New legal risks facing international companies operating in China and Hong Kong

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If a military conflict over the Taiwan Strait occurs, in addition to the resulting global instability, a host of complex legal issues will need to be addressed. Supply chain and other contractual relationships will be immediately impacted. Given Russia’s invasion of Ukraine and the announcement of a close “unlimited” relationship between China and Russia, this eventuality should no longer be considered remote or hypothetical. The impact of such a conflict would be further complicated by the ever-changing situation in Hong Kong, a major center for international finance and dispute settlement. International businesses and their lawyers would be well served by now considering the substantive and procedural challenges that these issues present.

Developments in the PRC

Last month, Chinese leader Xi Jinping signed a new military ordinance containing regulations governing the use of the People’s Liberation Army (PLA) in “military operations other than war”. Although the full text of the regulations has not been released, according to PRC state media, “the [regulations] standardize and provide the legal basis for Chinese troops to carry out missions such as disaster relief, humanitarian assistance, escort and peacekeeping, and safeguard national sovereignty, security and human rights. China’s development interests.” What caught readers’ attention was the mention of both military operations and safeguarding China’s national sovereignty and security. Xi’s use of the term “military operation” coincides with how Russian President Putin described the invasion of Ukraine. In other words, if the PLA were to invade Taiwan or conduct military operations over the Taiwan Strait or the South China Sea, it would not be considered an “act of war” from the Chinese point of view. , but rather as a special military operation entirely within China’s internal territory aimed “safeguarding national sovereignty and security.” Moreover, around the same time, the Chinese Foreign Ministry announced that the PRC had sovereignty, sovereign rights and jurisdiction over the Taiwan Strait and called it “a misrepresentation when some countries call the international waters of the Taiwan Strait.” This further changes the political and legal landscape for companies operating in the Greater China region.

“Act of war”?

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