WHEN lawyers representing different parties cannot reach agreement over the interpretation of a clause in a contract, they go to court to seek a definitive ruling. But when the differences are over the composition of a court yet to be set up, as is the case with the establishment of the Court of Final Appeal, a judicial solution is not readily available. By an ingenious design, Simon Ip Sik-on, Legislative Councillor representing the legal constituency, has found a way to cut what he describes as a Gordian knot. His proposal is simple: Let's put aside our differences over the composition of the CFA and set it up first; incorporate Article 82 of the Basic Law, which governs the composition of the CFA, into the Letters Patent so that the CFA itself can rule whether its own composition is compatible with the Basic Law. 'This would be rule of law in action,' said Ip. It remains to be seen whether the proposal will be acceptable to legislators when it is introduced next Wednesday as an amendment to a motion introduced by Jimmy McGregor urging the Government to set up the CFA at the earliest opportunity. For while the CFA row revolves around the interpretation of Article 82, which is a replica of the relevant provision in the Sino-British Joint Declaration, the nature of the row is essentially political. What divides the legal community is what the article should mean in terms of the number of overseas judges who can be invited to sit on the CFA. Article 82 of the Basic Law says: The power of final judgment of the Hong Kong Special Administrative Region shall be vested in the Court of Final Appeal in the Region, which may as required invite judges from other common law jurisdictions to sit on the Court of Final Appeal. In 1991, after discussions through the Joint Liaison Group, China and Britain agreed the CFA would have five judges, but only one of them would be from overseas. The narrow interpretation has been criticised as inconsistent with the Joint Declaration and the Basic Law by a sizeable sector of the legal community which wants a more liberal interpretation. In a motion debate in 1991 initiated by Ip, Legco urged that the CFA's flexibility to invite more overseas judges should be restored through re-negotiation between Britain and China. However, both governments have stood behind their agreement and legal authorities have been cited to confirm the agreement is consistent with the Joint Declaration and the Basic Law. The row has dragged on for so long that there are fears a further delay in setting up the CFA would seriously affect international confidence in Hong Kong's judicial system, because appeals to the Privy Council will stop in just over two years. Businessmen worried about a vacuum at the top of the judicial structure are said to have opted to write into their contracts a clause providing for the resolution of disputes in a foreign jurisdiction. HOWEVER, opponents of the bill are adamant that principle should not be sacrificed for pragmatism or expediency and do not accept any legal vacuum would seriously affect the judicial system. By putting forward his proposal, Ip has side-stepped the problem of whether he has backtracked from his opposition to the '4-1' formula and shown he has come to accept the view that it is of paramount importance to set up the CFA first. However, although he has proposed a typically legal solution to solve what appears to be a legal problem, the signs are his proposal will not be politically acceptable to opponents of the '4-1' formula. All indications are that the Democratic Party will stick to their position of pushing for a more liberal interpretation by refusing to endorse Ip's proposal in Legco, where the party has a big bloc of votes. As one of the party's legislators, James To Kun-sun, said, it had no reason to accept the establishment of a CFA whose composition it wanted the CFA to invalidate. There is another hitch. Article 158 of the Basic Law provides that 'the power of interpretation of this Law shall be vested in the Standing Committee of the National People's Congress. The Standing Committee of the National People's Congress shall authorise the courts of the Hong Kong Special Administrative Region to interpret on their own, in adjudicating cases, the provisions of this Law which are within the limits of the autonomy of the Region'. The article further provides that the courts will have to seek an interpretation of the relevant provisions from the Standing Committee of the National People's Congress through the CFA when interpreting provisions concerning affairs which are the responsibility of the Central People's Government or the relationship between the Central Authorities and the Region. A cursory reading of the article seems to suggest this does not preclude the CFA from ruling on its own composition, but it is not clear if the NPC Standing Committee will accept this interpretation. The Hong Kong Government says it does not consider Ip's proposal is necessary because the 1991 agreement is consistent with the Sino-British Joint Declaration and the Basic Law. Bar Association chairman Gladys Li said it was absurd to ask the CFA to rule whether it was properly established, although other lawyers said it was not uncommon for the courts to rule on their own jurisdictions and other attributes. In the final analysis, granted that the nature of the CFA row is essentially political, the fate of Ip's proposal will hinge on individual legislators' assessment of the urgency of the need to set up the CFA first. For those who feel it is better to establish the CFA first and then resolve the differences later, Ip's proposal will provide an honourable means for them to retreat from their previous position.