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DiscussionMr. Metzger: What I would like to do at this point is to open the floor for questions and discussion. Professor Mochtar: Thank you, Mr. Metzger. First of all, we must express our appreciation for your having chosen this topic for the seminar because I think it's very timely, and for having got us papers which are full of so many wise insights reflecting practical experience. I think in addition to the agenda which sets out harmonization and cross-border dispute settlement, there are certain other areas which we can identify for regional cooperation which need critical legal inputs. I have in mind areas like cooperation in the field of energy. This is a very high priority area for Asia where I think the International Energy Institute recognizes that, in this last decade of this century, there has to be an expansion of something in the order of 70% in the production of energy. New critical areas for regional cooperation in this sector would involve cross-border transportation of gas. You have your new members - Kazakstan and Uzbekistan - thinking of pipelines into the South Asian sub-continent. In the South Asian sub-continent itself, there are grids which are to run through three or four countries. A regime which would provide for a high degree of cooperation and which would be involved in running the cross-border transportation of natural gas, calls for a kind of legal architecture which is a challenge to legal creativity. Another area where regional institutions have been created is river basin development for the Mekong, the legal framework for which came into place last year and provides for cooperation for the sustainable development of the entire river basin. This certainly is an area where creative legal work has been required. Now the question that I really want to put is þ who does it? I mean, things like harmonization, cross border are in a way much more purely technical lawyer subjects but the kind of legal architecture that you need for, say, an international pipeline system, or for a basin development program, requires a lot of interdisciplinary cross fertilization. You would need lawyers, you would need economists, you would need engineers and then you would need private and public sector interactions. It would not just be an inter-governmental exercise. It would need bankers, it would need the people who would think of the financing, think of how to package all of these to make something like this happen. I end with the suggestion and a question whether the Asian Development Bank itself could not be both a catalyst and an institution which could orchestrate the different kinds of inputs that you need of lawyers but interacting with a lot of other relevant professions and actors. Lastly, to address the question of dispute resolution, I entirely agree that we need to rescue cross-border international commercial disputes from the kind of expensive litigation and arbitration (which theoretically you were told was an inexpensive and expeditious method of dispute resolution). I mean anyone with any experience in this field knows that this is just a myth. I mean in fact you need to rescue international, commercial disputes from those processes. Last year in East Asia, and I think even South Asia, an institute for alternative dispute resolution was launched which will, I hope, become a kind of institution which could bring in Asian experience, and Asian methods, and make parties even from Europe and the United States realize that there is a lot to be said for effective, expeditious mediation by skilled mediators, rescuing disputes from adversarial, contentious, expensive arbitral and litigation procedures. Mr. Metzger: In terms of the element of the question addressed to the role of the Asian Development Bank, this seminar in part reflects the interest of the Asian Development Bank and the questions that we are asking ourselves. What is an appropriate role for the Bank in this area as a part of the Bank's law and development programming, or more broadly, as a part of the Bank's regional cooperation activities? I have no definitive answers at this stage but there is a cooperative relationship between APEC and the Bank which at the present time is focusing, at the request of the APEC ministers, on infrastructure finance in the Region and the development of local capital markets. That cooperation þ where priorities have been established by APEC in requesting the Bank to assist by sponsoring conferences and by providing technical assistance - that might be used as a model for moving into the area which we were talking about - harmonization of commercial laws. I think that the subject requires, as has been indicated, a very broad constituency which Michael Ryland referred to as political will. Professor Mochtar talked about the absence of political attention and attention within the business community as the reason why some of the good work of UNCITRAL has not been translated into functioning laws in many jurisdictions. APEC is very attractive as a vehicle for encouraging harmonization of commercial laws. APEC has an intriguing reluctance to institutionalize things. It wants to get things done and yet not create burdensome institutions and bureaucracies which is probably, at this stage in its development, one of its strengths. It brings together politicians and ministers. It is basically a Ministry of Foreign Affairs/Ministry of Finance/Heads of State organization, so it certainly focuses political will. But it also has associated with it, through the Eminent Persons Group and through some of their programming, significant involvements from the private sector. APEC may provide both the environment and the structure for building a consultative forum to encourage development of a law harmonization agenda, building on the work of UNCITRAL and others. This