SECRET
PERSONAL
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(379)
Во 288 Гам
NATED
JT.
IKK༢༩༦་ ༢༠
368
Foreign and Commonwealth Office London SW1
Dir Murray MacLehose KCMG MBE Governor
HONG KONG
MASS TRANSIT SYSTEM
1.
R
368
Telephone 01- (4 HKK 21/2.
سمن
Your reference
Our reference
Date
1974.
31 December 1973
Q
172, 173 174
o 12 Stuart submission
nee HK fels
q
8 teb?
PA 12.5-14
皿
I have nothing much to add on this sad chapter. I fear that, as we all realised it might, it has resulted in damage to the UK/ Hong Kong relationship. Our policy now has necessarily to be one of damage limitation.
2.
This prompts me to write about the ExCo paper XCS(73)12 which Haddon-Cave sent to Duncan Watson (who is on leave) under cover of his letter of 8 December. We will not, of course, pass this out- side the FCO (indeed it has not been seen by anyone except Teddy Youde and the Department). But I fear we have not got to the end of discussions here about the reasons for ExCo's decision, Particularly if your negotiations with the Japanese run into difficulties. It would help us in coping with these if we could for our information clear up some points of detail arising from the ExCo memorandum.
3.
First it seems from paragraph 7 that there is no agreement with the Japanese of the nature of "force majeure". Is there any possibility of a Japanese claim that escalation of local costs could in certain circumstances amount to force majeure? If so it would seem, from Hong Kong's point of view, that the argument about a fixed price might not be at an end; and from London's, that there would still be a possibility of a substantial row, if it seemed that the Japanese were being given concessions in an area in which the Anglo-Italian bid foundered.
4. Secondly, it appears from paragraph 14 V (b) that the Anglo- Italian credit terms were better than the Japanese; but the summing up in 18 (c) suggests the opposite. There is also the suggestion in paragraph 20, that the realistic Anglo-Italian price would have been the maximum. As you know the Anglo-Italians strenuously deny this.
PERSONAL
15.