Hong Kong’s British Legacy – the Rule of Law

HK has best Rule of law in Asia: According to Someone who was Maybe Paid to Say That


Some HK “Consultancy” apparently surveyed expatriates and multinational companies with HK regional headquarters on the practice of the rule of law, and produced a report which said in part:

“With its priorities on commercial law, such as enforcing contracts and securities and exchange regulations, Hong Kong came out on top of a table of 12, which included Singapore, Taiwan, South Korea, Japan and China.”

Hong Kong was praised for its transparency . . . “The basic elements of a modern market economy, such as property rights and contracts, are founded on the rule of law. Without the rule of law, free-market principles cannot really function properly”, the report said. “The professionalism and independence of Hong Kong’s legal system is one of its biggest attributes.”

And there we have it, folks. Hong Kong has a rule of law that puts to shame everyone in Asia including China, Japan and Singapore.

If only that were true. 

House of the High Court in Hong Kong Let me first say I am a great fan of Hong Kong. I travel there often and I have good friends there. I enjoy the vibrancy and often look forward to the shopping.

But the truth is there is no finer place in the world to get yourself cheated blind by some company and have no court to protect you.

Hong Kong has never had good government or rule of law, in the sense that we in the West think of it, and from my experience it was badly mismanaged by the British in a multitude of ways.

Some basic civil protections may be fine, but the picture is very different when we refer to corporate law and the actions corporations can freely execute to take advantage of the civil population, and without recourse. And that is absolutely the legacy of the British. 

Under their rule, HK was a Wild-West corporate town where almost anything was acceptable, where the Robber Barons ruled and where probably most fortunes made were illegitimate.

I will provide you with a few examples from different sectors of Hong Kong business.

Hong Kong Real Estate scam

A prominent Hong Kong land developer constructed some luxury apartment buildings that were greatly hyped and greatly overpriced. Prospective buyers were comforted in their reluctance to pay such high listing prices by evidence that much of the project had already sold out at those levels and that the prices would soon be even higher.

Unfortunately, the sales were all fake. The developer had “sold” many of the flats to friends and acquaintances on the understanding that they had no liability and that the purchases would be unwound as innocent buyers took the bait.

Fortunately for the buyers, the scale of the deception was a bit too large and all the facts became public. This is one of only two cases I’m aware of (though I’m sure there are more) where the courts actually sided with the victims and permitted the subsequent buyers to void their contracts and receive full reimbursement.

Hong Kong’s Famous Mobile Phone Company Scam

One of Hong Kong’s more prominent citizens owns a mobile phone company that attracted a great many new customers by having agents standing on every corner and giving a “free” mobile phone to anyone over 16 with an HK ID card and willing to put a signature on a piece of paper.

Over the next few years the cries of complaint became almost deafening. Subscribers would receive huge bills with no information on how or when the charges were assessed. No subscriber had a copy of a contract and apparently no subscriber was successful in determining the schedule of fees being charged by the company.

Eventually the matter ended in court, the many plaintiffs depending on Hong Kong’s famous “rule of law” to protect them. And sure enough, the court ordered the company to provide each customer with a copy of the contract so they could know the basis for the charges and fees.

Some two years later, if memory serves me correctly, the subscribers still had received no contract and the matter was back in court. Again, the court ordered the production and distribution of the subscriber contracts. A year later, still no result and the matter was again in court. The court again demanded the company comply.

Some time later, each subscriber received their contract as demanded by the court. Unfortunately, the mobile phone company took the 4-page contract, shrunk the type to a size so small that the entire 4 pages could be printed on one side of a piece of A-4 paper, and printed it on grey paper with pink ink. Totally unreadable by man or machine.

Back in court, the company claimed to the judge that it was “just trying to save trees”. To my best knowledge, that was the end of the matter.

Richard Li’s shareholder vote

Authorities are reportedly investigating PCCW chairman Richard Li’s failed $2.1 billion bid last year to buy out the company, Hong Kong’s leading phone carrier. The takeover deal conceived by Li has been labelled as “nothing less than dishonesty” by a judge.

