TNAG-2077-FCO40-2957-Hong-Kong-culture-1990 — Page 6

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FUTURE OF THE BRITISH COUNCIL IN HONG KONG

1.

These papers seem to me to give rise to both legal issues and political issues.

2. As regards the legal issues, the question is what legal status the British Council has in Hong Kong now and is it necessary or desirable to do anything to safeguard or improve that status against the resumption of Chinese sovereignty?

3. I am somewhat puzzled by the statement in Mr Davey's letter to Mr Ehrman that "in 1997 our legal basis [in Hong Kong] will disappear". The British Council is a body corporate established by Royal Charter in the country of its incorporation. That is its position in Hong Kong today and that will remain its position in Hong Kong in 1997. If, legally, that is considered to be sufficient today why should things be different in 1997?

4. I could well understand if the proposition were somewhat wider than is put in this correspondence, namely that there are procedural or technical advantages in registering or "reincorporating" under a Hong Kong law such as the Companies Ordinance or some private law Ordinance, but I would have thought those considerations were equally applicable now as in 1997. As to the choice between the various means open to the British Council to consolidate its corporate status, that must be a matter for the British Council's own legal advisers. For my part, I would not have thought that any of the suggestions were absolutely right. A private ordinance which did no more than confer the qualities of a body corporate on the British Council, without actually incorporating it, would be the most appropriate provision, but the least visible, if slightly anomalous, would be registration as an "overseas company" under the Companies Ordinance.

5. The political aspects of the matter are perhaps more complex. It is true that JD 130 and 131 deal with educational organisations and these provisions are reflected in Article 137 of the Basic Law. Nevertheless, however independent of the United Kingdom Government the British Council may be under its Charter and in fact, that is not necessarily the aspect in which it appears in other places in the world. The Chinese may well take the view that the

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CONFIDENTIAL