What Hong Kong’s New National Security Laws Could Mean For Telstra

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Sweeping new national security laws have passed in Hong Kong, raising concerns the region is no longer independent of the Chinese government. Given a number of Australian companies, like Telstra, have operations set up in the busy, financial zone, it’s set to make things complicated.

The Hong Kong national security law came into effect on June 30. The contents of the law were unknown until the Chinese government passed it, bypassing the Hong Kong Legislative Council. It makes things like secession from China, state subversion, terrorism and collusion with enemy foreign agents illegal and punishable by Chinese law.

The laws have been heavily criticised by Western governments and experts, saying that it unravels the existing ‘one country, two systems’ agreement that had been in place since the end of British rule in 1997.

While there are security concerns for those involved in the region’s protests, it’s also foreign companies, which hold information and user data linking online identities to real-life people, that are at risk.

Telstra’s working through Hong Kong law ‘implications’

Associate Professor Jeanne Huang, an expert on international commerce law at the University of Sydney, says the law affects two types of operations for foreign companies — content providers, like YouTube and Facebook, and companies that have data centres there, like Telstra.

For content providers, it means they’ll now have to comply with any directions from the Chinese government to remove offending content for users in the region. For data centres, it means they’ll have to hand over any financial or email data processed through the servers if under investigation.

Gizmodo Australia asked Telstra how the laws might affect its data centre located in Hong Kong and whether it was making plans to shift operations outside of the zone.

“We are working through the implications of the new laws,” a Telstra spokesperson told Gizmodo Australia. It declined to provide any further details.

That data centre is a part of its Colocation offering, which provides business customers with a remotely-located cloud solution.

Tech companies reviewing Hong Kong operations

The laws have been in effect for less than a fortnight but other tech companies have already signalled concern about the changes in Hong Kong. Microsoft confirmed to Agence France-Presse it would pause any data requests from Hong Kong authorities, joining Zoom, Google, Twitter and Facebook.

But Professor Huang said the situation is made more complicated for Australian companies thanks to the Australia-Hong Kong Free Trade Agreement, which came into effect in January 2020.

In a specific section of the agreement, Professor Huang said it allowed Australia and Hong Kong’s financial regulatory authorities “immediate, direct, complete and ongoing access to information” between an Australian and Hong Kong-operating financial service for “regulatory and supervisory purposes”.

She explained this was now a vague loophole that needed tightening up given the Chinese government could also access this information.

“The Australian government should insist on a narrow definition and exclude national security violations from the scope,” Professor Huang said.

“The Australian government may refuse to provide access to financial data processed in Australia to the Hong Kong financial regulatory authority for legitimate public policy objective [but it] may need to clarify whether supporting the democratic movement in Hong Kong is a legitimate public policy objective … so as to provide certainty to Australia data centres and financial institutions who do business with Hong Kong.”

Laws could see a tech exodus from Hong Kong

Ultimately, the laws are concerning enough that many foreign-operated companies will simply shift operations out of Hong Kong.

“Data centres [and] internet content providers that favour the democratic movement in Hong Kong are likely to move their service outside of Hong Kong to countries that do not have an extradition treaty with HK or that may not extradite them to Hong Kong for violating [the new law],” Professor Huang said.

The Australian government has yet to publicly announce any changes to how companies operating in Hong Kong interact with Australian data. It did confirm, however, it was looking to attract them to shift operations to Australia.

“We know that there are over 1,000 international businesses who have their regional headquarters presently in Hong Kong and we also know that many have already signalled that they’re looking to relocate elsewhere in the world,” Alan Tudge, Minister for Immigration, said in a press conference on July 9.

“This includes media businesses, financial services businesses, large consulting businesses, which have already signalled that they’re looking elsewhere and we want them to look to Australia.”

Given many businesses and governments were blindsided by the law’s passing, it’s a game of catch up Telstra and many others are in the process of playing.