The 1997 handover of Hong Kong from the UK to China had cast a shadow over the territory’s business community for several years before reunification became reality at a rain-soaked ceremony on 30 June, 1997.
Given some of the direst predictions made by some commentators at the time about what the future held, there is now general consensus that the transition has been achieved remarkably smoothly. Surprisingly little has changed for
the Hong Kong Special Administrative Region’s (SAR’s) expatriate army of lawyers, bankers and other professional service providers. This is all the more remarkable given the bumpy ride that Hong Kong has experienced in that time.
A period of crisis
The first major shock to post-reunification Hong Kong arrived not from the political sphere but the regional economy. Less than five months after reunification, Asia’s booming markets went into a sudden tailspin, prompting a massive IMF bailout plan for Indonesia and the launch of unprecedented restructuring programmes in countries such as South Korea and Thailand.
Hopes that Hong Kong would remain immune from the worst effects of the crisis evaporated when the Hang Seng Index collapsed and the high-flying Peregrine investment group crash-landed, prompting one of the most complex liquidations in corporate history.
While many Hong Kong law firms suffered a body blow during late 1997 and 1998, more opportunistic practices thrived on the huge volume of insolvency, corporate recovery and M&A work thrown up after the disaster. Many had to summon reinforcements from overseas to help deal with the unforeseen workload.
Constitutional clouds added to the gathering gloom in 1998 and 1999, causing significant rifts within the local legal community. Most notable among these was the ‘political’ influence that was perceived to have been exerted on the Court of Final Appeal (CFA), which ultimately forced an unprecedented clarification of a ruling originally made in January 1999 regarding the right of abode in Hong Kong of mainland-born children.
At the height of this constitutional ‘crisis’, some multinationals expressed fears that the reinterpretation could set a legal precedent for the Hong Kong authorities to run to Beijing each time a commercial ruling went against them.
The then chairman of the American Chamber of Commerce in Hong Kong, Jason Felton, said that some members would cease to operate in Hong Kong if doubts concerning the independence of the judiciary and the strength of the rule of law – Hong Kong’s traditional trump cards – persisted.
Polls measuring confidence levels in Hong Kong’s legal and judicial systems among its foreign business community, such as those undertaken by Bob Broadfoot of Political and Economic Risk Consultancy worsened considerably in 1999, for the second consecutive year.
