TNAG-0867-FCO40-1077-Air-services-between-China--Hong-Kong-and-the-UK-1979 — Page 102

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Mr J C Northover, MAED (G63A/1) KAVKO #2 KESIS OPP. 51

2 3 APR 1979

Q:

PA

RECIS NY

HO.

CHINA: AIR SERVICES AGREEMENT

INDEX

No

J23.4

1.

Thank you for sending me across Mr Stables' letter of 26 March, and Mr Gardiner's minute of 28 March. (Mr Gardiner's request for further papers is being handled separately.)

2. I am not in a position to comment on the technicalities of the suggestions for amendments to the Agreement; these are essentially for the Department of Trade, yourself and Mr Gardiner (who may wish to clear any final draft, for Hong Kong/China points, with either Mr Rushford or Mr Darwin).

3.

a)

b)

I have the following general comments;

Article 17: the Chinese may well be willing to accept arbitration. Over commercial contracts, their line is to press for Chinese arbitration (which would be unacceptable to us for obvious reasons), but then to concede arbitration under either Swedish or Swiss law. If this is what we want, there is no reason why we should not redraft the Agreement as appropriate.

It might make it easier for the Chinese to accept unblinding of the Hong Kong/Peking sector, if we proposed a deletion of the "Note" to paragraph 2 of Annex I. The imbalance between paragraphs 1 and 2 (as now proposed by Mr Stables) makes it abundantly and crudely clear that we do not regard Hong Kong as part of China; if we could concede to the Chinese the right to pick up/put down passengers freely on the specified routes within this country, they would have no/Fedtsyident object to the unblinding of the Hong Kong/Peking sector.

4. The Department of Trade are now considering the more substantive issues discussed in Peking Telno 362. The question of submitting a redrafted text of the Agreement to the Chinese in advance of technical talks is not quite as simple as Peking suggest, as we want to press for changes in the body of the Agreement as well as in the Annex. I should be prepared to take Peking's advice on the extent to which we should forewarn the Chinese of our proposals; we certainly should indicate clearly that we have substantive (as well as -technical) issues to raise. There would seem to me no harm

in staking out our negotiating position in advance on all issues in some detail, either by stating the issues we want to negotiate, or by sending a revised text which takes account of substantive as well as technical amendments; if we do the latter, the Embassy will require briefing in case the Chinese come back to them in advance of the negotiating team's arrival. If we give the Chinese a revised text (which the Chinese will probably study and in the main accept) which takes account only of technical amendments, it may

subsequently be harder to shift them on the substantive issues.

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