TNAG-2903-FCO40-4177-Drug-trafficking-agreements-between-Hong-Kong-and-other-coun-1993 — Page 4

CONFIDENTIAL

XCC(93)55

Ratio of Sharing for the Case in Question

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We consider that the request of the US authorities for a 50% share should be accepted, provided that all costs incurred by Hong Kong are deducted first. This is to ensure that our costs are recovered and that we retain the larger share, in recognition of the principle that the Party in control of confiscated assets is responsible for their disposal. Our costs are, at this stage, estimated at around 20% of the assets confiscated in this particular case as set out at the Annex. As related court proceedings with attendant costs are ongoing, the total cost to be incurred has not yet been finalized. It is proposed that Hong Kong deducts 20% from the confiscated assets to cover costs, and shares the net assets on an equal basis with the USA. In other words, the USA is to be given a 40% share of the gross confiscated assets only.

Other Aspects of Asset Sharing

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As Hong Kong has also contributed significantly to the identification and confiscation of the drug trafficker's assets in the United States, it is proposed that our offer to transfer 40% of the gross confiscated assets to the US Government be conditional on receiving a share of the net assets confiscated in the United States in this particular case. For convenience, we will assume that US administrative costs are also 20% of the total seized and that we ought to be credited with half the balance, i.e. 40% of the total. We propose to pay over only the net amount, i.e., 40% of the gross confiscated assets held by us less 40% of the gross confiscated assets held by them.

MECHANISM FOR ASSET SHARING

Appropriation of Funds for Sharing with the USA

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As the monies realized from the assets confiscated in the LAW Kin-man case have been credited to the General Revenue, the transfer of an appropriate share to the US authorities will require the approval of the Finance Committee. In this regard, the Attorney General's Chambers has advised that any sharing should be conditional upon the confiscation and realization of these monies continuing to remain free from legal challenge. Although the appellate time-limits for the confiscated assets have expired, an out-of-time application to set aside two of the three original US court orders is being heard in court and a ruling is likely to be available only in a few months' time.