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Banks snared by Hong Kong sanctions laws as US-China spat spirals
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International banks in Hong Kong are caught in the crossfire of competing laws enacted by the United States and China as the superpowers clash over the city’s future, with analysts warning businesses are being forced to pick a side.
Lawyers working for the lenders have been busy. Their clients have grown increasingly alarmed by two pieces of legislation that came into effect last month that could radically alter how they do business in the semi-autonomous city.
The first is a bipartisan US bill sanctioning Chinese and Hong Kong officials responsible for the current crackdown on political freedoms in the city. The second is a sweeping security law Beijing imposed on the finance hub that includes a ban on businesses complying with foreign sanctions.
That has left banks scratching their heads — how can they follow one law without breaching the other?
The biggest concern was Beijing’s track record of punishing businesses deemed to step out of line, with the security law giving it powerful new ammunition. “If they are deemed to have violated the national security law they are vulnerable to prosecution by the Chinese authorities.”
China has said it will have jurisdiction over especially serious cases — toppling the legal firewall between the mainland and Hong Kong — and it claims the right to prosecute anyone in the world for national security crimes.
But Julian Ku, a professor of constitutional and international law at Hofstra University, said events may force their hand. “The most likely result — if China is serious about enforcing their own provision of the national security law prohibiting compliance with foreign sanctions — is that the banks will have to pick the US or HK,” he told AFP.
“But not both.”
1. sanction (n)
an official order, such as the stopping of trade, that is taken against a country in order to make it obey international law
2. ammunition (n)
facts that can be used to support an argument
3. legislation (n)
a law or set of laws suggested by a government and made official by a parliament
4. provision (n)
supplies of food and other necessary things
5. topple (v)
to (cause to) lose balance and fall down
6. breach (n)
an act of breaking a law, promise, agreement, or relationship
- What was caught in the crossfire of competing laws enacted by the United States and China?
- Who is Julian Ku?
- What has China said they have jurisdiction over mainland Hong Kong?
- Based on the article, when did the legislation take effect?
- Do you think all laws are good?
- What springs to mind when you hear the word ‘bank’?
- Are you happy with your bank?
- What changes would you like to see in the way banks operate?
- What are the bad and good things about banks?