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4. The institutions have prepared drafts of the various documents which now include an MOU to be signed by the PRC and
HMG. Under the MOU the two governments would assume responsibilities, including, in HMG's case, guaranteeing any HKG expenditure on the Meetings up to 1 July 1997. The institutions maintain that the MOU is necessary as Hong Kong is not a member of the IMF/IBRD in its own right. Our Legal Adviser's view is that it should be sufficient for Hong Kong to give the necessary
assurances to the institutions direct given Hong Kong's autonomy and as the institutions are able to sign contracts with
non-members. Indeed, by not doing so Hong Kong is not
protecting fully its current and future autonomy.
5.
UKDEL has tried to persuade the institutions that there is
no need for an MOU to be signed by the PRC and HMG. But the institutions have shown no willingness to dispense with this
requirement and our cause has not been helped by the fact that the Chinese readily agreed to the proposal. However, UKDEL has managed to secure some amendments to the documents to minimise
the effect on Hong Kong's autonomy. The HKG have confirmed that they are content for HMG to sign the proposed MOU, particularly
if the alternative is to give up their bid to host the Meetings.
6.
Our clear legal advice is that the documentation creates a forting
On the question of contingent liability (estimated to be about £3.5 million) the Treasury accept that to pull out of the bid at this late stage could send damaging signals which could undermine confidence in Hong Kong. They also assess the prospects of the contingent liability being called as very low
given Hong Kong's financial strength. The Chancellor has therefore agreed that HMG should accept this contingent
liability, on the understanding that it would be shared jointly between the Treasury (with responsibility for the IMF) and the ODA (with responsibility for the World Bank). ODA Ministers
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