225
HKK 3/1
1973.
GPS 400
PRIORITY
CYPHER/CAT A
FM HONG KONG 270220Z
CONFIDENTIAL [ORWELL]
CONFIDENTIAL
RESC
RECIP
IN
c. 51
2 MAY 1974
HKR5/10
TO PRIORITY FCO TELNO 467 OF 27 APRIL
STERLING GUARANTEE.
LAST
1974
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EXECUTIVE COUNCIL DISCUSSED MEMORANDUM XCS(74)1(DESPATCHED TO LONDON ON 23 APRIL IN BAG NUMBER A46).
2. UNOFFICIAL MEMBERS WERE CRITICAL OF THE TREASURY ATTITUDE OVER ACCIDENTAL BREACHES UNDER THE OLD GUARANTEE. THEY BELIEVED THAT THE FORMULA GIVEN BY YOUR TELEGRAM NUMBER 1209 OF 26 NOVEMBER 1973, QUOTED IN PARAGRAPH 3 OF THE MEMORANDUM, ADMITTED OF THE INTERPRETATION WHICH WE FOLLOWED: AND THAT OUR ACTIONS STEMMING FROM THIS INTERPRETATION HAD POSITIVELY SUPPORTED STERLING. WE HAD
NOT WITHDRAWN ANY STERLING HELD AT THE BEGINNING OF THE GUARANTEE
PERIOD, AND ON THE CONTRARY HAD ACQUIRED POUNDS STERLING 40.7 MILLION (INCLUDING INTEREST AND OTHER EARNINGS, AS WELL AS OUTRIGHT FURCHASES) TO TOP UP. THEY PRESSED STRONGLY THAT THE MATTER SHOULD BE ARGUED FURTHER,
3. THEIR ASSESSMENT OF THE TREASURY'S ATTITUDE AS LEGALISTIC AND .
UNCOOPERATIVE COLOURED THEIR RESPONSE TO THE NEW DECLARATION.
THEY WERE CONCERNED THAT WE MIGHT AGAIN FIND OURSELVES BEING TOLD
THAT, ON SOME LEGALISTIC INTERPRETATION OF THE PROVISIONS, WE HAD
UNKOWINGLY BEEN IN BREACH. THERE WAS SOME DISPOSITION TO REJECT
THE GUARANTEE ALTOGETHER. FINALLY THEY ACCEPTED THE RECOMMENDATIONS
OF THE MEMORANDUM. THESE, HOWEVER, PROVIDE FOR FURTHER EFFORTS TO BE MADE FOR A REFORMULATION OF THE ACCIDENTAL BREACH PROVISIONS:
WE HOPE THAT YOU WILL CONSIDER THIS SYMPATHETICALLY PARTLY SO AS TO GIVE US A MORE PRACTICAL FRAMEWORK, BUT ALSO FOR THE SAKE OF COODWILL TAKING INTO CONSIDERATION THAT PROVISIONS MEETING OUR NEEDS WOULD NOT OPERATE TO THE DETRIMENT OF THE STERLING RATE.
CONFIDENTIAL
/WE FOR
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