On July 16, the U.S. Department of State, along with the U.S. Department of the Treasury, the U.S. Department of Commerce, and the U.S. Department of Homeland Security, issued a business advisory to caution U.S. businesses about emerging risks to their operations and activities in Hong Kong. Many of these risks stem from the implementation of the Law of the People’s Republic of China (PRC) on Safeguarding National Security in the Hong Kong Special Administrative Region, also known as the National Security Law (NSL), and other recent legislative changes.
Developments over the last year in Hong Kong present clear operational, financial, legal, and reputational risks for multinational firms. This business advisory provides companies with information that can assist them in making informed business decisions and properly assessing risk.
The policies which the PRC government and the Government of Hong Kong have implemented undermine the legal and regulatory environment that is critical for individuals and businesses to operate freely and with legal certainty in Hong Kong.
Businesses should be aware that the risks faced in mainland China are now increasingly present in Hong Kong. The National Security Law and actions taken by PRC and Hong Kong authorities may negatively affect their staff, finances, legal compliance, reputation, and operations.
The advisory highlights the following:
- Businesses operating in Hong Kong, as well as individuals and businesses conducting business on their behalf, are subject to the laws of Hong Kong, including the National Security Law. Foreign nationals, including one U.S. citizen, have been arrested under the NSL.
- Businesses face risks associated with electronic surveillance without warrants and the surrender of corporate and customer data to authorities.
- Businesses that rely on a free and open press may face restricted access to information.
- Individuals and entities should be aware of potential consequences of certain types of engagement with sanctioned individuals or entities.
- Businesses operating in Hong Kong may face heightened risks and uncertainty related to PRC retaliation against companies that comply with sanctions imposed by the United States and other countries, including through enforcement of the PRC’s Countering Foreign Sanctions Law.
Businesses with potential exposure should be aware of the potential reputational, economic, and legal risks of maintaining a presence or staff in Hong Kong.
In order to mitigate reputational and other risks, businesses should apply industry due diligence policies and procedures to address applicable and identified risks.