The two amendments, originally proposed by Lord Avebury, of the opposition Liberal Democrats, were adopted by the government and are now sponsored by the Labour Party's Home Office spokesman, Lord West of Spithead. They will open the door to people who were left stateless when, for various reasons, they failed to apply for full British citizenship before the handover.

Speaking from London, Lord Avebury, who has long campaigned for resolving what he called unfinished business left open by London before 1997, welcomed the British government's latest position.

'I am very happy indeed. In 1997, the government promised nobody would be stateless as a result of the handover. This is a fulfilment of the promise they made. We are just insisting they fulfil all their promises.'

Lord Avebury estimated the number of people affected was about 1,000.

The expected change to the law would end one of what London has admitted is a series of 'anomalies' in its immigration policies. Before the handover, about 8,000 British Dependent Territories Citizens (BDTC) - mostly former Gurkhas in the British forces and their descendants - were granted British citizenship. But some who applied, including those who did not fulfil the requirement of being ordinarily resident in Hong Kong on or before February 4, 1997, because they were abroad at the time either studying or as minors travelling with their parents, were denied citizenship.

They were given BN(O) passports - which carry no right of abode in Britain - after the BDTC passport expired at the handover. They include Nepalis who had renounced their nationality before seeking British citizenship, as Nepal did not recognise dual nationality. Being non-Chinese and unable to receive Chinese nationality they were considered 'stateless' by the British, and some were only allowed to stay in Hong Kong at the government's discretion.

Lord Avebury expected the earliest date those concerned could apply for British citizenship would be in the summer, after the expected passage of the bill in the House of Lords, and expected endorsement in the House of Commons by the Labour majority.

He said it would rectify the problems left over by a 2002 law, which granted citizenship to British overseas citizens, British subjects and British protected persons but not to BN(O) holders. In Hong Kong, a spokesman for the British consulate said the move was intended to address 'various anomalies' relating to the awarding of British citizenship. If passed, it would only cover a limited number of stateless people and would not confer British citizenship to anyone already eligible for nationality of another state.

Law Yuk-kai, director of Human Rights Monitor, said Britain 'has a moral obligation to correct its mistakes, and should not leave behind its former subjects because of technical reasons'. Ganesh Kumar Ijam, spokesman for the Hong Kong Nepalese Federation, said: 'This would definitely be one more option for Nepalese to live and work in the UK. Whether they will go would depend on their individual judgments.'

The Immigration Department said about 4,800 foreigners had applied for Hong Kong SAR passports in the past three years. Foreigners can renounce their nationality and apply to be naturalised as Chinese citizens.