TNAG-0448-FCO40-513-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1974 — Page 76

DRAFT TELEGRAM TO HONG KONG

STERLING GUARANTEES

1

Thank you for the report in your telno 467 of the recent

discussion in the Executive

Council.

Recent exchanges between us have, of course, focussed on

what may be termed the outer limits to interpretation of

the accidental breach provision. But this focus on the

breaches which the provision does not accommodate has

tended to distract attention from the breaches which it

does accommodate.

We would regard as accidental any breach which could not

have been reasonably foreseen or prudently provided against.

In particular, the provision would accommodate a breach that

arose as a result of a substantial fall in gilt prices in the It would, avon

cover broaches which ú

consecuting

months,

last days of the month. occurred

provided anch

'sense

described.

accidented in the

All this being so, and after further reconsideration of the

Hong Kong case, we do find it hard to see what unmet need

remains for any reformulation of this provision consistently

with preserving it explicitly to cope with accidental, repeat

accidental, breaches. We just cannot see as unsympathetic or

legalistic a reluctance on the part of HMG to go beyond a

dispensation which provides a let-out in respect of any

accidental breach. There is no question of lack of goodwill

in this, and we do hope that you will be able to persuade EXCO that the position is in no sense an unreasonable one.