TNAG-2028-FCO40-2890-Hong-Kong-freezing-of-Kuwaiti-and-Iraqi-assets-1990 — Page 74

Mr Stone

Ms Marsden

HONG KONG: KUWAITI ASSET FREEZE

Reference

1. I attach a minute from the Bank of England regarding a problem facing the Hong Kong subsidiary (BIAAL) of the

Baring Asset Management Ltd. In essence, the BIAAL, who

have a discretionary investment management agreement with

the Kuwaiti Investment Authority (KIA), have applied for

permission of the Hong Kong Government to continue to manage

the portfolio on behalf of the Kuwait Investment Office,

London (KIO). Their application is based on a letter of authority purportedly signed by the Kuwait Minister of Finance and dated 2 August (the date of the Iraqi invasion

of Kuwait).

CODE 18-77

2.

There is some doubt about the legality of this document,

and the legal adviser to the Monetary Affairs Branch

(Gannon) has raised queries relating to the witnessing of

the Minister's signature and also the relationship between

the KIA and the KIO. As a result, the Bank of England have

rejected the document and recommended Barings refer the case

to HMG via the Hong Kong Government for decisions to be made

on the legality of the document, and the relationship.

3. I have referred the papers initially to MED having

spoken to Mr Heigl, who thought (before seeing the papers)

that confirmation of the document might be obtained from the

Kuwait Embassy, London, on a government-in-exile basis. He

thought that possibly DTI might need to be also consulted regarding exemption from licence requirements.

4. You will recall that a recent telegram from Hong Kong referred to a discretionary investment manager having

continued to trade on behalf of the KIO after the imposition

of the freeze. It is possible that this is the case which

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