Reference
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Hove confurum.
27.
Xm $8 'MAES ond furt
Gist: Mely the King of this province Bui
Miss Stoddart!! MAED
RECEIVED, IN RESISTRY NO.
16 AUG 1979
LONDON HONG KON
DESK OFFICER INDEX
REGISTRY
PAI
Acton Taken
17/18
AIR SERVICES:
110/vm
1.
I agree with the view in paragraph 2 of Mr Aust's minute of 9 Augus to Miss Stoddart that there are grounds to doubt whether section 4(3)(b)* of the 1971 Act envisages an effect on relations between the United Kingdom and one of its overseas territories as a basis for directions to be given under that subsection. Although the Department of Trade has not raised the problem in the present context it was because it has previously been mooted that I recorded in my minute of 2 August that whether the circumstanoes set out in section 4(3) had arisen was a matter "which has not been disputed in this case so far".
2.
+
However, I think the requirement of the subsections may be met on grounds connected with the relations of the United Kingdom and one or more foreign countries. (which may be why the Department of Trade did not raise the issue). Although we refer to the route as being "the london-Hong Kong route", services go through one or more points which are not in UK territory. British Airways select up to three intermediate points out of about ten points on each of its ten services a week to Hong Kong. The availability of each such point is governed by a bilateral Agreement and in many cases the frequency of service, size of aircraft and thus the amount of traffic may also be regulated by a confidential memorandum of understanding.
3.
My understanding is that none of the present applicants could fly from London to Hong Kong without using one or more intermediate points. This could involve negotiation with other States if a change in an Air Services Agreement or a confidential memorandum of understanding were required. That Cathay Pacific (CPA) is Jong Kong based could be of significance in making any such arrangements. Already has had a significant effect on our aviation relations with China in that one of the two principal problems that occupied the last four weeks of the recent negotiations was the possibility that CPA might fly between London and Hong Kong coupled with the Chinese requirement that the British airline for the regional routes be based in Hong Kong.
4.
More generally, it has been the consistent argument advanced by UK delegations in negotiations involving rights to be used by CPA that CPA in as much a British airline as BA, BCAL or Laker. It is true that that argument is for external purposes while the 1971 Act regulates applications for licences in the United Kingdom, but the distinotion, admittedly quite clearly expressed in the Act, may now receiveQ much wider attention and could undermine the UK position in future negotiations.
5.
Whether these are significant factors in the present context is a matter of fact and policy, not law. The papers do not disclose whether such possible effects would have any actual bearing on UK policy on the London to Hong Kong route. However, I think there clearly could be grounds for the view that the distinction made between CPA and other "British airlines" bears on foreign relations and should not be a factor in the CAA's consideration of this case.
6.
I am uncertain whether the directions proposed would not be those envisaged by Parliament in that their purpose would be to amend the definition of "British airline" for the purposes of one application to the CAA. The last words of section 4(3) of the 1971 Act make it clear that Parliament accepted that directions could conflict with any requirements of the Aot (except section 4 itself) and
RESTRICTED
/would