The independence of Hong Kong's judiciary has suffered a major blow after its highest court backed a ruling forcing 5,000 migrants to return to the Chinese mainland.

The ruling last Thursday (10 January) by the Hong Kong Court of Final Appeal, upheld a 're-interpretation' by Beijing last year which overruled a 1999 decision allowing migrants to reside permanently in the region.

The controversial case is the first ruling to test the 'one country, two systems' principle enshrined in Hong Kong's 1997 constitution, which was agreed on the resumption of Chinese sovereignty over the former British Colony.

Hong Kong's highly-regarded judicial system helped the region seal its reputation as Asia's legal capital, but, while China is regarded to have maintained business confidence in the region following the hand-over, legal experts are concerned at the scope for political interference with judicial decisions in the wake of the ruling.

Robert Brook, a solicitor representing some of the immigrants for local firm Pam Baker & Co, said the Court of Final Appeal decision did not bode well.

"A lot of the basic law concerns economic issues and there is scope for Beijing to interfere in commercial disputes," Brook said.

The legal battle began in 1999 when the Hong Kong courts granted right of abode for a small number of immigrants.

Thousands more then applied to the courts, but the Hong Kong Government sought Beijing's help to head off a flood of immigrants.

Last year around 300 of the original claimants were allowed to stay, but the thousands who came later went to court in June to demand their rights.

Their claims have now been thrown out and they will have to leave Hong Kong in March.

The 5,000 who believe they have been cheated out of a right to live in Hong Kong are now working on an appeal to the United Nations.

Hong Kong is treading a politically sensitive path with Beijing and is currently negotiating to allow local lawyers to practise mainland law – opening up a massive new market – under China's plans to liberalise its markets for World Trade Organisation membership.