TNAG-0131-FCO40-167-Asia-Committee-of-British-National-Export-Council-1969 — Page 31

CONFIDENTIAL

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It is some time since Lord Shepherd left the matter of the Cross Harbour Tunnel, Hong Kong, to be pursued between ourselves and ECGD. Although the situation is still fluid, it is perhaps time to put the Minister in the picture, particularly as he has recently received a copy of a letter on the subject addressed to Colonel Clague by another shareholder in the project, Mr. Kadoorie. I think that a decision on whether to react to that letter can well wait for a few days but in the meantime, Lord Shepherd should know what is happening.

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We have, of course, been in touch with ECOD, whose revised terms have now more or less crystallised. They now require

several guarantees of shareholders in proportion to their equity holdings, but have dropped the joint guarantee. They also propose certain procedural arrangements to secure their access as

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creditors to the proceeds of the operation of the tunnel. Hong Kong Government have been told this and the other shareholders have been given the same information through the Trade Commissioner. In later telegrams these terms have been spelt out. In particular, ECGD have explained where they stand on the political risk and how the several guarantees would operate in that connection. Very briefly, in the event of a Chinese takeover, ECGD would not pursue those guarantors who have been forced out of

The

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CONFIDENTIAL