Hong Kong’s National Security Law 3 years on – Taiwan should build a defence

Written by Michael MO.

Image credit: Public domain.

Since Beijing enacted the National Security Law of Hong Kong (NSL) in 2020, over 150 pro-democracy campaigners have been arrested under the NSL, including Jimmy Lai, founder of Apply Daily, the media once operated in Hong Kong and Taiwan. The NSL police did not hesitate to exercise the law aggressively, even beyond the territorial boundaries. Recently, the Hong Kong NSL police issued bounties upon eight pro-democracy activists in exile and harassed their families and friends in Hong Kong by taking them for interrogations. The chilling effect of the NSL made many Hongkongers who are currently residing overseas, including some of the 32,000  who have been residing in Taiwan since 2019, fearing to face the same if they continue supporting pro-democracy activism abroad.

Hong Kong’s pro-democracy struggle was a hot-button issue in 2020’s Taiwan presidential election campaign. Both President Tsai and former head of Executive Yuan Su Tseng-chang took the city as a case in their speeches to remind the Taiwanese to defend the island and not turn Taiwan into another Hong Kong. Three years on, specific policies to guard the country against the potential legal and political harassment from the extraterritorial application of the NSL remain non-existent. While the issues of Hong Kong may no longer be a concern in the presidential race, the need to build a robust defence to protect Taiwanese interests in Hong Kong should still be on the political agenda of the island.

Weak protection and Taiwanese are “on their own” in Hong Kong

As the NSL is, according to Article 38 of the Law, applicable to any person in the world, Taiwanese in Hong Kong are inevitably subjected to it. Vague definitions of the four NSL offences, namely secession, subversion, terrorist activities and collusion with foreign states, allow law enforcement to put anyone who recognises Taiwan as an independent country or advocates for ’Taiwan’s independence in custody. The NSL is also being utilised in conjunction with Seditious Intention, a law enacted in the British era but never used under Beijing rule, effectively suffocated the space for free speech.

The Mainland Affairs Committee (MAC) branded the online registrar for Taiwanese heading to Hong Kong and Macau, which was launched in 2019, as a form of protection. The MAC recently produced free baggage tags with the system’s registration details for Taiwanese to pick up at the airports. Nevertheless, mere registration and tags are far from effective protections. The experience of a Taiwanese researcher detained at Hong Kong Airport and denied entry demonstrated that the city’s Immigration Department would not notify the MAC when they are detaining Taiwanese. To make the situation worse, there have been no Taiwanese staffers stationed in MAC’s office in Hong Kong since mid-2021, as the Hong Kong authorities refused to issue visas for MAC’s Taiwanese staff.

As the MAC can do very little to protect its compatriots in Hong Kong, the Taiwanese in the city have started to submit themselves to the chilling effect of the NSL. For instance, students studying in universities in Hong Kong enrolled in mandatory NSL courses and got used to self-censoring their opinions and actions. An interviewee of the same report expressed her decision to shorten her employment in the city and return to Taiwan earlier than planned. Taiwanese media, such as the Public Television Service and Epoch Times Taiwan, which may have subsidiaries or freelance personnel in Hong Kong, have also enabled geo-lock of the pro-democracy protest song Glory to Hong Kong published on their YouTube channels. The city’s prosecutor accused the song of inciting subversion and seeking an injunction order from the court.

The unresolved risk of “allegiance dilemma”

The NSL may also impact Taiwanese banks in Hong Kong. According to article 43 (3) of the NSL, law enforcement has overarching powers to freeze, confiscate and forfeit properties in relation to breaches of the law. Subsequently, both the Hong Kong Association of Banks (HKBA) and Securities and Futures Commission of Hong Kong (SFC) updated their guidelines, instructing financial institutions operating in the city to report assets of individuals accused of breaching or using the assets to help violate the NSL to law enforcement. The NSL police do not require warrants for retrieving the data from banks.

As of June 2023, 20 Taiwanese banks operate as foreign banks in Hong Kong, with nearly 1 trillion Taiwanese Dollars (~31.35 billion USD) exposure in the city’s financial markets, the seventh largest in the country chart.

While foreign banks, like other businesses operating in a different jurisdiction, must comply with the rules and regulations of the hosting territory, there is a concern that harassment of foreign firm executives in the mainland in the name of national security may eventually happen in Hong Kong. In March, the head of the Japanese drug maker Astella was detained by China on national security grounds. In late September, Hong Kong-based bankers Charles Wang and Michael Chan were barred from leaving the mainland after making visits. While the reasons for imposing exit bans upon Wang and Chan are yet to be known, it shows a worrying trend that executives of financial firms may become the next target of intimidation.

The NSL effectively provides law enforcement with the apparatus to harass individuals like their mainland counterparts. For instance, NSL police and courts can impose exit bans or confiscate passports as bail conditions. Together with the power of the government to impose exit bans upon individuals separately in recently amended immigration law, the legal instruments allow the NSL police to go after bank executives, including Taiwanese ones, just like in China when the order has been instructed from the above.

Let us imagine a hypothetical scenario: The NSL police requested Taiwanese banks in Hong Kong to hand out information on Democratic and Progressive Party (DPP) donors who have accounts in the city. While it seems straightforward that financial institutions must comply with the rules where they operate, handing out Taiwanese clients’ information, should these Taiwanese banks do so, may land themselves in a situation more vulnerable than other counterparts operating in Hong Kong.

