The Hong Kong government’s Lands Department has added national security terms to all land sale and short-term lease tender documents. The clause stipulates that prospective buyers can be disqualified if they or their parent firms engage in activities that “endanger national security” or affect “public order”. Investors have expressed worries that such practice might be extended to other sectors, including whether asset management companies shorting Hong Kong stocks or criticising government policy could be construed as threats to national interests.

Since the implementation of the NSL, the Hong Kong government has sought to vary the contractual relationships with its service providers and its employees by imposing additional requirements. The move by the Lands Department evidently aligns with the governing philosophy of the current Hong Kong regime, which is that the amorphous concept of  “national security” trumps everything, including the open economy and economic freedom of Hong Kong, and fundamental rights.

We believe that the business sector (and especially the international business community) should be cautious of any engagement with the Hong Kong government due to the vague definition, arbitrary interpretation and unlimited expansion of the NSL. Any activities considered by the Hong Kong government as a threat to the national security of the PRC may be seen as a breach of those terms and conditions under the government contract, and thereby result in contractual liability or loss. 

(This article originally appeared as an item in the Jan-Feb 2023 edition of our newsletter.)