TNAG-1270-FCO40-1620-Financial-policy-in-Hong-Kong-1983 — Page 51

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RECEIVED IN REGISTRY

20 OCT 1983

DESK OFER INDEX

SECRET

PA

on Taken

Fle

(75)

Foreign and Commonwealth Office

London SW1A 2AH

14 October 1983

J S Beastall Esq

HM Treasury Whitehall

SW1

Dear Jonn,

HONG KONG: HMG'S LIABILITY

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inchine

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171

1. Thank your for your letter of 4 October. I apologise for the delay in replying.

2. We have consulted our Legal Advisers. The formula to which you refer (which as you will remember was discussed with you when the Study of August 1982 was prepared) was not produced by them. They did concur in it but the second sentence involves a political judgement.

3. On the legal position, our present legal adviser considers that "financial obligations of the Hong Kong Government" are in law the debts of the Crown, acting in right of Hong Kong. It is, correct that the Crown has in the same capacity reserved the right to legislate in respect of Hong Kong (Article IX of the Letters Patent). In that sense it is free to legislate under the royal prerogative at any time and acting in right of Hong Kong, in order to establish from which particular resources those debts are to be discharged. However, such prerogative legislation in right of Hong Kong could not be used to require resources of HMG in the UK to be used to discharge the Crown's debts in respect of Hong Kong. Nevertheless if the resources falling within the Crown's control in right of Hong Kong were to become exhausted the Crown's debts would still subsist, even though it would have no legislative powers under the royal prerogative to provide for their satisfaction.

4.

Proceedings in the UK courts to recover such debts could be blocked by a certificate from a Secretary of State, given under S.40(3) of the Crown Proceedings Act 1947, to the effect that the alleged liability arose otherwise than in respect of Her Majesty's Government in the United Kingdom. But even if such a course was politically acceptable it would not dispose of our legal difficulties. If, for example, any debts were owed to foreign nationals or under treaties, and were dishonoured, the UK could incur international legal obligations to pay compensation.

SECRET

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