Article 43 of the NSL authorises law enforcement to request individuals who are “in possession information or material relevant to the investigation, to answer questions and furnish such information or produce such material”. Moreover, the Implementation Rules of the Article enable law enforcement to conduct searches without a warrant. In other words, all foreign banks, including Taiwanese ones, are subjected to such risks. However, the wording of the updated guidelines for banks and financial institutions on NSL, jointly produced by the police, demonstrates the worrying trend which makes Taiwanese banks more vulnerable than other foreign banks in Hong Kong.

The Q&As of the guidelines (HKBA: Q82, p.33; SFC: Q25) state that “the sharing of information with overseas head offices, subsidiaries or branches for risk management purposes…will not be affected”. Surprisingly, the word “jurisdictions” has been used in another Q&A” “information requests related to the NSL by law enforcement of an account” out of Hong Kong. The subtle differences between jurisdictions and overseas stated in the guidelines can render a huge contrast in impact.

From the perspective of the Hong Kong authorities, Taiwan is in no way overseas. In other words, Article 63 of the NSL on confidentiality can be applied to Taiwanese banks operating in Hong Kong. That means if the NSL police request information about a DPP supporter with an account in Taiwanese banks operating in the city, the staff might be forbidden to share the information of the investigation with the headquarters in Taiwan. While other foreign banks can share it back to their headquarters at home, which the guideline said, Taiwanese banks in Hong Kong cannot do the same when ’they’re being searched by, or relinquished information to, the NSL police as they are not overseas banks.

At the same time, Article 2 of the National Security Law of Taiwan prohibits individuals and entities from submitting official and confidential documents to hostile organisations. Similarly, Article 3 of the same law prohibits the similar submission of trade secrets. Arguably, representatives of Taiwanese banks are subjected to this law.

Such a precarious hypothetical scenario can put executives of Taiwanese banks at risk of an  “allegiance dilemma.” Should they refuse the NSL police’s order, their banks may violate Hong Kong’s operation guidelines and be at risk of arrests and exit bans while in the city. Should the banks provide clients’ data to Hong Kong’s NSL police, they can face charges in Taiwan. Executives may also be unaware of such contravention of Taiwan’s laws as managers in Hong Kong have to keep confidential about the search and surrender of data.

One may argue that democratic countries like the United States have similar provisions, and the situation isn’t unique to Hong Kong. However, foreign banks in the States can appeal the order to relinquish information to the Supreme Court before they are legally required. In the case of Hong ’Kong’s NSL, refusing to relinquish information to the NSL police alone already constitutes a criminal offence. Moreover, NSL trials are handled by Beijing handpicked judges, without a jury, plus possible news reporting bans. The legal safeguards and transparency provided to foreign banks operating in Hong Kong under the NSL regarding disclosures are in no way on par with those in the States.

While such a scenario has yet to happen, the increasingly aggressive use of the NSL by the Hong Kong authorities may make it a reality in the near future. Unfortunately, there is no publication from Taiwan’s Financial Supervisory Commission (FSC) addressing the risk of the NSL to Taiwanese banks operating in Hong Kong. 

What should a defence look like?

Given there are no, and will not be, diplomatic relations between Hong Kong and Taiwan, Taiwanese people and companies in Hong Kong are particularly vulnerable when the NSL police harass them. However, that does not mean the Taiwanese government can do nothing in such a limited space. In contrast, Taipei can formulate a robust policy responding to potential harassment and intimidation.

Primarily, the Taiwanese government should build connections with Hong Kong human rights lawyers who specialise in handling NSL cases. Not only can these lawyers provide immediate assistance to the Taiwanese people when they are arrested and charged by the NSL, but they can also provide valuable insights to the Taiwanese government to analyse the ever-changing application of the law by the Hong Kong prosecutors and courts. For instance, the lawyers’ network should be able to, on a regular basis, reflect the evolving approach taken by the Hong Kong authorities to arrest and prosecute dissidents. This may facilitate the constant adjustment of the MAC’s capacity to prepare for the protection of Taiwanese residing in Hong Kong. It will be equally important to let Taiwanese people in Hong Kong know that the MAC does have such a network of lawyers in the city. This will be particularly important to those studying in universities and working in industries vulnerable to the NSL.

Regarding Taiwan’s interest in Hong Kong, a strategic review of the exposure to the NSL should be conducted. While the MAC does conduct an annual analysis of Hong Kong and the FSC also has publications on the exposure for the financial sector, these publications do not formulate a rolling update on the risk of the NSL to Taiwanese businesses operating in Hong Kong. The Executive Yuan should lead a cross-sector review with more targeted information and analysis. Such a review should indicate which Taiwanese sectors are particularly exposed to the NSL and evaluate the potential impacts, both in monetary and non-monetary terms. The current publications from Taipei are insufficient for businesses to evaluate the risks themselves. In the long run, the Taiwanese government should inform businesses about their re-calibration of relations with Hong Kong—some de-risking strategies, such as including Taiwanese businesses in Hong Kong in the reshoring incentive programme, are urgently needed.

Ultimately, a degree of defence should be demonstrated through cross-departmental efforts before the Hong Kong authorities become more aggressive against Taiwanese and Taiwanese entities in the city.

Michael MO is a Sanctuary scholar at the School of Politics and International Studies, University of Leeds.