Sunday, February 19, 2012

Growing Concern Over Hong Kong's future

Former British Colony's Separate Identity is Threatened
But its Respected, Separate Legal System Seems Secure

Hong Kong residents are increasingly concerned about their future--more specifically, about mainland dominance, as reported by The New York times. Click here to read the article.

The quarrel, between two groups speaking mutually unintelligible dialects of Chinese, isn’t just about manners. It also illustrates how - 15 years after this former British colony was handed back to China - Hong Kongers feel less Chinese and more an island unto themselves than ever as they face a growing influx of visitors from the mainland.

And that’s a headache for the communist masters in Beijing, who are concerned about the threat of disloyalty in the semiautonomous territory and are lashing out against the notion of a separate Hong Kong identity.

A separate identity is of course what draws foreigners, too, to Hong Kong, and to working for, trading with, and investing in Hong Kong-based Chinese companies. Hong Kong's separate legal system, which has a long reputation for fairness and is based on English common law, is a key attraction.

"The comfort level is much higher when you are dealing with a Hong Kong company," an Asia-focused international consultant tells Foreign Confidential.™ "You feel that that if you are doing business with a reputable company you are going to get paid for your goods or services, and that there is legal recourse should a dispute arise. That isn't the case with a mainland company. If it decides not to pay you for your services or to renege on a contractual obligation you're simply out of luck."

Not surprisingly, foreign lawsuits against Hong Kong companies are not uncommon. Even in cases in which the complaints are brought in foreign courts, judgments can be enforced in Hong Kong. If a New York court, say, rules that a Hong Kong company must pay up, and it simply refuses to, its assets in Hong Kong and other overseas jurisdictions could eventually be seized. (The referenced case, Westminster Securities Corporation v. Petrocom Energy Limited, shows how a commercial dispute between a U.S. firm and a Hong Kong company can wend its way through arbitration and the U.S. court system.)

Given the ways in which many mainland Chinese companies and Communist Party officials have gained from their close connections, it is safe to assume that certain powerful forces would like to see a weakening of Hong Kong's legal system. For those for whom protection against litigants and creditors is a paramount concern the Special Administrative Region's independent judiciary is a frustrating irritant. After all, although China has made great strides, it is a country where until less than four decades ago, law itself was regarded as an objectionable "bourgeois concept" incompatible with official ideology.

Not to worry, expert observers say. One-Country-Two-Legal-Systems seems secure for the foreseeable future. One reason: foreigners are by no means the main beneficiaries of Hong Kong's separate identity and separate legal system. Hong Kong lawyer explains:

Even though Hong Kong courts technically have jurisdiction to hear a dispute, it is often argued that another forum is more appropriate – Hong Kong is forum non conveniens – and proceedings should be stayed in favour of another jurisdiction. This is especially relevant in the case of a dispute involving a mainland party. The Hong Kong plaintiff would much prefer to have the case heard in Hong Kong for reasons of convenience, expense, superior rules on procedure such as discovery, and most importantly because there is a perception that Hong Kong judges will be better qualified to adjudicate on the dispute with less danger of bias, especially if the mainland party is a state-owned company.