Foreign firms may flee Hong Kong if reforms go wrong way: top US lawyer

Top US lawyer warns city's politics will be at the centre of international focus and foreign firms may move to rival cities Singapore or Shanghai

PUBLISHED : Tuesday, 05 November, 2013, 4:17am
UPDATED : Tuesday, 05 November, 2013, 4:18am

International businesses will be watching Hong Kong's political development closely over the next 18 months and may move their interests elsewhere if reforms take the "wrong direction", the head of the world's biggest lawyers' body says.

American Bar Association president and corporate lawyer James Silkenat said there would be plenty of time for companies to decide on a course of action as the process unfolded.

"There is enough time for two things to happen," Silkenat told the South China Morning Post.

"If the direction is the wrong one, there will be enough time for businesses around the world to educate themselves [on developments].

"If the diagnosis is positive, the city will be more attractive to international financial and legal institutions," Silkenat added.

He said rival cities Singapore and Shanghai could be the beneficiaries if there was a flight of business from Hong Kong.

Silkenat's remarks, made while he attended a legal forum held by the Law Society last week, follow stern rebukes from Beijing to senior British and United States officials who were accused of meddling in Hong Kong affairs after making similar comments.

The chief of the professional body with more than 400,000 members and 135 years of history singled out the preservation of "rule of law" and an "open and democratic society" as factors determining the "right" plan for the chief executive election in 2017.

"At the moment, there is a lag of information internationally … but people will focus [closely] over the next 18 months, as Hong Kong starts to move towards 2017," he said.

"It depends on what Hong Kong wants for its future. We will watch how the government develops its electoral package and how the public reacts."

If companies were to dilute their stakes in Hong Kong, the most likely benefactors would be Singapore or Shanghai, said Silkenat, who has been travelling to China on business since 1975.

While Hong Kong had better regulatory schemes and strong, independent courts, "Shanghai may offer better business opportunities", he added.

The veteran lawyer said Hong Kong's better regulation meant it was still attractive to American law firms as a base for Asia.

While business in the city was usually apathetic to politics, Silkenat said foreign firms "want to focus on business too, but politics do have an impact on business".

Of a long list of problems he saw for foreign law firms practising in China, Silkenat named tax - foreign firms are subject to higher rates - as the foremost hurdle.

But he was optimistic. "We are working with the US trade representative and are hopeful that some progress will be made in the next 18 months."