TNAG-0170-FCO40-206-British-Trade-Commissioner-1969 — Page 128

4.

It seems to us that in these circumstances it is

unlikely that the Tunnel Company will refrain from seeking to improve the French terms and our own by playing the two agencies off against one another in the very manner ECGD are doing their best to avoid. We know, for example, that Colonel Clague has told our Trade Commission in Hong Kong that the central point now in his mind is whether ECGD will

cover the political risk without insisting on supporting

guarantees. The Trade Commission has asked ECGD whether the several guarantees on which they are insisting would be invoked if the project proved abortive at any stage, owing to the intervention of a foreign power in the Colony.

ECGD

are no doubt considering this question. This is not the first time Colonel Clague has sought to cover shareholders against the political risk. He did so in July, 1968, with the result then that ECGD also sought to cover themselves against the contingency of foreign intervention by a lien on Hong Kong external assets, in the event of an enforced withdrawal from the Colony. The legal advice then taken was that a claim by ECGD to be reimbursed out of the assets of the Hong Kong Government could not be justified unless the Hong Kong Government had agreed. This leads back to the previous unacceptable requirement of joint and several guarantees from all shareholders including the Hong Kong

Government.

31 January, 1969

(Hong Kong Department)