GRPS 11410
CYPHER/CAT A
IN NONG KONG 70942
CONSIDENTIAL
TO PRIORITY ECO TELNG 173 OF 7TH FEBRUARY, 1974,
1.
M.1.7.7.
FOLLOWING 18 TEXT OF LETTER OF INTENT:-
1200 201
PA
ON 11TH DECEMBER, 1973, THE HONG KONG GOVERNMENT (GOVERNMENT') INSTRUCTED THE MASS TRANSIT STEERING GROUP (**GROUP**) TO ENTER
INTO DISCUSSIONS WITH THE JAPANESE CONSORTIUM CONSORTIUM**) WITH A VIEW TOSSUING A LETTER OF INTENT AND TO DRAWING UP A FORMAL CONTRACT FOR CONSUTRUCTING, EQUIPPING AND FINANCING (IN PART) THE MASS TRANSIT RAILWAY 14 HONG KONG IF SATISFACTORY TERMS AND CONDITIONS FOR SUCH A CONTRACT COULD BE AGREED BETWEEN GOVERNMENT
AND THE CONSORTIUM.
2.
THE TERMS OF THE LETTER OF INTENT AND THE AGREEMENT REGARDING THE CARRYING OUT OF PRELIMINARY WORKS DURING THE PERIOD FROM THE DATE HEREOF UNTIL THE SIGNING OF THE FORMAL CONTRACT ARE SET OUT BELOW.
3. THE GROUP NOW PROPOSES TO ENTER INTO NEGOTIATIONS WITH
THE CONSORTIUM FOR THE PURPOSE OF DISCUSSING AND AGREEING THE TERMS AND CONDITIONS OF THE FORMAL CONTRACT IN ACCORDANCE WITH GOVERNMENT'S EASIC OVERALL DESIGN AND PERFORMANCE REQUIREMENTS TO SPECIFICATIONS TO BE APPROVED BY GOVERNMENT, AND IN ACCORDANCE WITH THE GOVERNMENT'S **REQUISEMENTS TO BE MET FOR A SINCLE-CONTRACT ARRANGEMENT FOR THE MASS TRANSIT RAILWAY DAYED 50TH AUGUST, 1973 (WITH THE EXCEPTION OF ARTICLE V (0) THEREOF) AND THE CONSORTIUM'S
RESPONSE THERETO DATED 27TH SEPTEMBER, 1973 AND ON THE BASIS OF THE CORRESPONDENCE AND AGREED RECORDS OF MEETINGS BETWEEN THE GROUP AND THE CONSORTIUM, SUBJECT, HOWEVER, TO CLAUSE 4 BELOW (WITH PARTICULAR REFERENCE TO THE CORRESPONDENCE AND AGREED RECORDS IDENTIFIED IN THE FILE MARKED APPENDIX ***** ANNEXED HERETO).
4. DETAILED DESIGNS AND SPECIFICATIONS FOR THE SYSTEM SHALL
BE PREPARED BY THE CONSORTIUM TO AN AGREED PROGRAMME FOR APPROVAL
BY GOVERNMENT AND, SUBJECT TO COMPLIANCE WITH THE BASIC OVERALL
DESIGN AND PERFORMANCE REQUIREMENTS, GOVERNMENT'S APPROVAL
OF SUCH DESIGNS AND SPECIFICATIONS WILL NOT BE UNREASONABLY WITHHELD.
5.
GOVERNMENT'S REQUIRED MAXIMUM CEILING PRICE OF hik DOLLARS
5,900 MILLION MUST NOT BE EXCEEDED EXCEPT IN THE CASE OF LOSS INCURRED BY THE CONSORTIUM ARISING FROM 1-
(1) UNREASONABLE RESTRICTIONS OR DELAY ON THE PART OF GOVERNMENT
IN MAKING THE NECESSARY LAND AND SUBTERRANEAN RIGHTS AVAILABLE,
OR IN GIVING ANY NECESSARY APPROVAL OR CONSENT TO COMMENCE
OR CARRY OUT ANY WORKS IN ACCORDANCE WITH AN AGREED PROGRAMME, CR
(2) MAJOR VARIATIONS OR ADDITIONAL OR EXTRA WORKS ORDERED IN WRITING
BY GOVERNMENT, OR
(3) FORGE MAJEURE AND/OR SPECIAL RISKS AS HEREINAFTER DEFINED.
