TNAG-2892-FCO40-4165-Transfer-of-assets-from-the-Hong-Kong-Government-to-the-Spec-1993 — Page 25

CONFIDENTIAL

PA BP 114.

HKCC 370/23

From:

Miss S Brooks

Legal Counsellor

Date: 29 March 1993

2

Ms Paris

HKD

CC: Mr Whitney, HKD

See (84

DISCUSSION PAPER ON TRANSFER OF ASSETS FROM HKG TO SARG

1.

I am not happy with the suggestion in paragraph 7 of "a legally binding instrument which would require the HKG to pass to the CPG on 1 July 1997 all its rights and obligations"... The proposed agreement should only cover physical and financial assets. International rights and obligations relating to Hong Kong are already being dealt with in the Sub-group of the Joint Liaison Group which is working on the continued application of international rights and obligations to the HKSAR after 1997. Legal rights and obligations of the HKG, for example, in connection with legal proceedings or debts or contractual rights are best dealt with ad hoc in accordance with principles of customary international law relating to succession.

If we write into the agreement a provision on legal rights and obligations, there is a very real danger that the Chinese are likely to argue that all the obligations of the HKG will not pass to the HKSAR Government. Given that the Hong Kong Government and Hong Kong will cease to be on midnight of 30 June 1997, there is a considerable risk that the obligations would fall to HMG.

2.

It would be best if the HKG whose assets will be transferred under the agreement on transfer of assets becomes a party to the agreement. The UK could authorise the HKG by an entrustment to enter into the agreement. It may well be however that the Chinese will not accept the Hong Kong Government as a party to the agreement (given their views on "three legged stools"). If so, HMG would be able to negotiate and enter into the agreement alone on behalf of Hong Kong Government, but it may be desirable to have a document beforehand in the form of an understanding between HMG and HKG whereby the Hong Kong Government authorises HMG to act on its behalf and dispose of its assets to the CPG on condition these are used immediately for the endorsement of the SAR Government. I envisage that the agreement would come into force at midnight on 1 July 1997.

I have made a number of manuscript amendments to the draft paper and added a few marginal comments. The amended paper is

3.

attached.

Shelagh Brooks

Shelagh Brooks

CONFIDENTIAL