As the Hong Kong government’s crackdown on pro-democracy activists continues unabated, relations between Beijing and London have become increasingly frayed. Areas that have previously highlighted Hong Kong’s connectivity with the West and London’s positive relationship with the former colony have become stress points, affecting the legal and financial sectors that have historically been the city’s competitive advantage.

In the backdrop of these tensions is the looming date of January 31st, when the U.K. will begin accepting applications from Hong Kong’s British National (Overseas) (BN(O)) passport holders to live and work in the U.K., providing a path to eventual citizenship for more than three million residents. Representatives of the National People’s Congress Standing Committee (NPCSC) are meeting this week in Beijing, where they are reportedly set to discuss plans to introduce retaliatory measures over London’s decision to offer BN(O) passport holders a path to the right of abode.

On Wednesday, facing a torrent criticism from the British government, a top U.K. lawyer hired by the Hong Kong government to prosecute a group of pro-democracy activists withdrew from the case, following broad pushback against his participation. This has highlighted growing unease in London about the political prosecutions being pursued by Hong Kong’s justice department. An experienced lawyer who had previously represented the Hong Kong and British governments in high profile legal cases, David Perry QC had faced condemnation from fellow barristers as well as the U.K. government. The Guardian’s Patrick Wintour reported last week that Foreign Minister Dominic Raab had issued harsh words about Perry’s initial insistence on continuing with the case:

Raab, interviewed by Sophy Ridge on Sky, said: “I don’t understand how anyone of good conscience, from the world-leading legal profession that we have, would take a case where they will have to apply the national security legislation at the behest of the authorities in Beijing, which is directly violating, undermining the freedom of the people of Hong Kong.

“I understand in the case of Mr Perry, in relation to the pro-democracy activists, and of course from Beijing’s point of view, this would be a serious PR coup. There is no doubt in my mind that under the Bar code of ethics a case like this could be resisted and frankly, I think people watching this would regard it as pretty mercenary to be taking up that kind of case.” [Source]

The case against pro-democracy activists that Perry was hired to prosecute centered on an August 18, 2019 protest. Hong Kong prosecutors argued that protestors had ignored police objections and incited a demonstration across the city. Organizers estimated that 1.7 million people participated in the march, which was led by pro-democracy heavyweights including Martin Lee, Albert Ho, and Jimmy Lai. What stood out most about the march was its uncharacteristic peacefulness after more than a month of increasingly violent street battles. A headline in the South China Morning Post that weekend read: “three nights of tear gas-free protests as Hong Kong’s anti-government movement gives peace a chance.”

But in April 2020, police nonetheless went forward with the arrest of 15 prominent pro-democracy activists for “organizing and participating in unlawful assemblies.” Citing the complexity of the case, Hong Kong’s justice department decided to hire Perry as their lead counsel in January of this year. On Wednesday, the Financial Times’ Primrose Riordan reported on his withdrawal:

Mr Perry was hired by Hong Kong authorities to prosecute a group of veteran activists including Jimmy Lai, the media mogul, and Martin Lee, who helped write the territory’s mini-constitution governing its handover from British to Chinese rule in 1997. The trial was set to begin on February 16.

The Hong Kong justice department said on Wednesday: “Mr Perry, QC, expressed concerns about such pressures and the exemption of quarantine, and indicated that the trial should proceed without him.”

[…] Allies of Mr Perry said he was acting under the “cab rank” principle, whereby barristers take cases as they come up. Other lawyers, however, have argued the principle did not apply when accepting overseas cases. [Source]

Under the “cab-rank rule,” barristers are obligated to accept any work in any legal field in which they claim competence, a principle that is designed to ensure that no person goes unrepresented in court. But Perry’s critics argued that the cab-rank rule did not apply to foreign work.

A leading local lawyer however said, privately, that "it restored my faith in the English Bar."

— Alvin Lum (@alvinllum) January 20, 2021

In Hong Kong, Perry’s citing of “the exemption of quarantine” in withdrawing from the case also raised eyebrows. Amid a wave of COVID-19 cases in the U.K., the Hong Kong government has for weeks banned all inbound flights from the U.K., and imposed strict three week quarantine requirements on all arriving passengers. Legal observers wondered whether the Hong Kong government had been prepared to exempt Perry from health protection measures in order for him to take up the case.