is as much a set of questions in my mind as it is a set of answers but certainly there is something to be built on there in terms of the ADB/APEC relationship and the breadth of the constituencies that APEC brings together. Ms. Mary Hiscock: My name is Mary Hiscock and I come from Australia. I think perhaps I would like to begin by saying how much I appreciate the opportunity to discuss some of the matters that have been raised today. I think that what has emerged from this spread of papers is that we really need to work at a number of quite different levels, and at each of those levels one is likely to move at different speeds. We have been talking about the harmonization and the development of legal institutions. We have been talking about problems that arise in specific legal transactions. We have been talking about problems of personnel where lawyers are not sufficiently skilled to interact with other people to achieve what they want to do, and we have been talking about problems of legal mechanisms where very often it's a matter of going around the edge rather than going straight down the middle to achieve what you want to do. What we have been talking even about is the development of legal systems; this is a very complex process which is likely to take considerable time. One of the really important points that was made is - it is going to be a question of priorities and of demonstrative economic benefits. If that is the case, then I think the kinds of intergovernmental discussions you find within the ADB make a very good forum because really what you have to do, I think, is to beat government leaders around the head constantly with the hard economic facts so that they will be prepared sometimes to take a chance. What they have to do is to take the chance to seize the opportunity when it comes along. I can think of two examples. Let me put the really positive one first. Harmonization can work. Look at the example mentioned before - documentary credits. The most successful harmonization in the world is the Uniform Customs and Practice of Documentary Credits (UCP). It doesn't matter what is the state of development of the system. It doesn't matter where the banking system is, it doesn't matter how bizarre you think it is - at the end of the day the questions will be governed by the UCP. Why is that so? Because they have very cleverly divorced the question of payment so that it will stand solely on its own feet and perfectly separate from any other questions that would activate us as lawyers in looking at the substantive problems of the transaction while we stand there wringing our hands on how difficult it is - pay up or else. I think that is a perfect example of working out an intellectually unsatisfying but practically excellent solution. So you figure it out as you go along. The second point I would want to make is that we have had a recent example of a catalyst in GATT. Nothing could have brought about the harmonization of intellectual property laws like TRIPS. It has a built-in timetable; it has built-in demonstrated benefits; it was a result of a trade-off; it was worked out in the political arena and within five years, at least theoretically, we should all know where we stand on intellectual property issues. So therefore, again, it has to be a question of inspired opportunism every now and then. The third point that I want to make is that I have my own private theory about the relationship of law and economic development. I have a view, and I would be interested if Dr. Kim would agree with me, that a good investment has never been put off because there is a bad legal system. At the end of the day, it is one of the risks that has to be taken into account and I think what has happened is that in the 30 plus years in which I have worked in this field, we are getting more choosy about what we think is a good investment and what we think is a good payoff. So I think it is quite interesting that the OECD is now working on proposals for a multilateral agreement on investment which would simply strip away the whole regulatory regime for foreign investment and take the issue back to where I think it really belongs. We will have good legal systems with regional cooperation when we develop good national systems to meet the national aims; and you can't put a piece of brown paper over the cracks in the legal system. You have to have each country working out its own solutions to its own problems, which means that it has the personnel to do that, it can think of the mechanisms to do that, it can develop the institutions to do that, it engages in the transactions which force it to do that, and it can talk to other people who had the same problems. So regional cooperation for me is sharing the experience, not necessarily sharing the solution, and that is why I think the Asian Development Bank is an excellent forum because it is a good place to share experience, and no one is really going to make them accept the solution unless it gets tagged on to a very attractive loan. Mr. Michael Polkinghorne: I work at the moment in Viet Nam and again this is a question for Dr. Kim. I have been an arbitration practitioner for some time and we have all got rather excited in Europe, England and the States with all of these new methods of alternate dispute resolution (ADR). I am just a little worried that in some areas of Asia we are forgetting the history of dispute resolution. What we are doing in all of our contracts which we are drafting is putting in either courts or going straight to arbitration as being a better solution. I am not thinking about the other possibilities which have been practiced here already for some time. I was wondering if Daewoo have, in any of their contracts, put in ADR clauses looking at something different from either straightforward court litigation or arbitration. Every time I have tried to put it