Foreign law firms leaving Hong Kong will be ‘sorry’: ex-justice chief Teresa Cheng

“The vast majority of businesses are in Asia, and in Asia, with the motherland as part of Hong Kong’s very strong backing and where the city has the international perspective to deal with international transactions, I think using Hong Kong as a base is actually a very smart idea.

“There could be reasons people would wish to pull out, either they are not getting the business or otherwise. But I think we have a phrase that says talent follows money.”

Statistics by Law Society showed 73 foreign law firms were registered in Hong Kong in April, down 21 per cent from 92 four years ago, with the body’s former president Chan Chak-ming saying the city’s legal sector had been hit hard amid complicated geopolitics and a slow economic recovery.

In February, US law firm Winston & Strawn closed its office in the city after a 15-year presence, while Mayer Brown announced in May that its Hong Kong operations would be split to form a separate partner firm.

Since her departure from the government in 2022, the city has braced discussions surrounding intensifying rivalry with Singapore in arbitration, passed its domestic national security law and witnessed a second wave of resignations from overseas judges on its top bench.

But Cheng remained steadfast in the city’s appeal to potential international clients, saying law firms would be “unwise” to ignore Hong Kong as a base for lucrative business deals.

The former minster, who now splits her time running the Asian Academy of International Law, teaching at Beijing’s Tsinghua University and serving as an arbitrator, expressed confidence in the city’s judicial independence and top-notch quality of its services.

The barrister said Hong Kong’s legal system has stood strong amid recent departures of top overseas judges, as the bulk of the city’s cases would rest with local judges while the city’s top court had ample experience to draw upon.

Cheng, who was also an arbitration specialist, rejected claims of rivalry between Hong Kong and Singapore for the regional top spot for arbitration.

In 2022, the Hong Kong International Arbitration Centre (HKIAC) processed 344 cases valued at about US$5.5 billion, while the Singapore International Arbitration Centre handled 357 cases valued at about US$5.6 billion.

“It’s not a zero-sum game. We can both serve businesses. It’s not that we will do well if Singapore declines, or that if Singapore does well we are declining,” Cheng said.

But she said Hong Kong would edge over Singapore in its connection with mainland China, as well as its location as the base for an international arbitration organisation.

Referencing a new arrangement allowing courts in Hong Kong and the mainland to reciprocally recognise and enforce judgments in civil and commercial cases, Cheng argued that this could only be made possible under the city’s unique “one country, two systems” constitutional framework.

Cheng added Hong Kong had also made itself more appealing to Belt and Road Initiative countries, especially those in Africa, by hosting the Asian African Legal Consultative Organisation’s regional arbitration centre in the city.

“For African countries, they may not want to go to Asia or use a local arbitration organisation here. We also do not want Chinese enterprises to go elsewhere. If they use the [organisation’s] services here [ …] it would be easier for African countries to accept,” Cheng said.

But Cheng said Hong Kong would not lose sight of its Western clients amid increasing readiness to serve clients from developing belt and road countries, as the city “will not be picky over clients”.

Cheng refuted apprehension that overseas business activity could fall under the city’s mandate for state secrets under the law.

“So I think to use one word and some people may spin a story about economic things, [how] you have to be very careful … I think it is a totally misconceived idea,” Cheng said.