TNAG-2027-FCO40-2889-Hong-Kong-freezing-of-Kuwaiti-and-Iraqi-assets-1990 — Page 115

0405507

LNMDAN 2977

CONFIDENTIAL

HMLNAN 5354

DD 04090OZ FCOLN

FM HOKON TO FCOLN

040515Z AUG

GRS 458

CONFIDENTIAL

UK COMMS ONLY

FM HONG KONG

TO DESKBY 040900Z FCO

TELNO 2437

OF 040515Z AUGUST 90

HKB 020/26

RECEIVED IN

SK

14 AUG 1990

INDEX

352

INFO IMMEDIATE WASHINGTON, GIBRALTAR, GRAND CAYMAN, GRAND TURK INFO IMMEDIATE HAMILTON. PLYMOUTH. TORTOLA

SIC

FOR IRAQ/KUWAIT EMERGENCY UNIT.

YOUR TELNO 1470: FREEZING OF KUWAITI ASSETS IN HONG KONG

WE DO NOT FEEL THAT THE COURSE OF ACTION SUGGESTED IN PARAGRAPH 1 OF YOUR TUR IS APPROPRIATE.

2. THE USE OF THE GOVERNOR'S EXISTING EMERGENCY POWERS MAY ONLY BE CONTEMPLATED IN CIRCUMSTANCES WHERE THE GOVERNOR IS SATISFIED THAT A PUBLIC EMERGENCY EXISTS IN HONG KONG. THEY ARE CLEARLY THERE FOR USE WHERE THERE IS A THREAT TO PUBLIC SAFETY, THE DEFENCE OF THE TERRITORY. THE MAINTENANCE OF PUBLIC ORDER AND THE SUPPRESSION OF MUTINY, REBELLION AND RIOT, AND MAINTENANCE OF ESSENTIAL SERVICES. CLEARLY. NO SUCH STATE OF AFFAIRS EXISTS,

3. YOU SUGGESTED HONG KONG LEGISLATION SHOULD FOLLOW THE PROVISIONS OF THE EMERGENCY LAWS (RE-ENACTMENTS AND REPEALS) ACT 1964. THIS LEGISLATION CONFERS A GENERAL POWER TO ACT IRRESPECTIVE OF THE COUNTRY OR TERRITORY FROM WHICH THE DETRIMENTAL ECONOMIC ACTIVITY EMANATES. THE INTRODUCTION OF SUCH LEGISLATION HERE COULD BE REGARDED BY PRC AS AN UNWELCOME ATTEMPT BY HK GOVERNMENT TO BRING IN LEGISLATION NOW, WHICH WILL CONTINUE TO TAKE EFFECT AFTER 1997. AND WHICH RELATES TO FOREIGN AFFAIRS. THE RIGHT TO ENACT SUCH LEGISLATION AFTER 1997 IS OF COURSE IN THE HANDS OF THE PRC UNDER ARTICLE 19 OF THE BASIC LAW.

4.

AN ALTERNATIVE ROUTE COULD ARGUABLY BE TO INTRODUCE LEGISLATION SPECIFIC TO KUWAIT'S ASSETS IN HONG KONG. BUT THIS STILL RAISES SERIOUS ARGUMENTS RELATING TO EXCHANGE CONTROL. SUCH LEGISLATION WILL BE SEEN AS A DANGEROUS PRECEDENT INVOLVING THE INTRODUCTION OF EXCHANGE CONTROL MEASURES AS A RESULT OF POLITICAL EVENTS ON A MATTER OF LITTLE DIRECT ECONOMIC SIGNIFICANCE TO HONG KONG. AS YOU KNOW, ONE OF THE MOST IMPORTANT PROVISIONS IN THE JOINT DECLARATION IS THAT THERE WILL BE NO EXCHANGE CONTROL IN HONG KONG. WE DO NOT WISH TO UNDERMINE THIS CONCEPT IN ANY WAY PRIOR TO 1937. WE ARE SURE THAT THE FINANCIAL COMMUNITY WOULD SHARE THIS VIEW.

5. CONVERSELY THE EXTENSION OF UK LEGISLATION TO HONG KONG, AS A MATTER OF FOREIGN POLICY FOR WHICH THE UK IS RESPONSIBLE AT THE SAME TIME AS IT WAS EXTENDED TO OTHER DEPENDENCIES WOW! M HOVE

6

!