The implications of Perry’s withdrawal from representing Hong Kong’s justice department are significant. Having inherited a common law legal system from the U.K., Hong Kong’s judiciary has maintained close ties with the U.K.’s courts. In rare legal cases of particular complexity, the Hong Kong government has historically looked to Queens’ Counsel, senior lawyers in the U.K. legal system, for assistance. And top British judges have been invited to sit on Hong Kong’s top court as non-permanent judges.

But amid growing concerns about the independence of Hong Kong’s judiciary, the U.K. government in November 2020 initiated consultations to examine the appropriateness of British judges to continuing to adjudicate cases before Hong Kong’s courts on a visiting basis. The political pressure on Perry to withdraw underscores the U.K.’s misgivings about the Hong Kong Department of Justice’s push for political prosecutions in the city.

Separately, the U.K.’s financial bodies are also coming under increasing strain in Hong Kong’s political environment. Ex-Hong Kong lawmaker Ted Hui, whose family’s local bank accounts were frozen after he fled the city to escape prosecution in November, spoke out this weekend after receiving a personal email from HSBC chief executive Noel Quinn explaining why the bank froze his credit cards and savings accounts. South China Morning Post’s Jeffie Lam reported on HSBC’s explanation and Hui’s comments:

Hui, who posted a picture of part of the letter [from Quinn] on his Facebook page, quoted Quinn as writing that it was wrong for bank staff to say the credit cards were cancelled as a commercial decision as HSBC had only frozen them – an explanation the ex-Democratic Party lawmaker rejected.

[…] On Sunday, Hui rejected the “irresponsible” explanation from Quinn, whom he quoted as saying HSBC was “not able to operate” his bank and credit card accounts and “had no choice” as it was legally obliged to take action following the police notification.

Hui accused the bank of failing to provide the legal basis for freezing his and his family’s accounts and to explain why they were “collectively punished”.

Citing the Organised and Serious Crime Ordinance, Hui said freezing accounts always started with a bank finding suspicious transactions. He accused HSBC of failing to follow professional due procedures as he had never received any questions from the bank regarding any transactions in his accounts. [Source]

Headquartered in London but with a vast customer base in Hong Kong, HSBC has been caught between a rock and a hard place since the 2019 protests, facing fierce criticism from both the British and Chinese governments. Amid struggles with profitability in Europe, it has pinned its future on China and mending its fraught relationship with the Chinese government. But its freezing of the bank accounts of pro-democracy activists and legal defense funds has scared its Hong Kong customers, prompting some to shift their assets overseas.

W/ HK activists' local bank accounts being frozen, @appledaily_hk has a guide to offshore brokerage firms, comparing requirements like foreign addresses, BNO passport, & minimum $. It cautions ppl to use Charles Schwab International, & not its HK arm. https://t.co/1LULe7jDhx pic.twitter.com/tY5JFyCHz5

— Mary Hui (@maryhui) December 9, 2020

Last week, a report published by Bank of America estimated that Hong Kong residents’ emigration overseas could trigger capital outflows of USD $36 billion from the city this year. That estimate comes as the date when the U.K. opens its special visa scheme for Hong Kong BN(O) passport holders draws closer. The U.K. Home Office in October estimated that more than 1 million people could emigrate to the U.K. in the next five years, including half a million in 2021.

The scheme has drawn the increasingly vocal ire of pro-Beijing figures in Hong Kong. Last week, pro-Beijing politician and former secretary for security Regina Ip penned an op-ed in the South China Morning Post titled “For Hongkongers who decide to leave, it’s time they had to choose: foreign citizenship or right of abode in Hong Kong”:

Hong Kong people have always been divided in their loyalties and sense of identity with the nation where they belong. Many were “brainwashed” before 1997 into perceiving China as “closed and authoritarian”, while Western societies are “free and open”.

[…] Although China does not permit dual nationality, it was prepared to accept the use of British citizen passports acquired under [the BN(O)] scheme as travel documents only, while insisting that any Chinese national who acquired British nationality through a Hong Kong connection remains Chinese. Such persons would not be eligible for British consular protection while on Chinese territory, including Hong Kong.

