Legal System

Hong Kong’s legal system is based on the rule of law and the independence of the Judiciary. Under the principle of ‘one country, two systems’, the constitutional framework for Hong Kong’s legal system is provided by the Hong Kong Basic Law. The Hong Kong Special Administrative Region (HKSAR) legal system, which differs from Mainland China’s legal system, is based on the English common law and supplemented by local legislation.

Generally speaking common law, as opposed to civil or socialist law, is a type of legal system where legislation is continually evolving. Courts refine and create laws on a case-by-case basis. When resolving a legal dispute, in the ideal world, a common law court looks to precedents set by other courts. What this means is that when a court is resolving a dispute, it must look to see if a similar dispute was resolved in the past. If one has, then the present day court is obligated to following the same reasoning used in the prior case; this principle is called stare decisis. On the other hand, if the dispute is totally unique, the court may resolve the matter itself using general guidelines. This new decision then becomes the precedent to which all future cases are bound. Over the years, the precedents created by past decisions coalesce into a complicated set of rules that apply to a wide array of case; this collection of rules is known as “common law”. Of course, common law systems are much more complex in practice, nevertheless the principle of stare decisis as described above, is the foundation of all common law systems.

The following laws are currently in force in Hong Kong:

• The Hong Kong Basic Law;

• National laws listed in Annex III to the Basic Law;

• The laws in force before July 1, 1997, that were adopted as laws of the HKSAR by the Standing Committee of the National People\'s Congress; and

• Laws enacted by the legislature of the HKSAR.

Privacy

At this time Hong Kong has not signed a Tax Information Exchange Agreement; it has, however, signed a Mutual Assistance Treaty with the United States. Moreover, Hong Kong is not a participant in the European Union Savings Directive. As such, Hong Kong offers a high level of privacy for both American and EU citizens. Furthermore, despite having signed a Mutual Legal Assistance Treaty with the United States, Hong Kong has not done anything to suggest that is not serious about protecting the privacy of its offshore investors. Nevertheless, American investors ought to be aware that their asset security is questionable thanks to the Mutual Legal Assistance Treaty.