The Government has shown 'a troubling lack of commitment' to the rule of law despite the mainland's hands-off approach, according to a Washington-based democracy watchdog.
In its latest report, the National Democratic Institute highlighted post-handover developments it said had sent 'unfortunate signals'.
The 18-page document cited the recent decisions by the Department of Justice against prosecuting Xinhua for an alleged breach of privacy laws and newspaper boss Sally Aw Sian for alleged involvement in a conspiracy to defraud advertisers.
It described the decisions as 'selective non-prosecution'.
Other incidents included the handling of Taiwanese flags on October 10 last year and the recent adaptation of laws to exempt state organs from some Hong Kong laws.
Noting the Basic Law provision requiring all central government offices to abide by SAR laws, the report said: 'The new law seemingly violates this constitutional provision.' It said the SAR Government could have chosen to simply replace 'the Crown' with 'the Hong Kong Special Administrative Region' rather than 'the state'.
The institute also challenged the courts' ruling on the legality of the provisional legislature and the right of abode of mainland-born children of Hong Kong parents.
It called the provisional legislature ruling 'an early, troubling indication that courts would not question the legality of an act of the sovereign even when that act violated the Basic Law'.
The decision could imply that the National People's Congress could legislate for Hong Kong in any way it saw fit, it warned.
The institute also attacked the right of abode ruling for allowing the Government's judgment about the public interest to supersede a right guaranteed in the Basic Law.
'When the rights are spelled out in the Basic Law, the courts must not defer in the adjudications of cases to the SAR administration or to mainland authorities. The . . . decisions in the right of abode case do not provide confidence that the courts can effectively protect rights guaranteed in the Basic Law,' the report said.
It stressed that the absence of direct interference from Beijing should not shield the SAR Government from criticism of its failure to commit to the rule of law and called for continual monitoring of the SAR's situation.