Mr Li, the younger son of Li Ka-Shing, the Hong Kong tycoon who is one of the world’s 20 richest men, made a HK$4.50-a-share offer for telecoms company PCCW. The intent was to buy out the minority shareholders. The offer was condemned by Justice Anthony Rogers, who ruled that a shareholder vote on the bid had been rigged and that the wishes of small shareholders had been infringed.

According to Hong Kong law, a majority of voters is necessary for these bids; Li did not have a majority. News reports tell us that Francis Yuen, a senior member of Mr Li’s buy-out group, instructed a manager at Fortis Insurance Asia (a firm once controlled by Li) to distribute 500,000 PCCW shares to 500 of the company’s employees. Mr Yuen’s secretary distributed proxy forms for the new shareholders at her office and the Fortis employees then voted in favour of the takeover, tipping the balance for the deal to go through.

It is significant that, according to reports, neither Mr Li, nor his company PCCW, nor Fortis, nor any of Fortis’ executives have any knowledge of the affair.

The above episodes are perfect examples of the open contempt in which “the rule of law”, “public protection”, “shareholder’s rights” and much more, are regarded in this British prize of capitalism and the rule of law. From these events, the consensus is that Hong Kong’s reputation for having a level playing field for business has suffered a severe beating.

Nathan Road – The “Golden Mile” – Hong Kong’s Shoppping Heaven

The area of Nathan Road is perhaps the most famous and well-known of all Hong Kong’s shopping and tourist areas. It also very likely has the highest concentration on the planet of thieves and small-time criminals masquerading as shop-keepers.

The criminality of this area is legendary, and has been so for decades. In a 12-month period, the number of tourists who are badly cheated must number in the hundreds of thousands, but the Hong Kong authorities, with their high regard for the rule of law, seem uninterested in investigating.

The scams are ingenious.

Illegal Shops on Nathan Road – Hong Kong’s “Golden Mile” Prime Shopping Area You decide on a purchase and the clerk asks you to pay in advance, preferably with cash so as to preserve your huge “discount”. You give him the money and he goes into the storage room to get your item.

You become alarmed when he doesn’t return after 20 minutes, and ask someone for help, only to be told that no staff member fits the description you provide, and the store has no idea who took your money. Sorry.

You examine an expensive new camera and decide to buy it. You pay for your purchase, take the box back to your hotel and discover it contains a cheap 5-year-old version of a different model that is worth perhaps 10% of the price you paid.

Of course, you return to the shop to complain – but the owner tells you there’s nothing he can do because you could have made the exchange yourself and are trying to cheat him. 

You want to buy an ipad. This should be easy because an ipad is an ipad is an ipad, the only difference being the amount of memory. And fortunately for you, the shop has a huge discount on ipads – too good to be true. But unfortunately you discover that the model on sale has no internet connection and contains menus in only the Cantonese language – which neither you nor anyone in China will understand. So what you want is the “International Version” which costs about twice as much.

If you’d done your research you would have known there is no “International Version”, that all ipads have wi-fi ability and menus in 50 or 60 languages. But if you didn’t, and if you’re gullible, you just wasted a lot of money – on a product that may not be legitimate and in any case has no warranty.

To my best knowledge, there are no shops anywhere on Nathan Road that are licensed resellers of any brand-name goods. Moreover, none of them have any stock; they carry only factory samples of popular goods. If you want to buy an item, a clerk will tell you he’s going “to the warehouse to get you a new one”, but he’s actually going to an unlicensed distributor to pick up either a grey-market item or a fake one. And that’s why they want you to pay in advance.

Countless thousands of tourists have purchased an Apple product or a mobile phone only to discover the “brand” exists only on the outside casing and that the inside is replicated junk.

A man operating on Nathan Road has a stable of some 20 to 30 shills – mostly refugees from the Middle East or Africa – on a tourist visa – all pretending to be tailors offering you a great discount on one of Hong Kong’s legendary high-quality suits.

He will take you to a one-room walkup containing expensive fabrics and photo catalogues from which you will select your dream suit. Naturally, at this low price you must pay in advance.

The suit that is delivered to your hotel just before you rush to the airport will be a poorly-fitting $100 piece of polyester, and if you have time to complain, your “tailor” is nowhere to be seen – and anyway has never seen you before in his life.