in the contract, people have looked at me as if I am crazy, as if saying, we have to first of all think about courts and then we have to think about arbitration and when we have worked out that those alternatives are not workable, then we will think about ADR. Dr. Kim: I am supposed to be also a mediator of CPR and in some countries they have ADR provisions like you said: let us first talk and mediate through a friendly consultation and discussion and see if we can resolve the dispute. Often, you know, the dispute can be solved if it is resolved that way. You can further elaborate pre-arbitration remedies but I do not think a dispute resolution clause can be drafted solely on the strength of ADR. I have declined to accept it. Mr. Michael Polkinghorne: I think it is fairly common in arbitration clauses to have a provision whereby the parties shall negotiate in good faith for a period of 30 days or 60 days. I think I was looking more along the lines of where you may have perhaps a European investor and the national investor doing something together (whether it be financing or a joint venture), where you actually come up with some form of ADR clause - mini trials or something like that, which basically accommodates more of the Asian investor's expectations as to how disputes can be resolved but yet gives some form of structure which provides comfort for the foreigners. We have tried that in finance but it does not work. Dr. Kim: I will tell you one reason why you may not want to formalize whatever procedure you want to have before formal arbitration. In many cases, the disputes are resolved in discussions with administrative people in the case of socialist market economies like the PRC, with Party people, and you do not want to preclude other possibilities. It would be very hard to draft an ADR provision which is meaningful, and then of course you will have to explain that to the other party. Mr. Michael Polkinghorne: I think the one we have used on a couple of occasions (we have yet to see if it works or not) provides for discussions with management totally apart from the project in question. It provides a forum in which they simply get together and talk about the problem, moving beyond the people who are actually involved in the dispute. They have their own parts to cover. They have too much to worry about themselves. Mr. Parvez Hassan: I am a lawyer but I wear another hat which is that of the Commission on Environment Law for IUCN. Three quick comments, first really I wanted to thank the Bank for the opportunity for all of us to come together. It's always a pleasure for us to be at the Bank to meet our colleagues in the legal profession and to see the wonderful work that they are doing here to try to forge regional cooperation among lawyers in the Region. Now let me first talk about the possibility that I anticipated we might be discussing here which was the growing importance of environmental law and cooperation. In the field of environmental law I think, being non-political in content, we might really have the highest degree of acceptability in moving forward. And it is in this area that I think regional cooperation has manifested itself in some very attractive ways. There are a series of states that have entered into agreements with respect to environmental issues. Some states have gotten together to make sure that migratory species and other forms of wildlife are protected across regional boundaries. And I thought that quality of cooperation and that quality of commitment might forge new alliances in the kind of areas that my distinguished friend from Bangladesh, Dr. Kamal Hossain, has talked about, which is power projects. It is something that I would also endorse the ADB looking at because you know many of the developing countries in the Region have energy as the number one item on their agenda. Now in talking about environmental law, I really wanted also to thank the ADB for joining and helping IUCN to put together what we hope will be a catalyzing factor in the Region for regional cooperation which is the Singapore Centre for Environmental Law. IUCN looked at the whole Region. We felt that most of the countries had really taken the front seat in signing and ratifying all the environmental conventions whether they were climate change or biodiversity; but yet when these signers and foreign ministers got back to their own countries to try to implement those conventions, they found when they looked behind that there is not a single lawyer in environmental law in many of those countries that could transform those international law obligations into municipal law obligations. So we in the Commission on Environmental Law felt this need and we came down to ADB, and Barry and his colleagues and the Office of Environment and Social Development have been very helpful. Starting at the end of this year, we will operationalize the Singapore Centre for Environmental Law. The vision is a very simple one: to bring law professors from the developing countries to Singapore a few times a year, train the trainers, develop materials for international environmental law which are rooted in indigenous experience, and these trainers then go back and start these courses. The mere interaction between as many as 30 or 40 environmentalists every year or twice a year would catalyze the kind of regional cooperation that we have talked of here. It will forge some kind of a unity, a collective thought process that might stimulate the kind of cooperation that we talked about. Lastly, I will go back home with a tremendous amount of excitement hearing about the Inspection Function being established at the Bank, and I think that there is a tremendous opportunity there. I do not know how they will develop. I would like to know a little more about them but the obvious question that a practicing lawyer like myself would be asking is who would