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But we must not expect them to do, or acquiesce in, anything which runs counter to their official line on Hong Kong (which is, in brief, that Hong Kong is Chinese territory temporarily occupied by Britain; that the three nineteenth century treaties under which Hong Kong was ceded to Britain were "unequal" and therefore invalid; and that (in the words used by Mr Huang Hua to the Prime Minister on 11 October 1978) the problem "should be resolved in due course through negotiations").
5. Against this background, the solution at which we have arrived, after extensive correspondence with the Governor and HM Ambassador in Peking, is to issue future leases in the New Territories without a fixed term, valid "for so long as Her Majesty may administer the Territories", and to convert existing leases into indeterminate leases of the same kind. This solution would require legislation in Hong Kong since leases of indefinite length are unknown in Common Law. We have agreed at official level that there would also have to be a covering Order in Council in the UK. In strict legal terms legislation in the UK could be held to be superfluous, since the Crown possesses full sovereign rights over the New Territories in international law, and under the Letters Patent the Governor could grant leases for terms expiring after 1997 while the local legislature could make provision for the grant of indeterminate leases. But there are very strong political arguments in favour of an Order in Council, firstly to make it clear beyond doubt that the proposed action has the full backing of the British Government; and secondly, to reduce the risk of a damaging challenge to the Hong Kong legislation in the local courts (the circumstances in which such a challenge might come about are listed in a separate note).
6. A draft for the Order in Council has been prepared in close consultation with the Governor, Mr Cradock in Peking and the Department's Legal Adviser. The text is attached, together with an explanatory note. The wording is generally consistent with the stated Chinese position on Hong Kong, and has been kept as simple as possible to facilitate explanation to the Chinese. I believe
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