TNAG-0448-FCO40-513-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1974 — Page 53

in market prices. We do not accept this inter-

pr

tion because it fails to take into account

that the November formula explicitly extended only

to breaches that are purely accidental, not to

any breaches.

4.

There then arises the question of what

breaches can be regarded as purely accidental.

Although you have asked, by implication, for

greater precision, we think it would be impossible

to try to set out a comprehensive list of possible

purely accidental breaches. In fact, it would

•

-/33 Fag c

be hardly to the advantage of the participants

since unlisted breaches would presumably be ineligible.

5. But as indication of what we regard as the

only fair and reasonable approach, we have stated

(in para 2 of our Tel No 357 of 10 April) that

we regard a purely accidental breach as one

which could not reasonably have been foreseen or

prudently provided against (if you can think of a

more useful form of words to describe "accidental",

we should be very happy to consider it); and instances as

an example, a breach arising from a

substantial

fall in the price of gilts in the last say,

two or three days of the month by which we meant

of course "working days. This is in no sense a

restriction of the November formula since it would

plainly be a quite distortion of the language of

that formula to treat as purely accidental a

breach that could reasonably have been foreseen or

prudently provided against. This being so, we were

frankly very surprised to find that you had regarded

the November formula as entitling Hong Kong to

expect that HMG would accept as purely accidental a

mesab

ops that agyla birra annanpol

/breach

NOTHING TO BE WRITTEN IN THIS MARGIN