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174,
TO ROUTINE FCO TELNO 594 OF 3 JUNE. 1974
YOUR TELEGRAM NUMBER 471: STERLING GUARANTEES,
RE
I 1
DI
IN
.. 61
5 JUN 1974
HKK 5/10
IT IS, INDEED, AS YOU SAY, THE OUTER LIMITS OF INTERPRETATION THAT WE ARE CONCERNED ABOUT, AND THIS IS BECAUSE OF YOUR CONCLUSION THAT WE HAVE CONE THROUGH THEM IN THE PAST, WHERE WE HAD HONESTLY
BELIEVED THAT WE HAD NOT.
2. WHEN YOU SAY IN YOUR PARAGRAPH 3 THAT PARAGRAPH 3(2) OF THE
DECLARATION.DOES NOT EXCLUDE THE POSSIBILITY THAT SEVERAL
SUCCESSIVE MONTHS MIGHT SHOW BREACHES THAT WERE ACCIDENTAL QUOTE IN
THE SENSE DESCRIBED ABOVE UNQUOTE PROVIDED IN SUCH A CASE THAT ACTION
HAD BEEN TAKEN IN EACH MONTH TO CORRECT ANY BREACH THAT HAD ARISEN
IN THE PREVIOUS MONTH, DO YOU MEAN QUOTE THAT COULD NOT HAVE BEEN REASONABLY FORESEEN OR PRUDENTLY PROVIDED AGAINST UNQUOTE OR QUOTE AS A RESULT OF A SUBSTANTIAL FALL IN GILT PRICES IN SAY THE LAST TWO OR THREE DAYS OF THE MONTH UNQUOTE, OR BOTH?
3. EITHER WAY, I AM AFRAID THIS DEFINITION OF QUOTE ACCIDENTAL UNQUOTE STILL CAUSES OR CAN CAUSE US DIFFICULTY BECAUSE THE FORMER PHRASE IS NOT SUFFICIENTLY PRECISE AND IN ANY CASE DIFFICULT
FOR US TO COPE WITH AT THIS DISTANCE AND THE LATTER PHRASE IS IMPRACTICAL FOR US - AS I EXPLAIN BELOW.
4. IN PARAGRAPH 2 OF YOUR TELEGRAM 1209 OF 26 NOVEMBER 1973, YOU SAID THAT YOU AGREED THAT THE TERMS OF THE GUARANTEE WOULD NOT BE
ABROGATED IN THE CASE OF A PURELY ACCIDENTAL FAILURE TO
SATISFY THE PROVISIONS OF PARAGRAPH 3 OF THE DECLARATION AS A
RESULT OF CHANGES IN THE VALUE OF HOLDINGS OF SECURITIES ARISING
FROM CHANGES IN MARKET PRICES.
15. THIS SECMED
CONFIDENTIAL