These stories about Nathan Road are available on countless travel websites, with stories that sometimes make you want to cry. The Hong Kong authorities have long known of these activities and could shut them down in a day. But they don’t.

Let’s not be too Hard on China

Today, China is everyone’s favorite whipping boy for copied DVDs, and, to hear Hillary Clinton’s friends tell it, that’s because the Mainland Chinese are all thieves while Hong Kong is “democratic” and “free” and follows the “rule of law”. But that viewpoint isn’t exactly correct.

The fake and copied DVDs (and many other products) began their lives in Hong Kong, not in Mainland China. And even today, the factories may be in China but the owners are now and have always been in Hong Kong. They shifted their factories across the border when Hong Kong reverted to China and access to the lower-cost labor became easier.

It is so infuriating to read the incessant articles today in the Western press, condemning “China” for the copies of DVDs and various luxury goods, but these items have been openly on sale in Hong Kong for 20 years or more, and never a peep from the NYT or the Economist, and certainly not from the US Secretary of State or Commerce Minister.

Hong Kong was a “democracy” and they were “on our side”, so all the copying was overlooked – in the same way that Saudi Arabia’s 2011 flood of beheadings somehow escapes the attention of the Western media in favor of condemning China for not wanting a population explosion. The hypocrisy is deafening.

There is a long list of well-known Hong Kong businessmen, socialites, wealthy entrepreneurs, who all made their money in illegal activities. And it was the British-installed and maintained legal system that permitted them to do it. That is the legacy of the British “rule of law” in Hong Kong.

Once again, under British rule, Hong Kong was a Wild-West corporate town where almost anything was acceptable, where the Robber Barons ruled and where probably most fortunes made were dishonest and illegitimate. It hasn’t changed all that much.

It is so tiresome to hear the democracy do-gooders, especially from the US, displaying their abysmal ignorance and simple-mindedness by crowing about how Hong Kong is such a success because it has democracy and “freedom” and “human rights”. The truth is otherwise. Hong Kong prospered because theft was legalised, because large corporations could rob the small ones and all corporations could fleece the public at will – and with the full protection of the British court system.

The Origin of British Hong Kong

You may not know this, but Hong Kong (as a colony) was founded by the British specifically for a life of crime. When Britain gave the Jewish Sassoon family the exclusive franchise to distribute opium in China, the family needed a base of operations for the importing, processing, packaging and distribution. Hong Kong was forcibly “leased” solely for the Sassoon family’s opium business.

Britain had an insatiable appetite for Chinese tea, but the Qing Dynasty and its subjects did not want to buy anything that the British produced. The government of Queen Victoria did not want to use up the country’s reserves of gold or silver in buying tea, so it decided to forcibly export opium from the Indian Subcontinent to China. The opium would then be exchanged for tea.

China’s government, not too surprisingly, objected to the large-scale importation of narcotics into their country by a foreign power, provoking Britain to declare war. This was the bloody origin of Hong Kong’s 155 years as a British colony.

And, though I hate to say this, the same British rule of law that drove Hong Kong then, still drives it today.

And the Origin of British Hong Kong Banking

After the British established Hong Kong as a colony in the aftermath of the Opium Wars, local merchants felt the need for a bank to finance the growing opium trade with China, so they established (by special permit from the British) the Hongkong and Shanghai Banking Corporation – HSBC today – “The World’s Bank”. This is the same bank that almost 30 years ago built the world’s most expensive building as their head office in Hong Kong – 1 billion US $.

And the ubiquitous American Connection . . .

Warren Delano was a senior partner in Russell & Company, whose ships carried the opium that was imposed on China.

Delano said he could not pretend to justify the opium trade on moral grounds, “but as a merchant I insist it has been . . . fair, honorable and legitimate,” and no more objectionable than the importation of wines and spirits to the U.S.

He returned to America a rich man, and gave his daughter Sara in marriage to a James Roosevelt, the father of Franklin Delano Roosevelt, the American President. Neither side of the family talked much about the source of their great wealth.

Obtained from bearcanada.com

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