A perennial problem in the “One Country, Two Systems” model is the demarcation between “one country” and “two systems”. Balancing security with liberty is particularly challenging in HK when security is approached from a national legal-political system that does not share HK’s values on the rule of law, judicial independence, the court’s role, and the primacy of personal liberty. This paper proposes ways in which courts and related institutions can be strengthened to enable them to perform the crucial role of striking this balance. Principles for rationalizing Beijing’s exercise of the final interpretative power over the Basic Law are proposed. I also argue that the concept of act of state should be narrowly defined. Moreover, there are conflicts in the roles of the Secretary for Justice as simultaneously a politically accountable minister and the guardian of public interests; decisions on prosecution/ civil litigation should be left to independent officers.