The iconic Lion statue in front of the HSBC headquarters in Hong Kong on March 17, 2021. Photo: AFP / EYEPRESS / Sunny Mok

Hong Kong’s banks and financial institutions hope that Beijing will allow the special administrative region’s legislature to vet and potentially tweak the Anti-Foreign Sanctions Law before it is implemented in the city.

The anti-sanctions law, which will forbid Hong Kong-based individuals and entities from enforcing foreign sanctions in the territory, has received mixed reviews from the city’s pro-establishment camp.

Some have said local legislation was necessary due to the special considerations of Hong Kong’s practical situations as a global business hub while others have said the new law should be applied locally only by promulgation.

The National People’s Congress (NPC) standing committee is expected to discuss a motion about adding the anti-sanctions law into Annex III of Hong Kong’s Basic Law between August 17 and 20. If local legislation and public consultation are allowed, the law could come into effect several months later thereby giving foreign banks more time to prepare.

In 2019, the Donald Trump administration imposed several rounds of sanctions against Huawei Technologies for national security reasons. Last August, it sanctioned a dozen Hong Kong and Chinese officials who stand accused of undermining Hong Kong’s autonomy and freedoms.

Last December, 14 vice-chairmen of the NPC standing committee were put on a US sanctions list, triggering Beijing to draft the Anti-Foreign Sanctions Law. Sanctioned Hong Kong officials include Chief Executive Carrie Lam and Justice Secretary Teresa Cheng.

On June 10, the NPC standing committee approved the Anti-Foreign Sanctions Law, which provides a legal framework for China to retaliate against foreign sanctions targeting its companies and individuals, and effectively makes it illegal to enforce foreign sanctions in China.

Although pro-Beijing media citing unnamed sources said that Beijing plans to implement the law in Hong Kong soon, it has remained unclear whether such a motion will be passed at the NPC standing committee next week or when it will take effect in the territory.

Hong Kong’s Chief Executive Carrie Lam speaks at a press conference alongside government officials in Hong Kong on December 23, 2020. Photo: AFP / Isaac Lawrence

If implemented, Hong Kong’s banks and financial institutions will be between a rock and hard place. They will either be punished by Beijing for enforcing US sanctions or will face secondary sanctions from the US for complying with China’s anti-sanctions law, according to some legal analysts.

On Sunday, Justice Secretary Cheng said in her blog that the anti-sanctions law would be added into Annex III of the Basic Law.

“As it is a national law, and as the imposition of countermeasures is entirely a matter of foreign affairs, the most natural and appropriate way for it to be introduced to the HKSAR would be to add it to Annex III to the Basic Law in accordance with Article 18 of the Basic Law,” Cheng said.

“This of course is a matter for the NPCSC to decide after consultation with the Basic Law Committee and the HKSAR government.”

“The anti-sanction law of the PRC was enacted as a countermeasure in the face of unilateral coercive measures which are prohibited under international law,” she said, adding that the enactment of this law was legitimate, reasonable and fair.

She wrote it was also in conformity with the requirements relating to countermeasures as set out in the Draft Articles on the Responsibility of States for Internationally Wrongful Acts (ILC’s Draft Articles) adopted by the International Law Commission (ILC) in 2001.

The ILC is composed of 34 international law experts, who are elected by the United Nations General Assembly every five years.

According to Article 18 of the Basic Law, China’s national laws listed in the Basic Law’s Annex III shall be applied locally by way of promulgation or legislation by Hong Kong. Both ways have been used before.

For instance, the NPC standing committee passed the National Anthem Law on September 1, 2017, and added the law to Annex III to the Basic Law on November 4 the same year. It took more than two years to complete the local legislation in Hong Kong.

The Legislative Council passed the National Anthem Ordinance on June 4 last year and came into effect on June 12. The government had blamed the pro-democracy camp’s filibuster for the delay of the implementation of the controversial law in Hong Kong.

Foreign banks in Hong Kong are caught in between rival sanctions laws.

After the National Security Law was passed by Beijing on June 30, 2020, it came into effect on the following day by promulgation. Tong Ying-kit, a 24-year-old Hong Kong waiter, was arrested during a rally on that day as he drove a motorbike flying a protest flag into three police officers. He was found guilty on July 30 this year of terrorism and secession.

Several pro-Beijing media reported on August 4 that Cheng had exchanged views with some Chinese legal officials about the anti-sanctions law during her visit to Beijing between July 27 and 30.

Cheng told the media that banks should not be over-worried about the implementation of the law in Hong Kong as Beijing would only use it when some foreign countries ignored international law by imposing sanctions on Hong Kong and China. However, Cheng did not comment on whether there would be local legislation for the anti-sanctions law in Hong Kong.

Tam Yiu-chung, the sole Hong Kong representative on the NPC standing committee, said Sunday he thought that it would be more suitable to have local legislation in Hong Kong about the law as the procedure would help ease the public’s concerns. Tam added that as China’s anti-sanctions law was not established purely for Hong Kong, it should have some “arrangements” when it was enforced in Hong Kong.

Prior to this, members of the pro-establishment camp have expressed different views about whether local legislation is needed for the anti-sanctions law. Ronick Chan Chun-ying, a lawmaker representing the banking sector, said China’s anti-sanctions law was written in a macro perspective and did not state the punishments and law enforcement details.

Chan said financial institutions would require clearly defined clauses to handle disputes and claim damages. Felix Chung Kwok-pan, a legislator of the Liberal Party, said it would be better to have local legislation as foreign companies could express their opinions during the process.

Lau Siu-kai, vice president of the Chinese Association of Hong Kong and Macao Studies, said it was not necessary to have local legislation in Hong Kong as Beijing had the decisive power over the launch of any countermeasures against foreign sanctions.

Law said implementing the anti-sanctions law directly in Hong Kong by promulgation would provide more flexibility to Beijing as most countermeasures involved diplomatic considerations.

On July 23 this year, the US sanctioned seven officials from the central government’s Liaison Office. The US government also issued a business advisory to highlight its concerns about the impact on international companies of the National Security Law in Hong Kong.

On July 27, China imposed sanctions on several US individuals and organizations in response to recent US sanctions on Chinese officials in Hong Kong. Former US Commerce Secretary Wilbur Ross was among the sanctioned Americans.

The US has said it would impose more sanctions on China, which Beijing has said it would retaliate against.

Read: HK banks may soon need to choose between US and China