TNAG-2103-FCO40-2995-Future-of-Hong-Kong-exchanges-with-the-Chinese-on-the-Basic--1990 — Page 36

Ms Major,

Hong Kong Department,

WH 304

CONFIDENTIAL

incorporated into analyst

fr

Paul Fifoot,

for 1013

FROM:

Legal Advisers

DATE:

15 March 1990

CC:

Mr Whomersley Ms Barrett

HONG KONG ANALYSIS OF THE LATEST DRAFT OF THE BASIC LAW

1.

I have the following comments on this Analysis:-

"Part A: Unsatisfactory Issues"

Articles 2 and 12

(44).

The problem here derives from JD 8 which sets out, by excluding foreign affairs and defence, a comprehensive field of competence in which the SAR may exercise a high degree of autonomy. Articles 2 and 12, by omitting those two matters leaves in doubt what, foreign affairs and defence apart, is the extent of the field of competence of the SAR. In short does the Basic Law allow the SAR to act in internal matters (plus those external matters authorised by Chapter 7) unless the relevant function is conferred on the CPG, or has the SAR only competence to act where there are specific provisions in the Basic Law authorising it? There are provisions in the Basic Law which point both ways; Article 20 is indicative of the more restrictive approach and, if this restrictive approach is to prevail, the absence of any reflection in the Basic Law of JD 85 would be unfortunate. However, I think it would be not unreasonable for the SAR authorities to proceed on the assumption that they have competence as to subject matter except as restricted specifically by Articles 13 and 14 of the Basic Law, as regards functions specifically conferred on PRC authorities, and as regards the relationship between the PRC and the SAR.

This of course goes only to the subject matter and not to the extent of competence within the subject matter. It cannot be repeated often enough that the SAR is not accorded autonomy; it is accorded a high degree of autonomy, and that leaves a grey area as to matters which the PRC will arrogate to itself. Further it can hardly be questioned that the constituent power rests in the PRC.

Our public line then could follow Hong Kong's suggestion save that the last sentence should commence, "The scope

PF1AAL

CONFIDENTIAL

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