What Make Hong Kong as a Deal-making Hub
By C. M. Chan
“One Country, Two Systems”
- Hong Kong is a Special Administrative Region of China. Under the Basic Law (Hong Kong’s Constitutional document), Hong Kong enjoys a high degree of autonomy and retains its own legal system
Under "One Country, Two Systems", Hong Kong is the only city in China which practises Common Law
- Official Language
In addition to the Chinese language, English may also be used as an official language
International ConnectivityArticle 13 of the Basic Law stipulates that the Central People's Government is responsible for foreign affairs relating to Hong Kong but it authorises the Hong Kong to conduct the relevant external affairs. Article 151further provides that Hong Kong, using the name "Hong Kong, China" may enter into agreements on its own, with foreign states and regions and international organisations, in economic affairs, trade, finance and monetary affairs, shipping, communications, tourism, culture and sports.
- Over 260 multilateral treaties apply to Hong Kong
- Founding member of WTO
- Member of Asia-Pacific Economic Co-operation (APEC), Asian Development Bank (ADB) and AsiaInfrastructure Investment Bank (AIIB)
- 8 Free Trade Agreements ("FTA") with China, New Zealand, European Free Trade Association, Chile, Macao, ASEAN, Georgia and Australia
- CEPA: a free trade agreement pursuant to which qualifying products, companies and residents of Hong Kong enjoy preferential access to the mainland Chinese market
Hong Kong as an International Financial Centre
Hong Kong’s free economy
- Hong Kong Government policy of "laissez-faire" approach, allowing market driven with minimal government interference
- Hong Kong has been world’s freest economy – Hong Kong has ranked first in terms of economic freedom for 25 years according to the Heritage Foundation until 2020
- Hong Kong was ranked No.4 globally on the ease of doing business according to the World Bank Group's Doing Business 2019 Report
Capital Market – Hong Kong is a popular market for fund raising
- Free import and export of capital funds - no restrictions on capital flows into and out of Hong Kong
- Minimal restrictions on foreign exchange regulations
- Hong Kong Dollars is pegged to US Dollars thereby providing currency exchange stability
- Hong Kong properties (movable and immovable), securities, most investments can be bought and sold by anyone, without nationality restriction
- Hong Kong’s international outlook and its proximity to Chinese markets making it an ideal place for trading financial products including equities (IPOs), debt securities, private equity investments
- Hong Kong has a strong and well-regulated financial sector supported by free press, free flow of information
- Most major financial institutions are presence in Hong Kong, including all major Chinese banking corporations, which are essential for cross-border transactions
Hong Kong low tax regimeHong Kong maintains a simple and low taxation system (which only tax on territorial basis, i.e.profits arising outside of Hong Kong not subject to tax in Hong Kong. For instance, there is no estate duty, no Capital Gains Tax, no VAT making Hong Kong an attractive venue for international transactions and wealth/asset management centre.
Pool of international talentsHong Kong has abundance of professionals with international experience (including lawyers,accountants, financial advisers, tax experts, auditors, company secretaries, compliance officers, insurance experts etc), as evidenced by the presence of international law firms, accounting firms, consulting firms in Hong Kong.
Strengths of Hong Kong Legal Services
Common LawHong Kong Law is part of Common Law family. Hong Kong is the only common law jurisdiction within China. The Common Law system in Hong Kong is maintained under Article 8 of the Basic Law. Hong Kong Courts have built up a well-established commercial case law archive that is widely by the international business community. Common law is favoured by many international businesses because it is flexible but yet predictable. Based on Common Law Contract Law, Hong Kong Contract Law embraces the principle of freedom of contract thereby allowing businesses to enter into bespoke agreements to fit their specific needs.
English LanguageEnglish is one of the most widely spoken languages in the world and it will remain the international language for business for the foreseeable future. Under Article 9 of the BasicLaw, in addition to the Chinese language, English language is also an official language used by the Hong Kong Government, legislature and judiciary. Hong Kong’s Common Law is familiar to the international English-speaking communities, from North America to India, Australia, Asia andAfrica.
Choice of Hong Kong Law as governing LawBased on the doctrine of precedent, Hong Kong law allows parties to foresee an outcome of a legal dispute with a high level of certainty. Contracts governed by Hong Kong law are interpreted in a similar way as an English law contract which follows the principle of ‘freedom of contract’. Generally speaking, a Hong Kong contract is generally accepted to be valid by HongKong Courts unless it is for an illegal purpose or is otherwise contrary to public policy thereby making choice of Hong Kong Law as governing law of a contract an attractive option.
Legal Gateway to China
Cooperation between Hong Kong lawyers and Chinese lawyersHong Kong's close proximity to the Mainland and the increasing economic integration of the two economies under the Closer Economic Partnership Arrangement ("CEPA") mean that Hong Kong is an ideal neutral venue for the resolution of Mainland-related disputes. Under CEPA, Hong Kong law firms can form Joint Venture firms with PRC law firms to provide one-stop shop legal services to international clients. There are 11 such Joint Venture law firms in Guangdong province. Hong Kong Barristers may also be employed as Consultants in mainland enterprises.
The "Belt and Road Initiative" and the "Greater Bay Area"Greater Bay Area Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area ("Greater Bay Area") was announced on 18 February 2019. The Greater Bay Area comprises Hong Kong and Macao, and the nine municipalities of Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan,Jiangmen and Zhaoqing in Guangdong Province.
Belt and Road Initiative It is a global development strategy adopted by the Chinese government in 2013 involving infrastructure development and investments in 66 countries. As both initiatives involve foreign entities, Hong Kong can play a significant role. Hong Kong legal services have extensive experience working with global investors, lenders and Government in risk assessment and management and all legal issues relating to project finance, tendering, insurance, construction and operation. In particular, Hong Kong legal professionals can provide integrated legal advice for cross-border agreements and related services, such as contracting,companies’ establishment, matters regarding financing, insurance, employment, company secretary and taxation. Foreign entities may consider choosing Hong Kong Law as governing law of the contracts and selecting Hong Kong as an arbitral seat for resolving disputes arising from such contracts.