TNAG-0448-FCO40-513-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1974 — Page 67

665

CONFIDENTIAL

Miss Pestell

RECEIVED JN

Reference.

LASI

REGISTRY No. 51

REF.

20 MAY 1974

NEXT

REF

HKK 5/co...

STERLING GUARANTEE: HONG KONG

1.

Agreed with It Lewty

PIA

The dispute over the accidental breaches provision did not come up at Mr Barratt's lunch with Mr Haddon- Cave yesterday.

2. Mr Jones has brought me down the latest version of their proposed telegram, which has been approved by Mr Barratt. The Treasury hope strongly that it will be possible to send it today.

3. The draft is, of course, similar to their earlier ones which we have seen and has, I understand, been amended to take account of points made earlier by Mr Aust.

4. I suggested to Mr Jones that the second sentence of paragraph 3 could give rise to further dispute if there were a substantial fall in gilt prices in the last two or three days of the month which was no more than a continuation of a fall which had been proceeding throughout the month. Did the Treasury intend that breaches resulting from a failure to extrapolate the behaviour of gilt prices during a month should be regarded as accidental? Mr Jones said that he thought that this was not the Treasury's intention but would check. Subject to this, and to Mr Aust's views, we agreed that the point might be covered by insertin of the words "and unexpected" between "substantial" and "fall".

Diherty

D I Newty

Financial Relations Department

17 May 1974

Copied (with enc) to:

Mr Stuart (HKIOD)

Mr Aust (Legal Advisers)

PS Mr Jones has just told me that Mr Walker is prepared to accept falls of the kind referred to above as accidental and therefore we need not insert the words "and unexpected".

CONFIDENTIAL