TNAG-0379-FCO40-425-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 78

Foreign and Commonwealth Office London SW1

Mrs M E Hedley-Miller

Treasury

Telephone 01-

71

File

(59

PA

Your reverence

Our reference

Date

1 August 1973

59/ED

HONG KONG: CONSTITUTIONAL POSITION IN RESPECT OF

STERLING RESERVES

1. At our Meeting on 27 July I was asked for a ruling on the extent to which HMG can control the actions of the Hong Kong Government. You asked this in connection with a possible reduction by the Hong Kong Government of their Sterling holdings in London against the wishes of HNG.

2. Our view, which has been confirmed by the Department's Legal Adviser, is that constitutionally the Governor could be instructed by HM the Queen through the Foreign and Commonwealth Secretary to take any given course of action, with the important rider that this question cannot be looked at in purely constitutional terms since in practice this authority has not been exercised in recent years. Furthermore, politically, the imposition by HMG of a decision which went strongly against the advice of the Unofficial Members of the Executive Council and which necessitated the use by the Governor of his reserved power to override the Executive Council or of his Official Majority in the Legislative Council would have far reaching repercussions.

3. I also attach a recent Note we prepared on the constitutional status of Hong Kong which gives further background information on the constitution and the respective powers and composition of the Executive and Legislative Councils. I am sending copies of this letter and enclosure to David Holland, Catherine Pestell (FRD) and to Douglas Stone (Bank of England).

Enc:

SECRET

M A Goodfellow

Hong Kong and Indian Ocean Department