Pro-democracy demonstrators carry a banner against the new national security law as they march during a protest in Hong Kong, on July 1. Photo: Lam Yik/Bloomberg

Global lawyers and companies in Hong Kong are unsure about the city's future as a global business hub following Beijing's introduction of a new national security law for the city and the tough U.S. sanctions that are expected to follow.

Tuesday's passing of the new law marked the most significant shakeup to Hong Kong's constitution since the city's return to Chinese rule in 1997. With local authorities already strictly enforcing the law just hours after its full text was made public, global law firms are scrambling to deal with clients' inquiries about how the new law will affect their bottom lines—an increasingly complicated question as the United States ramps up its response.

"I've been dealing with client requests all day," Benjamin Kostrzewa, a registered foreign lawyer at Hogan Lovells, said Thursday. "We have a lot of inquiries on the national security law and how it will be interpreted and enforced."

On Wednesday, thousands of protesters defied a police ban to take part in the city's annual demonstration on the 23rd anniversary of Hong Kong's handover and the first full day of the new law coming into force. Police fired tear gas and water cannons and arrested close to 400 protesters, and 10 of them were charged under the new law.

Nick Turner, of counsel at Steptoe & Johnson, said that many clients are taking a "wait-and-see" approach in order to understand exactly how the national security law will be implemented in Hong Kong as well as the wider backlash globally.

"I think the clients we speak to are really focused on the U.S. side of things—they want to understand what restrictions the U.S. government might put in place and how they might affect their business," he said.

On Monday, before the national security law was adopted, the Trump administration announced that it had stopped all exports of U.S.-origin defense equipment to Hong Kong and will take steps to treat Hong Kong the same as China in the realm of dual-use technology export controls. The Commerce Department also announced the suspension of export license privileges that Hong Kong enjoys.

On Thursday, the Senate gave final congressional approval to the Hong Kong Autonomy Act, a law that would impose sanctions on businesses and individuals that help China restrict Hong Kong's autonomy, including banks and firms that do business with them. The legislation, which was passed unanimously by both the House and the Senate, now awaits the signature of President Donald Trump.

In a statement, the American Chamber of Commerce in Hong Kong said that it remains committed to the Hong Kong market and that it will take time for businesses to digest details of the new national security law.

"We look forward to … interaction with the Hong Kong SAR government to seek further clarity on how the law will be interpreted and implemented, and the implications for American businesses operating and investing in Hong Kong," the statement said.

Thomas So, a partner of Mayer Brown and a member of the National Committee of the Chinese People's Political Consultative Conference, a top government advisory body in Beijing, believes the law successfully meshes together Hong Kong and China's distinct legal systems.

"The central government has placed a lot of trust on the Hong Kong government and system to help handle what are generally cases that the central authority handles," he said. "If you look at the U.S. for example, national security cannot be dealt with by the states—you have national level CIA and FBI."

So said global companies and firms in Hong Kong should pay particular attention to two aspects of the law: they should not do anything that might be interpreted as encouraging pro-independence activities, and they should also devise policies preventing employees from using company offices and equipment to promote activities now banned by the law.

"If you do not have a policy setting out very clear parameters of what the company encourages or does not encourage staff to do, and for some reason some of your staff take part in activities that fall under any of these [new] offenses, then there's a risk that the company might be dragged [into trouble]."

The national security law cracks down on "secession, subversion, organisation and perpetration of terrorist activities," as well as collusion with foreign countries to endanger national security.

The city has operated under the "One Country, Two Systems" principle, which gives it a separate legal and political system from mainland China. But the national security law was introduced by Beijing, bypassing Hong Kong's own legislative process.

In a statement released Wednesday, the Hong Kong Bar Association (HKBA) criticized the manner of the law's introduction. Adopted in Beijing on Tuesday, the law came into effect that same evening. The Hong Kong bar also criticized the lack of an official English language version of the law.

"Nobody in [Hong Kong] had seen so much as a draft or accurate summary of the [national security law] before its entry into force," the statement said.

Martin Rogers, Asia chair at Davis Polk & Wardwell, says that his clients are still evaluating the impact of the new law and are not making any immediate decisions as yet.

"In the medium-to-long term, for business, markets, regulation and dispute resolution, I would hope that [the law's] effect would be neutral," he said.

"It is too early to say what the international communities' long-term reaction will be," said Keith Brandt, Hong Kong managing partner at Dentons, adding that he believes any outflow of investment from Hong Kong, should it happen, will be measured over months and years as people evaluate whether Hong Kong's distinct legal, political and economic systems are preserved.

"In hope rather than in expectation, perhaps [the law] will usher in a new period of certainty and prosperity for Hong Kong," he said.