[…] But it may be time for the Chinese government to end its special treatment of Hong Kong Chinese for historical reasons, and enforce its nationality law to disallow dual nationality.

[…] 23 years after the reunification, people have had enough time to hedge. When they make a conscious decision to leave and, by implication, give up on Hong Kong, it is only right that they should be asked to make their choice – China or a foreign country – foreign citizenship or the right of abode and the right to vote in Hong Kong. [Source]

South China Morning Post’s Tony Cheung and Natalie Wong also reported last week that Beijing was “mulling” retaliatory measures, including banning BN(O) passport holders in Hong Kong from public office:

Beijing is mulling whether to ban British National (Overseas) passport holders in Hong Kong from public office in retaliation over London’s decision to offer them a visa with a path to the right of abode, the Post has learned.

Officials were divided, however, on whether they should also call for a more drastic step of denying Hongkongers with such BN(O) status the right to vote in the city.

These proposals are believed to be in a suite of Hong Kong issues to be discussed when China’s top legislative body meets next week. But a final decision might not be made or announced even after the session, sources said.

[…] No Hong Kong-related matter had been tabled as of Wednesday but sources said this could change soon. They added that while the three-day meeting might not involve immediate decisions on Hong Kong issues, delegates were expected to further deliberate Beijing’s plans, including proposed new rules about holding public office in Hong Kong, and proportionate ways to retaliate against the British government’s new pathway for the city’s residents to acquire citizenship. [Source]

Chief Executive Carrie Lam has said that retaliation against the BN(O) visa scheme would be “a matter of course.” Some pro-Beijing politicians have advocated for even more extreme measures including stripping BN(O) passport holders who move to Britain of their right to vote in local elections. Legal experts, however, have acknowledged that such a measure would be difficult to defend legally, as the ban would have to contend with questions of why other dual-citizens could maintain their voting rights.

With the NPCSC meeting this week, the U.K. government today condemned Beijing’s retaliatory plans, including its threat to stop recognizing BN(O) passports as valid travel documents. The British embassy in Beijing published a series of responses refuting Chinese claims relating to the BN(O) visa scheme, emphasizing that the 1984 Joint Declaration committed the Chinese government to “permit Chinese nationals in Hong Kong who were previously called ‘British Dependent Territories Citizens’ to use travel documents issued by the Government of the United Kingdom,” and that a withdrawal of recognition would be in direct contravention to the treaty.

Practically speaking, measures to revoke recognition of the BN(O) passport would not stop Hong Kongers looking to emigrate from leaving the city, as they would be able to use their HKSAR passports to travel. The U.K. Foreign Office stated months ago that BN(O) passport holders would not need valid BN(O) passports to apply for the scheme or to travel to the U.K. Any revocation would therefore be largely symbolic. Nonetheless, retaliatory measures by Beijing would further complicate an already fractured Sino-British relationship.

For Beijing, the challenge of working with the U.K. will be up to its new ambassador Zheng Zeguang, a top foreign ministry official whose appointment surprised analysts that expected him to be sent to Washington. London-based think tank Asia House profiled Zheng, who will be replacing China’s long-standing ambassador to the U.K. Liu Xiaoming:

[…] But while Liu’s departure is not a surprise, the choice of his successor is interesting. Zheng is known as a US affairs expert who was seen as a likely candidate to succeed China’s Ambassador to the US, Cui Tiankai – the most senior foreign affairs position outside Beijing. The appointment of a heavyweight replacement in London underlines the UK’s importance to China, but also implies that China’s tough, sometimes combative approach to diplomatic relations is here to stay.

[…] Increased animus towards China from political elites in the UK has fuelled a rise in negative rhetoric from both sides. The most obvious sign of deteriorating relations has been the recent confirmation from the UK government that it will ban leading Chinese telecom firm Huawei from participating in the UK’s 5G networks, citing cybersecurity concerns.

[…] [Zheng] is perhaps much better known, however, to Chinese domestic audiences with whom he is is very popular as one of the few Chinese envoys willing to make outspoken public comments about China’s concerns with their host country’s stance towards their home nation.

Although no date has been announced, the Chinese Embassy has confirmed that the change will take place this year, with farewell activities already planned for Ambassador Liu ahead of the annual Spring Festival in February, China’s biggest annual holiday. [Source]