-sanctions laws would be used with “care”. But her definition is the opposite of reassuring:  Any new legislation will “only” be used in retaliation for punitive actions taken by foreign governments – as if there were any other circumstance in which they might be used.

What Cheng perhaps meant to say was that Hong Kong’s anti-sanctions laws would only be used once Beijing has decided to strike back against any new US sanctions. At the moment, the central government appears to have decided that discretion is the better part of valor. It has kept its own anti-sanctions sword sheathed, choosing not to stand behind sanctioned officials by punishing financial institutions based on the mainland. This is for obvious practical reason: these officials’ personal financial exposure to the institutions are probably zero, but acting against the institutions could result in them being forced out of the global financial system once they announce they will no longer comply with US sanctions. And that, right there and then, would be the end of US-China relations as the world knows it.

Although it is likely, therefore, that the new Hong Kong laws would similarly not be intended for use, it does need to be wondered why Cheng was given instructions to enact them. If Beijing ever decided to use its own Anti-Sanctions Law against financial institutions based on the mainland, the global financial conflagration that followed would engulf Hong Kong, regardless of whether it had its own laws. The reason is likely symbolic, to bolster the confidence of the establishment in Hong Kong by showing Beijing’s determination not to be bullied by the US, and possibly to placate conservative elements of the elite who are currently gathered in Beidaihe.

The problem for Cheng, and Hong Kong, is that symbolism has a way of being misinterpreted or misconstrued by ignorant foreigners. Once these new laws are passed – probably by being inserted into the Basic Law ­– it will further erode the case for Hong Kong being considered separate from the mainland in the global trade and financial community. It will empower hawks in the US administration pushing for firmer action over Hong Kong’s eroded independence. And it will weaken those in the international business community trying to persuade their governments to back off.

Perhaps more worrying, however, is Cheng’s language related to other areas of judicial reform. Trivialising concerns over the erosion of judicial independence is guaranteed to further stoke those fears. At the least, a less combative tone could be expected from a Justice Secretary than this: “Judicial reform is happening every day when the judiciary amends certain rules. That is judicial reform, isn’t it?”

What else could be coming? How about a review mechanism that holds judges politically accountable? It could be written in terms that Cheng is able to wrap into a package to present as something that is not a violation of the Basic Law. But if it doesn’t hold up to the scrutiny of the legal profession in other common-law jurisdictions, no amount of protesting the country’s innocence is going to prevent the erosion of confidence of the business community here.

It would be wise not to jump to any conclusions yet about what Cheng has planned. But it would be imprudent not to prepare for the worst.

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