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awkward decisions being taken by either side on the question of sovereignty, and I suggest that we should keep this possibility in mind.
8. If Options C or D proved acceptable and really did, as at present envisaged, involve relinquishing sovereignty while retaining administration it would be advisable to spell out in agreement with the Chinese what that meant. Who would in practice conduct, and be responsible for, Hong Kong's inter- national relations? Would we, for example, try to agree a solution on the lines of the one used in respect of the Persian Gulf states when, as our protected states, the sovereign had responsibility for international relations but the UK conducted them? Would the inhabitants continue to hold and acquire British nationality? Would we have sole responsibility in practice for internal administration? Would border controls con-
tinue to be exercised, and if so where?
9. It is premature in my view to attempt to consider in any detail the domestic mechanisms of how we would give effect to an agreement with the Chinese, when we have not even worked out in any detail what kind of agreement we wish as a matter of policy to negotiate. Since, however, it seems likely that a change in our position on sovereignty would be involved under Options C or D an Act of Parliament would be necessary, and this might prove to be the most appropriate vehicle to give effect to whatever other changes in the law and constitution of Hong Kong were needed in order to implement the arrangements agreed with the Chinese.
10. If you would like to discuss any of these issues further with Sir Ian Sinclair and myself I would be glad to arrange a meeting.
7. Bunows
cc: Sir I Sinclair
Mr Donald FED
F Burrows
Legal Counsellor
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