As if Hong Kong’s market hadn’t withstood enough of a battering over the last 12 months, more questions were asked of its long-term viability with the introduction of the new National Security Law officially passed on 30 June 2020. While this has surely contributed to a significant reduction in public demonstrations of civil unrest that had been capturing the attention of the world’s media over the last twelve months, and causing huge disruption to the functioning of Hong Kong’s fabled financial district, it hasn’t been conspicuously embraced by the international business community in the SAR.
On top of this, a resurgence of the COVID-19 virus, in numbers of new and locally transmitted infections way in excess of what was previously seen, has crushed tentative optimism of a path to a return to economic normality as the city re-enters partial lockdown for the foreseeable future. It seems that every month sees more evidence of a reduced focus on Greater China amongst international firms and it is increasingly easy to attribute these decisions to a culmination of these different factors – a “perfect storm”. Following the announced closures of Orrick and Osbourne Clarke in Hong Kong, Bryan Cave Leighton Paisner and Stephenson Harwood announced they would be shuttering their Beijing outposts which had ceased to be economically viable, and neither firm saw lateral hiring as a way to reverse this.
Perhaps more starkly notable, and these cannot be the only such moves although they did grab the headlines, were the announcements that two UK partners were returning there. David Irvine quit Kirkland & Ellis after just over 4-1/2 years to return to his alma mater Linklaters in London while Michael Jacobs similarly decided that the United Kingdom offered a brighter future than Hong Kong, swapping Allen & Overy for Herbert Smith Freehills. From viewing the statistics (infections and deaths per capita, unemployment levels, business closures, etc) alone, the UK’s handling of the pandemic has been catastrophic and only the most one-eyed optimist can see the country’s stilted lurch towards finalising its exit from the EU not having severe additional consequences for the economy. Nevertheless, that scenario has been considered preferable to the uncertainty that faces Hong Kong by two high-profile legal figures that we know of.
That being said, as always, resilience is the word that most often crops up whenever Hong Kong’s future is discussed. Firms are renewing interest in insolvency and restructuring, as they do in any downturn. Local spin-outs of international operations will likely be a feature of the corporate market. Chinese companies finding themselves in the crosshairs of new and evolving US sanctions are delisting from US markets and will likely be seeking a new home in Hong Kong. Uncertainty can also breed opportunity.
Elsewhere, India and Singapore remain markets of interest. India’s top firms continue to hire talent from each other in healthy numbers while Singapore will clearly be looking at Hong Kong’s predicament with interest. Already keen rivals on the international arbitration circuit, it will be interesting to see what measures the Government, having just undergone a general election, will advance to lure business and talent away from Hong Kong to the more sedate city-state.
Contributor: Sam Kenworthy (Director – Head of Private Practice)