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5.
It is obviously important to get the legal position clear. But in considering HMG's position, I do not believe that the political aspect can in practice be left aside (para 2 of your letter). The position would remain that obligations arising from Hong Kong would rest with the Crown. If the Government of Hong Kong ceased to be effective, there would be no other authority than HMG which could honour these obligations and politically it would be impracticable for Ministers to try to evade them. Obviously each item of any claim on the Hong Kong Government would have to be carefully considered. Some might be found to be unreasonable or legitimately transferable to some other body. But I would see great political problems about HMG arguing that, as a matter of principle, they were not liable for the debts of the Crown in respect of Hong Kong.
6. As you will appreciate this correspondence touches on an extremely delicate question. If it were ever thought in Hong Kong that HMG's commitment to the Territory might be qualified in the way that your letter implies it would have a devastating effect on confidence in Hong Kong. I have not consulted Ministers but I am at your disposal if you would like to discuss the question further.
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Dich Cipt
R D Clift
Hong Kong Department
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