On September 6, the U.S. Departments of State, Agriculture, Commerce, Homeland Security, and Treasury jointly released an updated warning for U.S. businesses about risks to their operations and activities in Hong Kong.
Many of these risks stem from the 2020 Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong SAR (National Security Law, or NSL), as well as the Safeguarding National Security Ordinance (SNS Ordinance), which was enacted in March 2024 under Article 23 of Hong Kong’s Basic Law.
These legal changes mean that the risks they face in the PRC are now increasingly present in Hong Kong. The NSL, the SNS Ordinance, and actions by PRC and Hong Kong authorities, such as the imposition of bounties, may negatively affect businesses’ staff, finances, legal compliance, reputation, and operations.
Risk factors that were formerly limited to mainland China are now also a concern in Hong Kong and could affect commerce, trade, and seemingly routine individual commercial activities in Hong Kong.
The advisory highlights the following:
The SNS Ordinance contains broad and vague provisions regarding the criminalization of “colluding with external forces,” activities involving “state secrets,” and “espionage,” among other acts, that could affect or impair routine business activities in, or travel to, Hong Kong. Further, Hong Kong officials have stated that provisions in the SNS Ordinance apply extraterritorially.
The vaguely-defined nature of the law and previous government statements and actions raise questions about risks associated with routine activities that may violate the NSL and/or the SNS Ordinance, such as:
Under similar laws to those recently enacted in Hong Kong, PRC authorities in mainland China appear to have broad discretion to deem a wide range of documents, data, statistics, or materials to be state secrets and to detain and prosecute foreign nationals for alleged espionage.
Following the enactment of these similar laws in the PRC, there has been increased PRC scrutiny of foreign firms, such as professional service and due diligence companies, operating in mainland China. PRC security personnel could detain U.S. citizens while inside mainland China or subject them to prosecution for conducting research or accessing publicly available material.
PRC and Hong Kong authorities may attempt to use broadly defined offenses in the SNS Ordinance to prosecute individuals or businesses for engaging in routine business activities, including:
The alert notes that Chinese authorities define “state secrets” to include information concerning, among other things:
The SNS Ordinance updated the colonial era sedition law and increased the penalty from two to seven years, or ten years if the alleged offense involves an “external force.”
“seditious intention” includes “an intention to bring a Chinese citizen, Hong Kong permanent resident or a person in the HKSAR into hatred, contempt or disaffection” against the PRC’s “fundamental system of state” or state institutions, or against various offices of the Central Authorities in Hong Kong.
The NSL established an Office for Safeguarding National Security (OSNS) in Hong Kong. It is staffed by PRC security services and not subject to the jurisdiction of the Hong Kong authorities, including its judiciary. Rather than Hong Kong courts, the OSNS is empowered to exercise jurisdiction over certain cases brought under the NSL
While Hong Kong maintains a separate regulatory framework from mainland China for how businesses, individuals, and government authorities collect, handle, and use data in Hong Kong, the NSL and the SNS Ordinance appear to grant Hong Kong law enforcement broad authorities to conduct wiretaps or electronic surveillance with the approval of the chief executive, rather than the courts, in national security-related cases.
In light of these risks, some foreign businesses with operations in Hong Kong have reportedly requested their non-Hong Kong staff to leave their laptop computers and mobile phones in their home offices prior to traveling to Hong Kong due to security concerns.
Other foreign firms have removed automatic access to internal global databases for Hong Kong-based staff without priorcorporate approval due to similar data security concerns, or have separated their Hong Kong-based operations from their existing corporate structure altogether.
The SNS Ordinance also adds new risks for businesses and individuals that engage in certain forms of economic and market research and could potentially limit access to important economic data. This may include economic and business analysts, market researchers, and credit rating analysts, as well as the firms that employ them, particularly firms that conduct due diligence research on Hong Kong or PRC authorities, as well as those who consult with foreign government officials, departments, and agencies as part of their routine operations.
Likewise, the SNS Ordinance's provisions related to the publication of "false or misleading" statements could present potential risks for the routine work of foreign press, research and academic institutions and think tanks, foreign banks and financial institutions, and other foreign businesses.
For example, the SNS Ordinance added a new “espionage” offense, which says “if a person colludes with an external force to publish to the public a statement of fact that is false or misleading” it could be punishable by up to 10 years in prison.
Businesses operating in Hong Kong may face retaliation and countermeasures in the PRC for adhering to sanctions imposed by the United States and other countries.
Hong Kong authorities officially recognize UN sanctions, but not U.S. sanctions, and Hong Kong’s financial sanctions regime is governed by its two ordinances on UN sanctions and UN anti-terrorism measures.
Rules issued by the PRC’s Ministry of Commerce (MOFCOM), including rules issued under the Law of the People’s Republic of China on Countering Foreign Sanctions and the PRC's 2015 National Security Law, do not apply in Hong Kong. To date, the PRC Countering Foreign Sanctions Law has not been adopted or implemented under Hong Kong’s separate legal system.
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