TNAG-2957-FCO40-4236-Future-of-Hong-Kong-British-Consulate-General-Colvin-House--1993 — Page 50

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case of the Colvin House site, the LC had to approve an ExCo

decision to grant the land at nominal cost. Since Chinese approval was forthcoming (at the time of the Prime Minister's visit to Hong Kong in September 1991) we have been negotiating

with the BLD over terms of a PTG. The British Trade Commission,

negotiating on our behalf, consider that they are unlikely to

get 50% any further with the BLD. We maintain that the BLD's latest

A special Condition 14 of the PTG draft (copy attached) fails to provide what we would see as adequate protection for an important and costly development in the event of expropriation. Indeed OED advises that we have never, apart from recently in China on a much smaller

investment, had to accept such provisions anywhere else in the

world.

Ас

A

in Special Conction 14 (b)

4. Our main sticking point is a reference to "the depreciated

A current replacement cost" as the basis for awarding compensation

and the fact that the Director of the BLD would have sole

discretion to define this sum. (We also challenge the formula

put forward for assessing compensation for site formation and infrastructure judged separately from the actual building

and we consider notice of 12 calendar months for vacation of the

premises totally inadequate.)

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A- B

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5 We have obtained Hong Kong's agreement to comply with relevant international obligations (their draft reflects this). The Vienna Convention on Consular Relations, 1963, makes

provision for "prompt, adequate and effective compensation" in the event of expropriation. (Should the Chinese fail to

recognise the application to Hong Kong after 1997 of the Vienna

Convention, customary international law would afford us similar

protection). The Joint Declaration and the Basic Law also make provisions for compensation in the event of expropriation on the basis of the "real value" of the property. For practical

purposes, the interpretation we need to see placed on these guarantees is one that allows us to resume operations in

C÷D

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A-B The flang Kong Goverment have recently proposed that in arriving smm referred to in paragraph 4 above

at the

shall ensure that he fully

comphes

with

1

the Director the relevant

nitimational Blyations subsisting at the date of resumption.

reference to obligations under biter national law is helpful,

While

a