US Warns Companies About Risks in Hong Kong Due to New Security Laws
The US government has issued a warning to American companies about the increasing risks of operating in Hong Kong. This advisory was updated by the US State Department along with five other government departments, including agriculture, commerce, homeland security, and treasury.
New National Security Laws
The advisory highlights that the risks faced by businesses in China are now also present in Hong Kong due to the new national security laws. These laws include the Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region, also known as the National Security Law (NSL), and the March 2024 Safeguarding National Security Ordinance (SNS Ordinance or ‘Article 23’).
Impact on Businesses
The US State Department stated that these laws erode fundamental freedoms and human rights protections in Hong Kong. They may negatively affect businesses’ staff, finances, legal compliance, reputation, and operations. The advisory also mentions potential legal, regulatory, operational, financial, and reputational risks, including increased scrutiny, financial penalties, and legal actions for perceived violations of the NSL or the SNS Ordinance.
Conflicting Jurisdictional Requirements
Businesses may face conflicting jurisdictional requirements and liability related to sanctions compliance efforts. Failure to adhere to US sanctions can result in civil and criminal penalties under US law. Although Hong Kong maintains a separate common law legal system, currency, and regulatory structures, the imposition of the NSL has significantly reduced its autonomy and undermined human rights and fundamental freedoms.
International Relations
Hong Kong continues to exercise independent authority in commercial agreements, customs, monetary policy, and representation in international organizations. However, businesses may face retaliation and countermeasures in China for adhering to US and other countries’ sanctions. Hong Kong authorities officially recognize UN sanctions but not US sanctions, and its financial sanctions regime is governed by ordinances on UN sanctions and anti-terrorism measures.
Doubts Revealed
US -: The US stands for the United States of America, a country in North America.
Hong Kong -: Hong Kong is a special administrative region of China, known for its skyscrapers and busy harbor.
Security Laws -: Security laws are rules made to protect a country from threats. In this case, new laws in Hong Kong are making it more like China.
US State Department -: The US State Department is a part of the US government that deals with foreign countries and advises on international issues.
National Security Law -: The National Security Law is a rule in Hong Kong that aims to stop actions seen as threats to China’s security.
Safeguarding National Security Ordinance -: This is another rule in Hong Kong to protect China’s security, similar to the National Security Law.
Reputational risks -: Reputational risks mean the chance that a company’s good name could be harmed, affecting how people see them.
Compliance -: Compliance means following the rules and laws. Companies need to make sure they are doing this to avoid trouble.