IT IS AGREED THAT THE MAXIMUM CEILING PRICE OF $255,68E MILLION OFFERED BY THE CONSORTIUM AND CALCULATED AT THE MERCHANT SELLING EXCHANGE RATE EXISTING ON 1ST OCTOBER, 1979 (EQUALLING NK BOLLARS 4,998,26 MILLION) CAME WITHIN THE REQUIRED MAXIMUM CEILING BUT THAT FOR THE PURPOSES OF THE FORMAL CONTRACT, PAYMENTS TO THE CONSORTIUM MAY BE MADE IN BOTH YEN AND HONG KONG DOLLARS AND THAT THE CURRENCY MIX, THE CURRENCY OR CCURRENCIES IN WHHICH THE CONTRACT PALCE IS SPECIFICO, THE FIXING OF APPROPRIATE EXCHANGE RATES AND THE EFFECT OF MATERIAL EXCHANGE FLUCTUATIONS ARE MATTERS TO HE AGREED IN THE NEGOTIATIONS FOR THE FORMAL CONTRACT,
6. THE FINAL DEFINITION OF FORGE MAJEURE WILL BE NEGOTIATED AKO AGREED BETWEEN THE GOVERNMENT AND THE CONSORTIUM EN ACCORDANCE WITH INTERNATIONAL PRACTICE AND WILL BE STATED IN THE FORMAL
CONTRACT. WHILE IT IS AGREED THAT FORCE MAJEURE SHALL NOT INCLUDE UNFORESEEN CIRCUMSTANCES, IT IS ALSO AGREED THAT THE DEFINITION IN F.1.0.$.. (WHICH HAS BEEN DISCUSSED BETWEEN THE TWO PARTIES) REQUIRES TO BE WIDENED TO COVER -
(A) CERTAIN EXTREME ACTS OF NATURE WHICH THE CONSORTIUM COULD NOT
REASONABLY HAVE FORESTEN:
(B) INTERNATIONAL ECONOMIC DISASTERS: OR
(C) INTERRUPTIONS TO NORMAL ECONOMIC ACTIVITIES CAUSED BY WIDESPREAD
STRIKES OR PROLONGED BREAKDOWN OF ESSENTIAL WATER AND ELECTRICIT
SERVICES IN HONG KONG
WHICH HAVE A SUBSTANTIAL BEARING ON THE CONSORTIUM'S ABILITY TO
FULFIL ITS OBLIGATIONS UNDER THE CONTRACT.
7. THE CONSORTIUM AGREES THAT IN NO CIRCUMSTANCES MUST THE
MAXIMUM CEILING PRICE BE EXCEEDED ON ACCOUNT OF ADVERSE PHYSICAL CONDITIONS ENCOUNTERED BY THE CONTRACTOR,
THE GOVERNMENT AGREES TO HMANNDOVER TO THE CONSORTIUM ALL AVAILABLE TECHNICAL DATA, AND OTHER RELEVANT INFORMATION AND HISTORICAL RECORDS RELATING TO THE PROJECT, THE GOVERNMENT
WILL HANDOVER THIS INFORMATION IN GOOD FAITH AND WILL USE ITS BEST ENDEAVOUR TO ENSURE ITS ACCURACY, BUT THE CONSORTIUM MUST SATISFY ITSELF AS TO ITS CORRECTNESS AND SUFFICIENCY, ARRANGEMENTS FOR DECIDING WHERE FINANCIAL LIABILITY SHOULD REST, SHOULD ADDITIONAL INFORMATION BE REQUIRED AS A RESULT OF INACCURACIES BEING REVEALED IN THE INFORMATION ORIGINALLY PROVIDED, WILL BE DISCUSSED IN THE NEGOTIATIONS FOR THE FORMAL CONTRACT.
9. (A) THE CONSORTIUM SHALL, DURING THE PERIOD FROHM THE DATE MEREOF UNTIL THE SIGNING OF THE FORMAL CONTRACT,,
PROCEED WITH THE PRELIMINARY WORKS BET OUT IN APPENDIX **B** ANDEXED HERETO IN ORDER TO FACILITATE THE START UP OF THE PROJECT CONSTRUCTION.
