However, the vires of BA's exemption has not been challenged so far, and so long as that cxemption stands, it is difficult to see how one could justify using an Order now to exempt other British airlines even if it also applied to BA. To do so could be taken as indicating that we doubted the vires of BA's exemption and could lead to adverse allegations (or possibly even some sort of claim) by Valakera based on the detriment suffered by him as a result of the unlawful preference given to BA.
8. The best course,
if it were decided to accede to Laker's request, would seem to be for the Governor to exempt all British airlines by an amendment to the Hong Kong Regulations. If this should be challenged in the Hong Kong courts by any airline, HMG could let it be known that we would amend the 1969 Order to put beyond doubt the power of the Governor to grant such exemption. Such an amendment to the 1969 Order would probably have to be applicable to all our colonies but this would not seen to present any difficulties since it would not affect the status quo in the other colonies who would be free to decide whether to extend the present exemption in their regulations.
9. Doubts have sometimes been expressed as to whether the wording of BA's exemption covers the London-Hong Kong cabotage route. Although I think the wording does cover most of BA's scheduled services where Hong Kong is an intermediate stop (eg London-Hong Kong-Peking) or where services between London and Hong Kong make an intermediate traffic stop, I am doubtful whether it would cover London-Hong Kong services which do not make an intermediate stop at which traffic rights under an igreement are. exercised.
10.
If it is decided that any services between London and Hong. Kong should be exempt from Hong Kong licensing procedures, at least for the moment, I think that a replacement for Regulation 32 could be to the following effect:-
"Subject to the provisions of paragraph (3) of Regulation 22, nothing in these regulations shall apply to any British airline (as defined in Section 3(1) of the Civil Aviation Act 1971) in respect of its scheduled services".
This wording is based on the assumption that Hong Kong based airlines should remain subject to local licensing procedures.
11. If, on the other hand, it is decided that the revised regulations should apply to any services operating only on the cabotage route, the exemption for British airlines would need to read:-
11
•
..nothing in these regulations shall apply to
a British airline (as defined ...) in respect of
-3- COMINT DEUUTA 1.
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