TNAG-0850-FCO40-1060-Future-of-Hong-Kong-New-Territories-leases-1979 — Page 192

Mr Cortazzi

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HONG KONG: NEW TERRITORIES LEASES

1.

The Governor of Hong Kong called on the Attorney-General at 12 noon on 18 July to discuss the proposed Order in Council (copy of latest version attached). Mr Rushford and I accompanied him. The meeting was arranged in the light of Mr de Winton's letter of 16 July to Mr Rushford indicating that the Attorney-General had doubts about Clause 3 of the draft Order and would prefer to see it omitted.

2.

The Attorney-General said that he had difficulty in under-

He feared that it would attract standing the purpose of Clause 3. criticism in Parliament on the following grounds:-

a) That it was meaningless;

b) That it was misleading (in the absence of any under- standing with the Chinese about the future of the New Territories after 1997);

c) That there was no reason to take such action now (since the clause would have no effect in law until 1997).

3. Sir M MacLehose made the following points in reply, and in answer to further questions:-

i) The terminal date in New Territories leases was likely

to act increasingly as a deterrent to new investment. He had been told by Chairmen of major multinational companies that while they were prepared to take the political risk of investing in Hong Kong, their lawyers were concerned about the value to be placed on assets if the leases concerned expired in 1997.

ii) Changing the leases into indeterminate leases was not

enough by itself. It was also necessary to remove any legal obstacle on the British side to the continuation of British administration in the New Territories after 1997. Otherwise there would be no real advance on the present position: it was not our intention to provide for a situation in which British administration would cease but the leases would continue.

iii) There could be no question of going ahead unless it was

clear that the Chinese would not object and were prepared for us to say so publicly. We would also make it quite clear that the action taken with regard to future administration was purely permissive and did not prejudice the position of the present or future Chinese Governments.

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