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E.R.
provisions of the British Nationality Act 1981 will apply. Thus the grandchild of an assurance holder born in the United Kingdom will acquire British citizenship "otherwise than by descent" at birth if he is able to do so under section 1 of the British Nationality Act 1981 i.e. by being born in the United Kingdom to a parent who is a British citizen or settled in the United Kingdom. A child born outside the United Kingdom (including Hong Kong) will be a British citizen under the British Nationality Act 1981 only if section 2 applies, i.e. he has a parent who is a British citizen "otherwise than by descent" (in which case the child becomes a British citizen "by descent") or he has a parent serving in Crown, designated or EC service (in which case he becomes a British citizen "otherwise than by descent").
Our Nationality Division have attempted to sketch this out in the attached charts. I hope this is helpful.
Yours eve
Goofy Stalller
G N STADLEN