Law Firms in Hong Kong Navigate Data Security Concerns Amid China’s Tightening Rules

Latham & Watkins, a prominent global law firm, has made a significant move to cut Hong Kong-based lawyers’ default access to the firm’s global database. This decision highlights the increasing concern surrounding the handling of confidential data in the legal industry, especially as China tightens its security rules.

According to a report by the Financial Times on Feb. 13, Latham’s Hong Kong lawyers will now require firm permission before accessing the international database, whereas they could previously see China files by default. This change means that in the event of a raid, law enforcement would only be able to access the Hong Kong and China databases, as shared by a source familiar with the matter with the Times.

The decision by Latham comes in the wake of China’s implementation of data restrictions last year and heightened scrutiny of businesses amid escalating tensions with Western countries. In a similar vein, Chinese authorities questioned employees at Bain & Co.’s Shanghai office last year, as confirmed by Bloomberg News.

“This move by Latham simply makes official what many people in Hong Kong across all professions and businesses were already doing,” remarked Robert C. Bata, a principal at advisory firm WarwickPlace Legal.

Interestingly, Dentons announced last year that it was separating from its Chinese operations to comply with the new data regulations imposed by China. These regulations empower President Xi Jinping’s administration to shut down or fine companies that mishandle sensitive information.

While some other US law firms with Hong Kong offices, such as Mayer Brown, Morgan Lewis, and Quinn Emanuel Urquhart & Sullivan, declined to comment on their measures, Baker McKenzie emphasized the importance of robust systems and controls to ensure compliance with local laws and regulations while safeguarding client data confidentiality.

As the landscape for US law firms in China becomes increasingly challenging due to various factors, including economic downturns, tightening security regimes, and heightened competition, some firms have opted to close their China offices and expand in Singapore. This shift is driven by Singapore’s strategic location and business-friendly environment for corporate clients.

Furthermore, Hong Kong itself is set to tighten its security regimes with the proposed legislation covering offenses like treason, sabotage, sedition, theft of state secrets, and espionage. This move aligns the city more closely with mainland China’s laws on state secrets and espionage, as reported by Bloomberg News.

In the face of evolving regulations and geopolitical tensions, law firms operating in Asia are navigating a complex landscape to protect sensitive information and uphold client confidentiality. The decisions made by firms like Latham & Watkins underscore the importance of adapting to changing circumstances while maintaining high standards of data security and compliance.