OFFICIALS are pessimistic about the outcome of the plenary session of the Joint Liaison Group, seen as crucial to the Court of Final Appeal. The meeting, which begins today, will see the British pressing the Chinese on what further questions they have on the draft bill setting up the court. But officials said they were not optimistic. 'We expect more questions and stalling from the Chinese side,' one source said. China has not approved the bill and has said it will disband the court in 1997 if it is set up without its permission. The Attorney-General Jeremy Mathews said yesterday uncertainty over the court had damaged business confidence. There was clear evidence contracts were being drawn up to avoid resorting to Hong Kong courts in the event of dispute by providing for arbitration overseas. 'It is clearly harmful to Hong Kong's reputation as a commercial, financial and services centre if investors are showing a lack of confidence in Hong Kong's judicial system,' he said. Speaking in Hong Kong at an international labour committee of the American Bar Association, Mr Mathews said: 'We do not know why the Chinese side have not been able yet to confirm that they are content with the draft bill.' He warned: 'Uncertainty over when and on what basis it will be established is already having a damaging effect on confidence in Hong Kong.' The bill needed to become law by July when the current Legislative Council session ended because one year's 'lead time' was necessary. Panels of temporary local and overseas judges had to be formed. Although the Chief Justice had made contact with various common law jurisdictions on the appointments, Mr Mathews said any follow-up action prior to the enactment of the draft bill was likely to be futile. Other essential preparations tasks included amendments to the organisation and nomenclature of the court system, rules of procedure and the drawing up of practice directions relating to the court, he said. Mr Mathews said these tasks would only be meaningful if the administration was sure the bill would be enacted. The establishment of the court by July 1996 at the latest would enable it to gain acceptance and to build up a track record of jurisprudence, he said. 'If the court is not established before 1997, there would be complete uncertainty as to what form the legislation would take, whether it would be based upon existing principles or not, and as to who the judges of the court would be,' Mr Mathews said.