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Substance
5.
All land leases granted in the New Territories have been written to expire three days before 1 July 1997. So long as other aspects of the commercial environment in Hong Kong remain stable, owners and potential owners of land seem prepared to take the risk of China's political intentions. But the shortened span of their land leases under British law, and our inability to grant leases either with a terminal date after 1997, or (for legal reasons) without a specific terminal date at all, is becoming an increasing point of concern (eg to accountants) and a deterrent to some new investment. It is not yet acute, but is bound to become so sometime in the next four or five years, and something could suddenly project it as a major issue of confidence. We therefore need to do something to bring expectations of tenure under British law into line with political expectations under the Chinese official line (while of course not explicitly giving up existing rights under the Lease for what they are worth). The Chinese line on Hong Kong is that the problem will be solved by negotiation "when the time is ripe" - a formu la conveniently devoid of a date tag.
6. We are agreed that, with the prior agreement of the Chinese, we should therefore in future issue leases of undetermined length and convert existing leases expiring in 1997 to leases of undetermined length, and that this:-
Requires legislation in Hong Kong, since there is no such thing as a lease of undetermined length under Common Law, and
a)
b)
c)
d)
that this legislation should be covered by an empowering Order-in-Council in the United Kingdom. Though this could be held to be superfluous under international law, weagreed that it is highly desirable politically in Hong Kong and would be better understood by Peking. Moreover
the Order-in-Council should make clear that the Hong Kong Government would be acting within its legal rights in legislating for a future beyond 1997.
The object of (b) and (c) would be to underpin the legality and significance of (a) and to eliminate the possibility of the validity of the new leases being challenged in the Hong Kong court s as being ultra vires so far as they might relate to a period after 1997.
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