TNAG-1769-FCO40-2523-Hong-Kong-mergers-involving-banks-and-other-financial-instit-1988 — Page 109

Mr Peter Morris

Hong Kong Department

MKC

МКС 20213

02/3

FROM : Mr P Fifoot

Legal Advisers

DATE : 13 June 1988

Jel &

RAINIER INTERNATIONAL BANK (TRANSFER OF HONG KONG UNDERTAKING) BILL 1988

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1. I have received a further letter of Linklaters & Paines and you have now received the letter promised by Mr Alcock. My concern about extraterritoriality remains.

2. The problem is this. In order to avoid legislation by a colonial legislature coming unstuck because it purports to have extraterritorial application, it is necessary for there to be some "territorial connection" with the matters affected by the legislation. I am quite prepared to accept that that provides a fairly wide form of connection and we acted on this basis in the Deutsche Bank case. In that case the Hong Kong ordinance provided for the vesting of that "part of an undertaking" of a foreign corporation which was governed by Hong Kong law, the transfer of which was governed by Hong Kong law or "was derived from the Hong Kong business" of the bank. The nexus under the first two elements is clear. The third element (derived from the Hong Kong business) could encompass transactions which were not covered by the first two elements so long as a court was prepared to agree that they were part of the Hong Kong business.

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3. What are we being asked to accept in this case is anything done by the Hong Kong branches of Rainier (a foreign corporation) has a Hong Kong connection. No doubt it does have such a connection in the sense that it is recorded in the books of a relevant branch. But it is conceivable that the Hong Kong branch could have been used to do business say in Singapore which is, in no sense, connected with Hong Kong. In short, the business of a branch in Hong Kong of a foreign bank is not automatically Hong Kong business. I have no means of judging on the facts of the case, but I am apprehensive that if we were to agree to the present formula, we would be taking a change or rather we should be authorising Hong Kong to take a chance. I would therefore prefer it if the definition of "Hong Kong undertaking" in clause 2 (1) were amended to include the same restrictions as are set out in section 4 of the Deutsche Bank Ordinance. Our possibility would be to insert after the word "therefrom" in the fifth line of the definition the words "being business, properties and liabilities of the definition which is governed by Hong Kong law, the transfer of which is governed by Hong Kong law or which is derived from

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