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SL/CW 24126/35
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31st July, 1968.
Hong Kong Tunnel
Lord Brown yesterday saw Colonel Clague for a further discussion about this project. Clague produced a couple of suggestions with particular reference to the joint and several guarantees which apparently cause the Hong Kong interest so much trouble and we are examining this. Even if means could be found, however, to meet
our objections to our involvement in the equity risk on the Tunnel there would still remain the special political risk.
2.
On this Tony Percival feels strongly that were we to cover this scheme without providing for means of access to the Hong Kong assets held in London we would in the event of enforced withdrawal from the Colony find ourselves vulnerable to criticism for not doing so. This point was put to Lord Brown and he asked that the precise legal position in respect of access to these assets be made clear. Colonel Clague said that the Hong Kong Government would never give its authority to earmarking of its assets for this purpose but that it should be possible for the Department to so arrange it that in the event of the envisaged circumstances coming about E.C.G.D. would have an unsubordinated right to access to these assets. I expressed myself as somewhat sceptical about this proposal but in view of the Minister's interest I should be grateful if you and Carter to whom I am copying this would consider whether you are now in a position to define precisely the status of these assets in the situation envisaged and whether it might be possible to set up a claim on these assets in this situation to meet outstanding obligations in respect of the Hong Kong Tunnel.
3. I should add that Lord Brown has asked that a definitive brief be prepared for him with a view to this issue being considered by Ministers at an earlydate after the holiday season. I understand that Colonel Clague has also within the last few days seen Lord Shepherd, although I do not know what resulted from this meeting.
(K. W. Cotterill)
C. C. Lucas, Esq., H. M. Treasury,
RECEIVED IN ARCHIVES No. 63 5 AUG1968
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