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5. We accept that "undetermined" might be too vague a term for the period of a lease, and agree that the alternative you propose of "for so long as the Crown administers the Territories", (ie essentially your 5(d)) has the merit of stating the position clearly and according with what everyone knows to be political reality. I hope we can all agree with this as the formula on which we should work.
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6. If so, I understand we are also agreed about the need for legislation to cover the grant of leases for a period which has no predetermined length. The only point at issue is whether legislation in Hong Kong which will be necessary in any case should be backed by an Order-in-Council in London. As you know our own legal advice here is that such backing would be necessary; however I naturally defer to the FCO view that under international law this is not strictly necessary, that is to say that if we so acted and were challenged in Court we would win. Politically, however, it is highly desirable to leave no opening for somebody even to claim that the Hong Kong Government is acting beyond its powers, and this could only be ensured if the Hong Kong Government was covered by UK legislation. There would also be advantage in demonstrating that HMG were behind the Hong Kong Government's action.
1.
I quite understand there may be reluctance to legislate in the United Kingdom, and that the contingency of a legal challenge, at least until 1997, may appear fanciful. But I am advised that the latter is not so and that almost immediate challenge could not be excluded, because, for instance, of the implications for the value of leases. In view of the sums involved I could well understand a prudent purchaser seeking a court ruling if there were the slightest doubt. And then there is also the possibility of action by cranks, etc. There is a note on the possibilities by the Acting Attorney General at Annex A.
8.
For these reasons I very much hope that the Department will agree to recommend a covering Order-in- Council.
9. Peking might also like to comment on whether the CPG would be likely to prefer initial action in the UK, or a situation in which Hong Kong appeared to be acting on its own I say "appeared" because of course all Hong
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