US law firm Latham & Watkins is cutting off automatic access to its international databases for its Hong Kong-based lawyers,

Financial Times

US law firm Latham & Watkins is cutting off automatic access to its international databases for its Hong Kong-based lawyers, in a sign of how Beijing’s closer control of the territory is forcing global firms to rethink the way they operate.

The world’s second-highest-grossing law firm has told staff that while Hong Kong will have access by default to China documents, from this month they will not be able to see other content in its international databases unless specifically given permission, according to two people with knowledge of the matter.

The move underscores the growing difficulties for global companies operating in a city that made its name as an international financial hub. It comes after Beijing introduced new anti-espionage and data laws restricting information flows out of the country.

The law firm’s policy cuts off Hong Kong lawyers from default access to content in its US, Europe, Middle East and Asia databases.

Latham & Watkins is now “treating Hong Kong as the same as mainland China”, one of the people said, as US firms grow wary over Beijing’s closer control of the territory. The law firm declined to comment.

It is already considered best practice to wall off confidential client data, restricting access only to those who need to see it. However, the change will mean staff in Hong Kong no longer have default access even to non-private files from outside China.

Latham & Watkins is also separating its Hong Kong office database from the rest of Asia — its offices in Seoul, Singapore and Tokyo — to create a new “Greater China” database shared with the Beijing office, the people said.

“There’s definitely a concern over the new [Hong Kong security law] . . . that essentially puts Hong Kong data laws on par with China’s,” the first person added.

Hong Kong last month unveiled its proposals for a new security law that would step up scrutiny on data and “state secrets” after China strengthened its data and anti-espionage laws.

“What it means is if you have . . . raids in Hong Kong, law enforcement [can only] access Hong Kong and China databases,” the second person said.

The Los Angeles-founded firm last year closed its Shanghai office, moving staff from there to Beijing. It said at the time that China was still “an important market” and an “integral part of our practice in Asia and globally”.

It has also in recent months asked staff not to take their work laptops on trips to mainland China, two people added.

Last year, professional services companies Deloitte and KPMG advised some of their staff to use burner phones when visiting Hong Kong. 

Beijing’s political crackdown on Hong Kong, with a sweeping national security law imposed on the city in 2020, has silenced dissent, curbed civil freedoms and dented the once freewheeling territory’s appeal for foreign investors and businesses.

The US in 2020 revoked the city’s special trade status as a result of the imposition of the security law, saying the territory was no longer considered autonomous enough to be treated differently from mainland China.

Many foreign companies have reduced their presence in Hong Kong or moved their headquarters functions away from the territory — a move also partly prompted by three years of a tough zero-Covid policy and then a slow economic revival in the city after the pandemic.