The Legal System

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Hong Kong is a common law jurisdiction. This means that its legal system has its roots in case law that developed in England in the Middle Ages. The continued use of common law was one of the key principles when Britain and China made arrangements for the handover of sovereignty over Hong Kong. These arrangements were documented in the Sino-British Joint Declaration of 1984, and later codified in the Basic Law, which entered into force on July 1, 1997. The guiding principle for the relationship between Hong Kong and mainland China is known as “one country, two systems”.

The Basic Law effectively serves as Hong Kong’s constitution. Hong Kong, along with Macao, has the status of a Chinese Special Administrative Region. This means that Chinese law, with some exceptions, shall not apply in Hong Kong. Hong Kong’s special status under the Basic Law has been guaranteed until 2047. It appears that Beijing may expect Hong Kong’s role to continue unchanged beyond 2047*.

New statutory law in Hong Kong is made by the Legislative Council, based on proposals (bills) produced by the Chief Executive. In recent years, Hong Kong has for example introduced the following pieces of legislation in the commercial field: the Competition Ordinance (Cap 619) of 2012, the Companies Ordinance (Cap 622) of 2014, and the Sale of Goods (United Nations Convention) Ordinance (Cap 641) of 2021.

When it comes to the previously mentioned application of Chinese law in Hong Kong, apart from largely ceremonial legislation governing things like the national flag and the national anthem, one notable piece of legislation is the Law of the PRC on Safeguarding National Security in the Hong Kong SAR (also known as the National Security Law), which was adopted by the Standing Committee of the National People’s Congress in 2020.

More about the legal system in Hong Kong

  • According to the Basic Law, Hong Kong courts enjoy independence. Hong Kong’s Court of Final Appeal has final adjudication in Hong Kong cases. Judges from other common law jurisdictions like England and Australia serve as non-permanent judges on the Court of Final Appeal.

    Business disputes are frequently referred to the courts of Hong Kong for resolution, and the courts are widely respected for the integrity and expertise with which they handle commercial matters. Common law injunctions, like the Mareva injunction (interim freezing order), are available in Hong Kong. This means that an aggrieved party may be able to safeguard his or her commercial interests at the outset of a dispute.

    Commercial arbitration is also widely available in Hong Kong. Parties tend to refer disputes to established arbitration institutes, like the Hong Kong International Arbitration Centre, rather than relying on ad hoc arbitration. The 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also known as the New York Convention) applies to Hong Kong arbitral awards. This means that a Hong Kong arbitration award is enforceable in a large number of countries around the world.

    Arrangements are in place for the mutual recognition of arbitral awards between Hong Kong and mainland China. In addition, the two jurisdictions are in the process of enacting a framework for the reciprocal recognition and enforcement of judgments in civil and commercial matters.

  • The freedom of contract is held in high regard in Hong Kong. This means that courts will generally enforce contracts that have been validly entered. There is no general doctrine of voidance of commercial contracts due to inequality of bargaining power, nor is there a separate requirement of good faith. This means that absent a vitiating factor like misrepresentation or mistake, a contract is usually enforceable as written.

    Certain types of contract are subject to formal requirements. For example contracts for the assignment of real property or company shares have to be made in writing, and require stamping (i.e. the payment of stamp duty). Most other contract types can be entered at the discretion of the parties. Oral agreements are enforceable, however a written contract is recommended in matters of any significance.

  • The Companies Ordinance (Cap 622) of 2014 governs the establishment, management and winding-up of companies. The Companies Ordinance revised the legislation previously in force by, among other things, codifying a director’s duty to exercise reasonable care, skill, and diligence.

  • Employment law in Hong Kong is mainly governed by the Employment Ordinance (Cap 57) and related statutes. The Employment Ordinance offers employees limited employment protection. The legislation sets out requirements with regard to matters like minimum wage, pensions (including the so called Mandatory Provident Fund), holidays, sickness allowance, and severance pay.

  • The Competition Ordinance (Cap 619) of 2012 is the first piece of legislation of its kind in Hong Kong. It introduces three main prohibitions, i.e. restrictive agreements and concerted practices, abuse of a substantial degree of market power, and mergers and acquisitions that substantially lessen competition in Hong Kong (the M&A ban is limited in scope to the telecommunications sector).

  • Hong Kong provides intellectual property rights owners a comprehensive framework of legislation that provides protection for trademarks (the Trade Marks Ordinance (Cap 559)), copyright (the Copyright Ordinance (Cap 528)), and patents (the Patents Ordinance (Cap 514)) in line with international standards.

  • On the back of the Sale of Goods (United Nations Convention) Ordinance (Cap 641) of 2021, the 1980 United Nations Convention on the International Sale of Goods (“CISG”) is being implemented in Hong Kong. This brings benefits to the business community as CISG is viewed as the most successful, substantive and widely-used commercial law treaty in the global marketplace.