CO882-(6-8) — Page 362

PUBLIC RECORD

OFFICE

Reference :--

TLC.O. 882

ستسييسا

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ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH—NOT TO

PUBLIC RECORD OFFICE, LONDON

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the alternatives under (v). If not, they were asked to state if they adhered to their proposal for a Board of Management, and in that case they were to understand that their proposal could only be considered if so modified as to allow the Colonial Government an adequate share of the control and of the revenue of the whole under- taking, that is to say, a representation on the Board and a share based on the relative cost of constructing and equipping the Hong Kong and Canton sections of the line, exclusive of any agreed expenses incurred in raising funds for the undertaking and any commission on materials supplied.

8. On the 8th July the Corporation replied Eastern, that on the question of placing the management

No. 88.

of the line in the hands of a Board, the Directors PP. 49–50. did not feel that their opinion formerly stated in reference to control should be departed from in principle. As regards the points (A), (B), (C), and (D) of the Colonial Office letter the Chairman wrote as follows:-

"Condition (A). I think this can be ac- cepted by the Corporation without dispute.

"Condition (B). This could be accepted with certain reservations which the Corporation believe His Majesty's Government would consider reason- able, e.g., the cancellation of the concession could not be agreed to unless the Corporation were at fault and the non-construction of the line were due to their dilatoriness, in- capacity to accomplish the work, or intentional obstruction. To hold them responsible in case of force majeure would be unreasonable, as would also any proposal to cancel their concession without full repay- ment of all costs incurred to date for survey and all other outgoings. With such reservations as these to be liberally and fairly interpreted, the Corporation would not demur to the acceptance of the condition.

"Condition (c). The Corporation recognize that it is essential that the Legislative Council of Hong Kong should approve the terms of the Agreement for the reasons stated in letter.

your We should point out, however, that the Chinese have a voice in the settlement of this question, in view of the fact that a section of the line, if through communication is to be maintained, will be within Chinese territory.

"Condition (D). The Directors regret that they are unable to alter their views

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in regard to the question of leasing the line for various reasons which I need not recapitulate beyond saying that the conditions of the preliminary agreement do not in the first place contemplate such an arrangement, and assuming that with the aid of His Majesty's Government a new agreement were obtained, it seems to the Directors quite certain that the Chinese Government would never consent to profits over the Chinese section being made responsible in priority for the interest and sinking fund for the moneys required in making the British section.'

The Directors were therefore unable definitely

to accept the alternatives proposed or the requirements enumerated; but they thought that there should eventually be no great difficulty in reconciling the divergent views of the Secretary of State and the Corporation and they urged that "qualified persons should discuss the ques- tion and endeavour to arrive at a working decision."

9. The Secretary of State then decided that Sir C. Smith and I should discuss the matter with the Directors. On the 23rd September we met Mr. W. Keswick, M.P., the Chairman, and Mr. Macrae, one of the Directors, of the Corporation, who had been deputed to confer with us.

The ground was cleared by a state- ment, made in unmistakeable language, in reply to our enquiries, that the Government in dealing with the Corporation were treating with the body which would (perhaps under another name) carry out the undertaking. We were assured and the assurance can be accepted- that there was no intention of handing over the concession to other parties for any consideration whatever. We then discussed the salient features of the various proposals and it was decided that the Corporation should, without prejudice, make suggestions for further con- sideration, embodying the points on which we seemed to be agreed.

10. Mr.

sent

me

籍

now Keswick has letter (of October 3rd) which, though it does not quite follow the lines that we anticipated, deserves consideration. His latest proposals are--

(1) The British and Chinese sections to be constructed by the respective Gov- ernments;

(2) The working of both sections as one undertaking to be by agreement between the two Governments;

19789

B