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English law governs succession to immovable property. In any proceedings with respect to land in the New
Territories, however, the Courts have power to recognise
and enforce Chinese custom."
It might be worth asking whether the provisions mentioned in the last sentence of the above quotation could have any bearing on the possible extension of leases in the New Territory beyond 1 July 1997.
6. In conclusion I should like to turn to the broader question of the advisability and timing of securing legislative authority for leases of indeterminate length. I doubt, with respect, whether PRC silence - or low key reservations in the face of any such move as the granting of leases of indeterminate length by the Hong Kong Government will greatly influence the plans of potential investors in the Colony. My own belief is that anybody who puts his money into Hong Kong realises it is a gamble where if he is unlucky the odds could turn against him almost overnight at the whim of the PRC Government, legal niceties and tacit understandings notwithstanding. The only encouragement offered by the possession of such a lease to an investor would be the possibility that, if dispossessed by the PRC, he might be able to claim some compensation from the UK Government. On the other hand he might even be discouraged at the prospect of such a lease by the fear that it might be terminated before 1997 - perhaps by the Hong Kong Government itself without satisfactory compensation. Such uncertainty would scarcely be conductive to the establishment of business confidence in the Colony. Complete agreement in advance with the PRC on the envisaged action over the leases in the New Territories is clearly essential. Failure to secure this might lead to such a move's being interpreted, by either the Hua/Teng government or a less amenable successor, as a challenge to restate their position in a fashion which could have a more serious impact on confidence in the colony than a failure to revise the present lease holding arrangements. Another danger of raising the leases issue with the PRC is the inevitable risk that we might be drawn into discussion of wider and more sensitive issues relating to Hong Kong which we might prefer to avoid - at least until nearer the 1997 deadline. If one of the concerns of the Hong Kong Government is what legal basis an authority would have after 1997 in the event that Peking still did not regard matters "ripe" for settlement, this too is a question which is possibly best tackled later rather than sooner. The above mentioned considerations therefore lead me to suggest that we must reflect very carefully on all the possible consequences of raising this question with the PRC
and to bear in mind that it might be in our interest to postpone such an approach until 1985 or even later.
19 July, 1978.
OM O'Brien
Far Eastern Section Research Department
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