THE Government yesterday survived a challenge to its localisation policy by expatriate civil servants as a High Court judge ruled most of the present arrangements lawful. But, in his landmark judgment, Mr Justice Keith declared five of the arrangements unlawful. One of the five is the ban on expatriates transferring to the permanent establishment, while locals are allowed to switch. The finding prompted an immediate government move to freeze new applications from agreement - or contract - officers to transfer to permanent terms while detailed arrangements, including the criteria for the switch, were being worked out. The Public Service Commission and staff representatives will then be consulted on the new arrangements, said Deputy Secretary for Civil Service Chris Jackson. Both Mr Jackson and his boss, Secretary for Civil Service Michael Sze Cho-cheung, remained cautious and said they needed more time to examine the implications. Mr Sze said: 'The judgment has upheld almost all the decisions challenged,' but admitted it raised several questions for careful study. In his 122-page report, Mr Justice Keith said the policy of demoting expatriate civil servants was lawful even though it infringed freedoms protected by the Bill of Rights. The controversial policy was needed to prevent a significant fall in the morale of local officers, he said. The judge was asked to rule on 27 government decisions in a suit filed by expatriate civil servants. He found 18 to be lawful, five to be unlawful and declined to rule on four others. 'The spoils of battle have been shared,' said Mr Justice Keith as he ordered each side to pay its own costs. Those he ruled unlawful include: A ban on expatriates signing contracts which extend beyond 1997. Local officers should have had their agreements capped in the same way, he said. The policy of compelling overseas officers to undergo Chinese language training when they transfer to local conditions. But proficiency in Chinese could be taken into account when considering which officers should be transferred. The provision of subsidies for the overseas education of officers' children only if they are schooled in Britain. The judicial review was brought by the Association of Expatriate Civil Servants and four officers - Fred Tromp, Geoffrey Bach, Robin Toes and Patrick Wilson. Mr Sze said the arrangements for the localisation policy were made 'in good faith as a fair compromise'. Association President Royston Griffey admitted he was disappointed. The decision to leave the demotion scheme in place was 'amazing' and set a bad precedent for future Bill of Rights cases, but he believed the legal action was still a success. 'If we hadn't done it perhaps all of us would have gone by now,' he said. Now the restriction on contracts spanning the handover has been declared illegal, overseas officers who aim to stay on can take their chances with the new administration, who might value their skills more. 'The Chinese Government has said they should stay. In fact, they want them to stay. Officially, the British government position is the same too,' he said. 'In between is the Hong Kong Government saying 'Go!' and I don't know why.' He criticised the Government for announcing yet another change to the rules at a press conference just after the judgment. Although the Government said it was freezing all transfers to permanent staff pending a review, it was a fact that the 'majority of the local officers have already transferred - after encouragement', said Mr Griffey. President of the Senior Non-Expatriate Officers' Association, Hui Kwok-hung, welcomed the judgment and said it helped stabilise the civil service.