The trial of Jimmy Lai, founder of the now-defunct *Apple Daily*, on charges of conspiracy to collude with foreign forces and sedition under Hong Kong's National Security Law (NSL) continues, with closing arguments resuming on November 18. The prosecution has argued that it does not need to prove a new agreement was made after the NSL's enactment, only that existing agreements continued. This stance highlights the increasing legal complexities for businesses operating in Hong Kong.

The case centers on allegations that Lai and others agreed to a series of actions, including calling for foreign sanctions against China and Hong Kong, before the NSL came into effect, and that these actions continued after its implementation. The prosecution contends that the continuation of these actions proves the conspiracy's persistence, making the defendants guilty. The trial was delayed due to severe weather conditions and the need for Lai to undergo cardiac monitoring.

This week features the closing arguments, where the prosecution has submitted written submissions exceeding 860 pages, addressing five key issues. These include the applicability of "frustration" in law, definitions of terms like "request," "sanctions," and "hostile acts," whether the prosecution must prove criminal intent in sedition charges, the criminal liability of corporate defendants, and responses to human rights issues.

Market Signals

Sector Impact: The continued tightening of media and expression controls in Hong Kong raises concerns about press freedom and judicial independence, potentially affecting businesses reliant on an open information environment.
Price Volatility: The outcome of the trial and interpretations of the NSL could impact investor confidence, potentially leading to market volatility.
Competitor Positioning Shifts: Regulatory concerns may prompt some businesses to re-evaluate their Hong Kong operations, potentially leading to shifts in regional business hubs.

Stakeholder Impact

Winners: The Hong Kong and Chinese governments are likely to view the prosecution as a necessary step to maintain stability and national security. Losers: Media organizations, journalists, and individuals in Hong Kong advocating for press freedom and democratic reforms are negatively impacted. International businesses may face increased operational risks and uncertainty.

Action Timeline

Immediate: Businesses should review their communication policies and data handling practices to ensure compliance with the NSL.
Short-term: Closely monitor legal developments, including the outcome of Lai's trial, to understand the practical application of the NSL.
Long-term: Companies may need to reassess their strategies and explore alternative regional hubs to mitigate risks.

Risk Assessment

Regulatory Risk: High, due to the broad and evolving nature of the NSL.
Market Volatility: Potential, if the trial outcome affects investor sentiment.
Geopolitical Tensions: High, as the case involves international relations and differing interpretations of national security and foreign interference.

Key Indicators

Signals for Market/Industry: The trial signals a more stringent regulatory environment in Hong Kong, impacting the media sector and businesses with international ties.
Leading Indicators: The outcome of the Jimmy Lai trial, any new interpretations of the NSL, and international reactions.

Regional Perspective

In the Hong Kong context, the case revolves around whether the continuation of alleged activities aimed at requesting foreign sanctions after the National Security Law's enactment constitutes an offense, even without a new agreement. This presents a significant challenge to the city's press freedom and business operations.

Immediate Implications

What Happens Next: Closing arguments are ongoing, and a verdict is expected that could significantly impact the application of the NSL.
Time-Sensitive Opportunities or Risks: Businesses should review their operational and communication policies to ensure compliance and avoid any misinterpretations under the NSL.

What to Watch

Leading Indicators: The outcome of the Jimmy Lai trial, any shifts in the interpretation or application of the NSL.
Expected Next Developments: This could include further legal cases related to the NSL.
Key Decision Points: The court's verdict in Lai's case will be a significant turning point.

Analysis

Jimmy Lai's trial serves as a test case for Hong Kong's National Security Law, particularly concerning charges of conspiracy with foreign powers. The prosecution's argument that the continuation of past agreements is sufficient for conviction, without needing new agreements post-enactment, suggests a broader approach to law enforcement. This approach could have far-reaching implications for freedom of expression and business activities in the city.