3. 22/27 Annex.
CONFIDENTIAL
13 October, 1967.
2.
I enclose three copies of the brief on Gestures and Assistance.
An agreed brief on the Cross-Harbour Tunnel forms a self-contained Annex to this. I also enclose copies of Figgures' original proposals and Cowperthwaite's comments from which it can be seen that some considerable dffort has been made to achieve an acceptable solution.
3.
The major concession is on the nature of the guarantee (paragraph 5 of the brief). It is very difficult to see from here whether this will be acceptable to the Hong Kong Government but it does avoid any lien on Hong Kong assets in London. Our understanding is that the promissory note will be issued by the Tunnel Company and bought by the lending Bank (1.0. Lloyds), the money realised being used to pay the contractor. The promiss notes will be redeemable on the dates agreed for repayments of the loant at any time, the Tunnel Company is unable to meet these obligations, then Hong Kong Government will honour them under an irrevocable instruction issued in advance to their bankers or agents in London.
4. A major difficulty may still arise on the condition in paragraph 6(e) oi the brief. Cowperthwaite seemed prepared in London to accept the need for the Hong Kong Government to assume the obligation to provide any additional finance, but was naturally anxious that this condition should not become known to the contractors or the Tunnel Company. The point is directly raised in Dickinson's letter of 5th October to you (copy attached) which we briefly discussed before your departure and to which I have prepared tentative reply (draft attached). It seems to us that this is just as clearly an obligation which would have to be made known to the Finance Committee as is the guarantee; and in the circumstances described in the reply it is most unlikely therefore that publicity could be avoided. There is a dilemma here which is reflected in the unfinished state of the draft reply to Dickinson. A short answer to E.C.G.D. is, of course, that the Hong Kong Government cannot (any more than H.N.G. can) charge assets without the knowledge and eventual approval of the legislature and the consequent possibility of publicity. Public revelation of the original loan guarantee proposals would have been a totally unacceptable political risk. Public revelation of an undertaking that Hong Kong will guarantee additional finance is most undesirable but might be an acceptable risk. It would be most helpful if you could complete and clear this draft reply while you are in Hong Kong.
5. As a belated afterthought (for which they apologise) the Treasury have added a condition (paragraph 6(g) of brief) which they say is standard practice.
H.P. Hall Esq., C.M.G., M.B.E.,
C/o Government House,
RONG KCG.
(W.S. Carter)
P.S.
CONFIDENTIAL
Would you please pass a copy of the brief to the U.K. Trade Commissioner so that he is in the picture. A fourth copy is enclosed for this purpose.