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18895/17/48.
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Mr. Wallace
1. It is perhaps desirable to consider afresh the various aspects of this most complicated question. Hong Kong acted as one of the sources of supply for goods required in connection with the prosecution of the war. Orders were placed by the Eastern Group Supply Council operating in India. The adjustment of the claims and counterclaims of various countries forming the Eastern Group Supply Council was effected by the Ministry of Supply in London, (See No. 2 on 18895/A/42) and even in the case of supplies to India the Ministry of Supply appear to have been responsible for effecting a settlement with the supplying country.(u however peror 3 below)
2. Of the supplies ordered by the Council which form the subject of these recent files, the position appears to be as follows:-
A.
Stores shipped or delivered to godowns.
The Ministry of Supply have met the claims amounting to £150,299.
B.
Stores not delivered but in the process of manufacture.
The claims amount to $7,748,986 (£484,312). In our despatch of 24th December 1947 we suggested to
Our
the Governor that claims should be rejected.
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reasons were that claims might not be fully
substantiated; that Hong Kong would not accept a war risks insurance scheme before the war which would have covered losses of the goods; and that claimants could in any event submit their claims for losses of supplies to the Hong Kong War Damage Claims Commission. As Hong Kong has now decided there shall be no war damage claims compensation this particular argument is not now relevant except in so far as there is no reason why H.M.G. should compensate if Hong Kong refused to have a compensation scheme of its own. The Governor agreed to the rejection of these claims on the understanding that a settlement on the line suggested by us should be made in the case of category C claims referred to below. Whatever the outcome of the claims in category C however, I fear there is no possibility now of considering any payment as regards category B claims. Government should in this matter adopt the same attitude as a commercial firm placing an order, namely that payment is made on delivery and the firm would hardly be responsible for payment if delivery were for any reason not effected.
C. Advances by local European firms to Chinese contractors to assist them in purchasing materials for manufacture.
The amount involved is comparatively small 8601,026 (£37,564). Our original suggestion was that as these advances were made to assist the war effort and were at a low rate of interest (3% per annum)
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