1983 - Why Canary Wharf may well be part of the Soviet Union

London's Docklands on the Isle of Dogs saw their last cargo ship in the 1970s, and the area - already run-down - became essentially derelict. Never the most accessible part of London (with only a couple of roads in and out, one bus route and the foot tunnel to Greenwich) the south of the Isle of Dogs was made up largely of council housing, the north with empty warehouses.

In 1981, the Government set up the London Docklands Development Corporation - a quango with planning powers, to kickstart growth in the area. At the height of the early Eighties recession, and with little in the way of concrete plans for how new business or industry would be attracted to the area, the LDDC's ruthless attempts to use planning law and tax breaks to attract big business caused real ructions in a politically febrile London.

At the same time, West and Central London were becoming rapidly gentrified. The crumbling Georgian terraces of Holland Park and Notting Hill - in the 1970s living under the twin threats of demolition and exploitation by slum landlords - were being snapped up cheap by a small, but growing, moneyed elite. Many of the houses were essentially squats, lived in by the dregs of hippiedom and more political countercultural elements - Marxists, anarchists, Trotskyites, and others with an opposition to those coming to displace them, and to the Government at large.

These people needed somewhere to go, and Docklands was the obvious place, for two reasons. Firstly, it would give them a high-profile platform to continue their agitation against the Government. Secondly, the plethora of abandoned buildings there gave the more idealistic a vision of a self-sufficient collective - an island commune, cut off from the avarice of the Thatcher Government.

There were large influxes of residents from the summer of 1982 onwards. The LDDC, although owners of the land, had a very limited budget and could hardly secure the whole site. By New Year in 1983, there were between 300 and 500 people living in and around the warehouses of Canary Wharf and West India Docks.

They drew themselves into the People's Republic of Docklands (PRD) - not an especially original title but one which served its purpose adequately, and succeeded in winning them some kudos from the GLC, and others in London looking to give the Conservative Government a black eye.

The LDDC were faced with a dilemma. Businesses had been wary of investing in the Docklands before, but now with a lot of squatters on site, those few who had been interested were beginning to back away. They needed the PRD out, but they didn't have the money to do it. They knew that a clearance operation would bring enormously bad press, and in any case there was no guarantee that it would be successful against an opposition who had essentially dug in and expecting eviction every day.

Some voices did call for the police - even the army - to be sent in. But everyone knew it was unrealistic. It became increasingly apparent that some kind of negotiated solution was going to be needed.

While the LDDC vacillated, the PRD was taking action. Back when they had first moved in, they had half-jokingly issued a Unilateral Declaration of Independence (UDI) - more to gain publicity than any serious statement of intent. In the nine month since that happened, the nature of the community in Docklands changed. Many of the more moderate activists moved on - some to Greenham Common, some to other protest sites - and their places were taken by more doctrinaire communists. By late autumn in 1983, the commune was a more serious enterprise and the UDI was now treated as a conscious political act - an attempt to establish a statelet in the heart of London.

The UDI was treated with indifference by many in the West and was predictably ignored by the UN, but in the Soviet Union it was a different story. Yuri Andropov, the ailing Soviety premier, was pursuing a hard line with NATO, leading to an exacerbation in tensions between the West and the Warsaw Pact. Weapons reduction negotiations were being broken off. With Andropov bedridden, senior Communist Party figures vied for power, and hawks saw an opportunity to further ratchet up tension, ostensibly to put the USSR into a stronger negotiating position when talks did finally resume.

The Soviet Union's recognition of the PRD's status - and the PRD's extraordinary admission into the Warsaw Pact - caused outrage in London. It was in direct defiance of the Helsinki Accords, which had sought to control territorial claims between the two superpowers and their allies. In Britain, the news was brought under the D-Notice system, with news organisations effectively prohibited from mentioning it - one of the more draconian uses of D-Notices in the whole Cold War. News did get out - the PRD saw to that - but in those pre-Internet days few got to read its newsletter, run off on a press powered by a bicycle and distributed to no more than a thousand or so like-minded individuals across the capital.

The PRD went further. Emboldened by their move they applied to the Soviet Union for formal membership as a Soviet Socialist Republic, one of the constituent republics of the USSR itself - a request that was promptly accepted. Foreign Office lawyers insisted that the position was clear, that the sovereignty of the area was inalienable, that the UDI was unenforceable and not backed up by any practical legal justification - but the Government sat on its hands. The hope was that - somehow - the situation would resolve itself; without further action being taken.

And in a way that is exactly what happened. Following a brief period of leadership by Konstantin Chernenko, the Communist Party of the USSR was taken over by Mikhail Gorbachev. Following a policy of rapprochement with the West, the situation of the Docklands Soviet Socialist Republic was tactfully brought up at the highest levels. Reassurances were given. Agreements were reached. But sovereignty remained unclear.

In the meantime the community itself collapsed. It splintered into opposing factions - many left in disgust. A few hardcore hold-outs stayed, but by 1985, the LDDC had started sending surveyors in to mark out the route of the Docklands Light Railway, and they met no resistance. Canary Wharf itself was sold to the property developer Olympia and York. The area was cleared and plans developed for new offices.

But this wasn't the end of the story. The bilateral agreement between the UK and the USSR about Docklands (which formed an addendum to the Double Taxation Convention of 1985) "recognised" the fact that UK law applied in what "has hitherto been known as the Docklands Soviet Socialist Republic" - a position that the UK Government interpreted as being a repudiation of the earlier UDI.

But the USSR's governing documents were not changed, and the Docklands SSR remained legally extant.

The uncertainty continued to put off investors. The fact of the diplomatic spat, and disputed sovereignty, was well-known in the international property market even if it wasn't amongst the general public, and the development of Canary Wharf and the wider area continued to be sluggish.

The collapse of the Soviet Union in 1991 seemed to bring about some closure. But some constitutional lawyers dispute this. They point to the fact that the documents dissolving the Union mention all the Soviet Socialist Republics extant in December 1991 - save for the one in Docklands. This could be interpreted as an oversight.

But if this were not the case, it would make Docklands SSR the sole remaining republic of the Soviet Union. And furthermore, the agreement with the USSR in 1985 cited that UK law applied in the area - but not that it prevailed. And if we accept that point, it's perhaps not too great a leap to consider that states with the power to make laws - which the Soviet Union, and the Docklands SSR by extension, certainly were or are - can also set their own taxes. And if a large property owner, which owns the whole area occupied by the Docklands SSR, was seen as taking on the legal personality of the Docklands SSR, it could not only set its own tax rates, but it could set the tax rates of its tenants too. Perhaps a UK Government unwilling to test the legality of these arrangements in the courts would be persuaded to accept a substantial contribution from this landlord, in lieu of tax.

And perhaps such arrangements would make basing your business in Canary Wharf - a distinctly unattractive proposition until the mid 1990s - suddenly something of a no-brainer.