(B) BY THE END OF EACH MONTH DURING SUCH PERIOD, THE CONSORTIUM SHALL SUBMIT TO GOVERNMENT FOR APPROVAL A SCHEDULE
AND BUDGET FOR SUCH PRELIMINARY WORKS INTENDED TO BE CARRIED
OUT IN THE FOLLOWING MONTH, ANY CHANGE IN ANY SUCH MONTHLY SCHEDULE OR BUDGET SHALL BE SUBJECT TO PRIOR APPROVAL I WAITING BY GOVERNMENT. NONE OF SUCH APPROVALS SHALL BE UNFEASONABLY WITHRELD BY GOVERNMENT. GOVERNMENT SHALL REIMBURSE THE CONSORTIUM IN THE PREVIOUS MONTH IN WITH THE APPROVED SCHEDULE AND BUDGET.
ACCORDANCE
(C) THE AMOUNTS PAID BY THE GOVERNMENT UNDER THIS CLAUSE SHALL BE TREATED AS PARTIAL PAYMENT OF THE CONTRACT
PRICE IN THE EVENT THAT A FORMAL CONTRACT IS ENTERED INTO BETWEEN THE PARTIES.
10. GOVERNMENT AGREES THAT FOR THE PURPOSES OF THE TINELY COMMENCEMENT AND PERFORMANCE OF THE PROJECT CONSTRUCTIONS, IT WILL UNDERTAKE TO PROVIDE THE CONSORTIUM FREE OF CHARGE WITH THE REQUIREMENTS SET CUT IN PART I OF APPENDIX ** ANNEXED HERETO AND WILL ASSIST THE CONSORTIUM IN ARRANGING OR PERFORMING THE MATTERS SET OUT IN PART 2 OF THAT APPENDIX. EXCEPT IN30FAAR AS THE CONSORTIUM'S REQUIREMENTS IN APPENDIX
C PART 1 ARE REQUIRED BEFORE THE FORMAL CONTRACT IS SIGNED THE FINAL DETAILS, TO BE AGREED WITH GOVERNMENT, OF THESE REQUIREMENTS AND QUANTITIES (WHERE APPLICABLE) WILL BE SET OUT IN A SCHEDULE TO THE FORMAL CONTRACT.
1.
IN THE EVENT THAT THE NEGOTIATIONS DO NOT RESULT IN THE FORMAL CONTRACT EBEING SIGNED, GOVERNMENT SHALL PAY TO THE CONSORTIUM ALL ACCOUNTS REMAINING UNSETTLED FORSUANT TO CLAUSE 9 ABOVE AND UPON SUCH PAYMENT BEING MADE, ALL MATERIALS AND WORKS ACQUIRED OR CARRIED OUT BY THE CONSORTIUM OR OTHERWISE PAID FOR BY GOVERNMENT IN CONNECTION WITH THE PRELINIARY WORKS SHALL BECOME THE PROPERTY OF GOVERNMENT AND EACH PARTY SHALL BE RELEASED FROM ANY FURTHER OBLIGATIONS AND RESPONSIBILITIES TO THE OTHER PARTY. ANY DISPUTE AS TO THE EXISTENCE UR QUANTUM OF ANY PRELIMINARY EXPENSES NOT PREVIOUSLY APPROVED IN WRITING BY GOVERNMENT GR OTHERWISE ARISING UNDER THIS CLAUSE SHALL BE DETERMINED BY ARBITRATION IN HONG KONG.
12,
UNTIL A FORMAL CONTRACT IS SIGNED OR UNTIL PAYMENTS ARE MADE UNDER CLAUSE 11, GOVERNMENT UNDERTAKES NOT TO DISCLOSE AND TO KEEP CONFIDENTIAL ALL DATA AND INFORMATION PROVIDES BR SUPPLIED BY THE CONSORTIUM EXCEPT IN SO FAR AS IS NECESSARY FOR THE CARRYING OUT OF THE TEAMS OF THIS LETTER OF INTENT AND THE FORMAL CONTRACT.
13.
IF THE ABOVE MEETS THE APPROVAL OF THREEE GCONSORTIUM, PLEASE HAVE THE DUPLICATE OF THIS LETTER AND EACH APPENDIX SIGNED IN THE APPROPRIATE PLACE AS MARKED AND RETURN
THE SAME TO ME BY WAY OF CONFIRMATION.
ENDS
MACLEHOSE
NNNG
SENT AT 18502/077 £j
YOURS FAITHFULLY,
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