TNAG-2957-FCO40-4236-Future-of-Hong-Kong-British-Consulate-General-Colvin-House--1993 — Page 12

CONFIDENTIAL for transmission

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Another favir pair.

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acceptance of your proposal that the parties should first seek to agree a figure for compensation;

substitution of the principle of fair and equitable compensation which would meet the international legal

legal obligation to pay prompt, adequate and effective compensation for the criterion, suggested by you, that compensation should be the "full cost of re-instatement in alternative accommodation"; and

disputes about the level of compensation to be submitted to arbitration, under the Arbitration Ordinance, by three arbitrators (the Chairman being a senior sitting or retired judge from a Common Law jurisdiction) whose decision would be final and binding. We believe this would be greatly preferable to submitting disputes, as you have suggested, to an independent chartered surveyor nominated by the Hong Kong Institute of Chartered Surveyors. (There is no guarantee that a surveyor SO nominated will be impartial in his judgement, as the Institute may well be subject to influence or control by pro-Peking elements after 1997.)

All these points are dealt with in the revised (14) attached. As you will see, we have moved a very way towards your position and we hope you will find this an acceptable basis on which to proceed.

S.C. long

Gonot ever,

Heel

(Michael c c sze)

Secretary for gonstitutional Affairs

Encl.

G

CONFIDENTIAL for transmission