Today, Hong Kong returns to Chinese rule. Henry Sherman looks at how political change is likely to affect the legal system. Henry Sherman is a partner at Cameron McKenna and is resident in Hong Kong.

“Hong Kong is China. The foreigner is always an intruder, often tolerated, sometimes liked, often distrusted, seldom accepted.” So said Richard Hughes, journalist and author, in Borrowed Place, Borrowed Time, 30 years ago.

It is true that the British Colonial Administration has long been largely irrelevant to life in Hong Kong. While the handover has created some local misgivings, it has also generated a public sense of solidarity with the Mainland, against which the legal profession and the law stand out in stark contrast.

Even today, more than a quarter of all Hong Kong-qualified solicitors are non-Chinese, with virtually every major US and English law firm represented here in force. Publicly, at least, all of these plan to remain, encouraged by buoyant economic conditions and the government's vast infrastructure programme, which looks set to transform the whole territory into a millennial version of Fritz Lang's Metropolis.

The arrangements for returning Hong Kong to Chinese rule appear to promise business pretty much as usual for expatriate firms. Under the Joint Declaration, the 1984 treaty which formally ratified plans for the handover, the ex-colony's existing way of life, economic status and legal system are expressly guaranteed for the next 50 years.

It provides, for example, that Hong Kong will still be free to use English as an official language, that the current free-wheeling economic system and currency will be retained, and that Hong Kong will continue to control its own legal system, with guaranteed free speech and civil liberties. These principles have now been embodied in the so-called Basic Law, which will effectively become Hong Kong's constitution after the handover. According to

Article 8 of the Basic Law, “the common law, rules of equity, Ordinances [Statutes], subordinate legislations and customary law shall be maintained” – except in the areas of defence and foreign affairs.

Some of the obvious trappings will change. The Privy Council will be replaced by a Hong Kong Court of Final Appeal, Queen's Counsel will become Senior Counsel, and criminal actions will no longer be pursued in the name of the Queen. Publicly, most of these changes are presented as simply cosmetic – on a par with the removal of crowns from the old Royal Mail postboxes.

A closer look at how the system will evolve in the future, however, raises a number of intriguing questions. On paper, for example, Hong Kong is free to retain and develop its existing body of law. But under the Basic Law, the final right of decision as to which laws will apply in Hong Kong and how they are to be interpreted will belong not to the Hong Kong Administration or the judiciary, but to the legislature in Beijing.

In effect, the National People's Congress has a right to veto any laws that it decides fall outside Hong Kong's sphere of competence. If the Congress feels impelled to apply this power widely, there could be significant intervention in the Hong Kong legal process. For example, the exception for “foreign affairs” could conceivably be stretched to include the regulation of foreign corporations, including foreign law firms.

The development of the common law in Hong Kong raises a number of related issues. Traditionally, this has evolved, as it has in England, through judicial decision-making in English and there is no precedent for legal interpretation to be entrusted finally to a political body, let alone one operating in another language and to very different political and cultural norms. Again, much depends on how widely these crucial powers are wielded.

The Hong Kong legal system is supposed to become bilingual on handover. While there is a consensus that this overwhelmingly Chinese community should be served by laws in its own language, the speed of transition that is officially contemplated is alarming.

The problem of translating common law concepts into Chinese has led to concerns among both Chinese and expatriate lawyers. In fact, articles have begun to appear in Hong Kong Lawyer, the glossy official Hong Kong Law Society publication, discussing the precise details of how individual expressions and concepts should be translated and the problems are clearly formidable. In the words of a government draftsman, making the law genuinely bilingual is “a difficult and unprecedented task”.

The hope is that the legal system in Hong Kong will evolve into a common law jurisdiction similar to those in a number of Commonwealth countries. But there is a risk that, over time, this goal will prove unattainable and that, instead, gradually diverging bodies of law will develop, with uncertain consequences.

Much is likely to depend on the quality of the judiciary. In the colonial era, Hong Kong's judges largely succeeded in preserving their reputation for integrity and independence.

Although they have reacted cautiously to recent legal challenges to aspects of the hand-over process, the public commitments in the Basic Law give good reason to hope that this will continue to be the case.

The judiciary still contains a significant number of expatriates, although some senior non-Chinese barristers privately wonder whether their faces will still fit after handover. There has been a discreet exodus of the most well-padded and all have contingency plans in place, such as tenancies in their home jurisdictions. For those who remain, however, these are good times with fees outstripping those of their English equivalents.

In government, the process of localisation has proceeded at a greater pace, senior expatriates being steadily replaced with local Chinese lawyers. For some, what they regard as a premature end to long-running government service has been a bitter pill to swallow. Others, however, will no doubt reflect on the revolution that has also occurred in the English civil service and, with generous retirement terms, may count themselves fortunate.

Examples of action against government lawyers taken on an overtly racial basis appear to have been rare. While the influential South China Morning Post openly describes the outgoing Attorney General, Jeremy Mathews, as the “only senior official being forced out on racial grounds”, the controversial nature of his tenure may be gauged by the fact that the newspaper itself called for his resignation at least four times, while in 1990 the Bar Council itself voted for him to go.

At this stage, attempts at assessing the English legal profession's prospects can only be tentative. There is little doubt that Hong Kong will remain a highly sophisticated financial market and that, as a result, the largest English and US firms will continue to prosper.

China has committed itself to maintaining the principle of “one country, two systems” for the next 50 years, and there is a good prospect that English lawyers will play a major part in Hong Kong life for some time to come. There is, however, little doubt that they will do so in a changing legal landscape, one which even Mathews might find it hard to recognise in 15 years.