TNAG-2027-FCO40-2889-Hong-Kong-freezing-of-Kuwaiti-and-Iraqi-assets-1990 — Page 119

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CONFIDENTIAL

UK COMMS ONLY

FM HONG KONG

CONFIDENTIAL UK COMMS ONLY

MKB 020 126

14 AUG 1990

TO DESKBY 03113OZ FCO

TELNO 2429–

OF 031056Z AUGUST 90.

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INFO IMMEDIATE WASHINGTON, GIBRALTAR, GRAND CAYMAN, GRAND TURK INFO IMMEDIATE HAMILTON, MONTSERRAT (PLYMOUTH), TORTOLA

MIPT: FREEZING OF KUWAITI ASSETS IN HONG KONG

1. IT APPEARS TO US THAT OUR COMMON GOAL IS THE CONSISTENT AND EFFECTIVE PROTECTION OF KUWAITI ASSETS IN THE UNITED KINGDOM AND IN

ALL DEPENDENT TERRITORIES.

J

2. THE TEMPORARY FREEZING OF KUWAITI DEPOSITS WITH FINANCIAL INSTITUTIONS IN HONG KONG WOULD REQUIRE LEGISLATION. FOR A NUMBER OF REASONS WE DO NOT FAVOUR THAT COURSE OF ACTION. THE LEGISLATURE HAS RECENTLY ADJOURNED FOR ITS SUMMER VACATION AND WOULD HAVE TO BE RECALLED. THIS MAY GENERATE PUBLIC DISQUIET TO BE EFFECTIVE THE LEGISLATION WOULD HAVE TO COVER THE DISCHARGE OF REPAYMENT AND OTHER OBLIGATIONS BY HONG KONG INSTITUTIONS IN THEIR BRANCHES ABROAD. THIS WOULD REQUIRE EXTRA-TERRITORIAL LEGISLATION. EVEN IF SUCH LEGISLATION COULD BE PASSED IN HONG KONG IT IS UNLIKELY TO BE EFFECTIVE IN A FOREIGN JURISDICTION. SUCH LEGISLATION WOULD CLEARLY HAVE IMPLICATIONS FOR HONG KONG'S RELATIONS WITH FOREIGN POWERS, AN AREA OF RESPONSIBILITY THAT LIES WITH THE UK GOVERNMENT. IN ANY EVENT AS SUCH LEGISLATION WOULD AFFECT BANKING ASSOCIATIONS IN HONG KONG IT WOULD REQUIRE THE ASSENT OF THE SECRETARY FOR STATE

PURSUANT TO THE ROYAL INSTRUCTIONS.

3. WE NOTE THAT DURING THE CRISIS PROVOKED BY THE SEIZURE OF THE US EMBASSY IN IRAN THE UK PARLIAMENT ENACTED THE IRAN (TEMPORARY POWERS) ACT 1980. THIS MADE PROVISION FOR THE ISSUE OF ORDERS IN COUNCIL IMPOSING RESTRICTIONS ON THE RIGHTS OF CITIZENS TO ENTER INTO CONTRACTUAL RELATIONS WITH OR DISCHARGE CONTRACTUAL

OBLIGATIONS TO IRANIAN ENTITIES. FOLLOWING THE ENACTMENT OF THE LEGISLATION THE IRAN (TRADING SANCTIONS) ORDER 1980 WAS ISSUED. THIS CONTAINED SPECIFIC PROHIBITIONS ON TRADE WITH IRAN AND WAS EXPRESSLY EXTENDED TO DEPENDENT TERRITORIES. SUBJECT ONLY TO AGREEMENT ON THE SCOPE OF THE FREEZE (E.G. IT IS NOT CLEAR WHETHER TRADING CONTRACTS ARE TO BE AFFECTED) WE FAVOUR THIS AS THE MOST

APPROPRIATE MEANS OF ACHIEVING A CONSISTENT APPROACH TO THIS

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