The 1997 handover of Hong Kong from the UK to China had cast a shadow over the territory's business community for several years before reunification became reality at a rain-soaked ceremony on 30 June, 1997.
Given some of the direst predictions made by some commentators at the time about what the future held, there is now general consensus that the transition has been achieved remarkably smoothly. Surprisingly little has changed for
the Hong Kong Special Administrative Region's (SAR's) expatriate army of lawyers, bankers and other professional service providers. This is all the more remarkable given the bumpy ride that Hong Kong has experienced in that time.

A period of crisis
The first major shock to post-reunification Hong Kong arrived not from the political sphere but the regional economy. Less than five months after reunification, Asia's booming markets went into a sudden tailspin, prompting a massive IMF bailout plan for Indonesia and the launch of unprecedented restructuring programmes in countries such as South Korea and Thailand.
Hopes that Hong Kong would remain immune from the worst effects of the crisis evaporated when the Hang Seng Index collapsed and the high-flying Peregrine investment group crash-landed, prompting one of the most complex liquidations in corporate history.
While many Hong Kong law firms suffered a body blow during late 1997 and 1998, more opportunistic practices thrived on the huge volume of insolvency, corporate recovery and M&A work thrown up after the disaster. Many had to summon reinforcements from overseas to help deal with the unforeseen workload.
Constitutional clouds added to the gathering gloom in 1998 and 1999, causing significant rifts within the local legal community. Most notable among these was the 'political' influence that was perceived to have been exerted on the Court of Final Appeal (CFA), which ultimately forced an unprecedented clarification of a ruling originally made in January 1999 regarding the right of abode in Hong Kong of mainland-born children.
At the height of this constitutional 'crisis', some multinationals expressed fears that the reinterpretation could set a legal precedent for the Hong Kong authorities to run to Beijing each time a commercial ruling went against them.
The then chairman of the American Chamber of Commerce in Hong Kong, Jason Felton, said that some members would cease to operate in Hong Kong if doubts concerning the independence of the judiciary and the strength of the rule of law – Hong Kong's traditional trump cards – persisted.
Polls measuring confidence levels in Hong Kong's legal and judicial systems among its foreign business community, such as those undertaken by Bob Broadfoot of Political and Economic Risk Consultancy worsened considerably in 1999, for the second consecutive year.

Signs of recovery
But over the past year a renewed sense of optimism has taken root in Hong Kong, as the worst fears of mainland influence in its cultural and business affairs have been largely allayed, and the local stock market returned to health.
This latter development was fuelled in part by the technology boom that swept regional markets. This reached its height in February 2000 with the listing on the new technology board, the Growth Enterprise Market (GEM), of internet portal Tom.com, which prompted a much-publicised frenzy and queues of 20,000 people outside one HSBC branch on Hong Kong Island.
While the GEM has suffered from the global dotcom shake-out, and faces growing competition from a soon-to-be-launched second board in mainland China, it has still produced a constant stream of work for law firms in Hong Kong. Almost 60 companies have gone to the market since its inception in late 1999. Richards Butler, which advised the authorities on the creation of the GEM, has been a principal beneficiary of subsequent GEM-related work, having advised on 20 extant listings as of December 2000.
Nor have doubts surrounding the strength of Hong Kong's legal infrastructure prevented the closing of large-scale commercial transactions over the last couple of years. Most notable among these was perhaps the long-awaited and controversial agreement struck between the Government and Walt Disney to build a Disney theme park in Hong Kong – the first in Asia outside Japan. The deal, which was reached in late 1999, was lawyered by Baker & McKenzie (for Disney), and Paul Weiss Rifkind Wharton & Garrison (for the Government).
Confidence in Hong Kong as a corporate location has remained high – a message that Solicitor General Robert Allcock was keen to convey at November's In-House Congress Asia Pacific (see Legal Week, 30 November, 2000) – appears to be borne out by government figures released last month. These show that the number of foreign companies using Hong Kong as a regional hub increased by 20% to 3,001 in the year to 1 June, 2000. Hong Kong's director-general of investment promotion, Mike Rowse, claimed that business concerns over the rule of law are diminishing, adding that China's anticipated accession to the World Trade Organisation is already contributing to the rise in the number of overseas companies opening in Hong Kong.
The attractiveness of Hong Kong as an arbitration venue is likely to have been increased following the implementation of arrangements regarding reciprocal enforcement of arbitral awards between Hong Kong and China in February 2000. This move dispelled much of the uncertainty surrounding the fact that following reunification, Hong Kong and China ceased to be regarded as separate foreign states in relation to each other under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
According to Christopher To, secretary general of the Hong Kong International Arbitration Centre (HKIAC), more than 300 arbitration proceeding were held at the HKIAC last year, a significant increase from 1999′s figures. He expects further rises this year.
Further excitement has been generated following the announcement made by the Chinese Ministry of Justice that the mainland legal market is to be opened to Hong Kong lawyers. However, in the absence of more detailed clarification, where this move will leave UK-qualified lawyers based in Hong Kong remains to be seen.
The criticisms of the Government's Public Order Ordinance made this month by out-going Bar Association chairman Ronny Tong, and the Hong Kong Government's decision last week to encourage the Court of Final Appeal to ask Beijing for guidance in another right of abode case, indicate that some issues that have tarnished Hong Kong's international reputation since the handover have not been banished.
But the constitutional crisis feared by some in 1997 has yet to appear and for most of Hong Kong's corporate lawyers, 2001 looks set to be another year of "business as usual".
Colm Cronin is managing editor of Asian Legal Briefing, based in Hong Kong. www.pbpress.com.