have the ability to initiate the Inspection Function þ would it be only NGOs or would it be individuals that can get together; if there are serious activities that impact across boundaries, could there be a coalition of NGOs across state boundaries to make an Inspection request to be heard in the Bank? Finally, we will be very interested to watch the test of material adverse effect and to see what kind of jurisprudence in the practice of the Bank may emerge on these issues. It is only with the sense of hope and excitement that I mention this because I think there will be a tremendous opportunity for lawyers in the Region to forge the kind of alliances that I think activities like the Inspection Function would allow. We would be interacting with people and lawyers across state boundaries and putting together a thought process that might facilitate the vision that you try to orchestrate here. Mr. Metzger: On your specific questions regarding the Inspection Function, rather than going into them here as part of the Annual Meeting program, there is an NGO forum or meeting which is taking place right now. There is a presentation there on the Inspection Function. We can also separately answer those questions either from Jenny McGill in the Secretary's Office or any of the senior lawyers in the Office of the General Counsel. Also, because the rules are just being adopted, the Bank is putting together descriptive literature which will be very broadly circulated to the NGO community when the Inspection Function is operationalized later this year; there will be a lot more information forthcoming. Mr. Arjun Goswami: A question for Michael Ryland. There is a lot of cross-border technology - very powerful technology - in the payments and data processing area that is being developed by international banks. I wondered from your experience whether or not national regulators - this is really the third issue that Professor Mochtar was referring to, namely the level of regional cooperation between regulators - whether national regulators really understand the implications of new technologies in the industries they are regulating. Are regulations impeding modernization by standing in the way of the adoption of new technologies? Mr. Ryland: I am not aware enough of all government reactions. Speaking from Australian experience, it is true that lack of knowledge about what the technology is doing or can do leads to some nervousness on the part of regulators. I suppose you could say there is an initial tendency to want to regulate a little bit more. Having said that, I think the banking regulators and securities regulators in Australia have tended to hold back, to be a bit hands-off until they understood it better. So, for example, if you take regulation of derivatives, Australia like many other countries two or three years ago was expressing deep concern and worry and lots of anguish but it appears that after fairly detailed analysis by the Reserve Bank and by the Australian Securities Commission there is less concern about that now. Let us not say that they are not keen on regulating þ they are just easier on it. I think there are a couple of other things regarding advances in technology that are relevant. One is in the banking area. It is quite a good example of industry practice developing to solve problems precisely because the law is not there to help. So for a long time we have things like SWIFT and CHIPS as private payment systems with their own rules since there were not sufficiently detailed legal rules to deal with international payments. Again using the Australian example, because there were not adequate laws to deal with payment errors, the Australian Treasury Operations Association had to develop a manual on what, as a matter of practice, to do if there are payment errors of certain kinds. That sort of industry practice, I think, is actually a very good way to lead into law reforms; industry practice forms a much sounder base for legal and regulatory change than solutions generated by purely regulatory exercises. Ms. Susan Dacanay: Thank you for giving me this opportunity to speak. I am Susan Dacanay from the Department of Justice of the Republic of the Philippines. Regarding the harmonization of laws, I believe that focus should be directed also to the role of the legislators of the different countries in the Region for, after all, we always proceed with the premise that the legislators are the ones who enact the law. In the Philippines in recent years, we have enacted liberalization of the foreign banking laws; we have enacted a foreign investment law; we have enacted BOT laws to keep up with present developments. There should be mechanisms for the different legislators of the different countries to be introduced to legal changes taking place elsewhere in the Region, at least in those subject areas which are of common interest, like for example in banking, international trade, build-operate-transfer law. I would like to know to what extent can the Asian Development Bank or this forum assist in that endeavor. Mr. Metzger: The focus of technical assistance on law reform, whether it be at the World Bank or this institution, tends to be in working with people in the executive branch of government rather more so than with legislators. I guess the question is what are the appropriate forums. Is lawmaking a political exercise? Is it a technical exercise? It is both. And one of the things that the Bank is particularly sensitive to is the fact that the law reform process is more than a process of changing black-letter law; changing black-letter law is a very important piece, but it is only a piece of what is the process of effective law reform. The people who are enacting the laws, the people who have to administer the laws, the people who have to enforce the laws, and the judiciary need to know what is the background of the law reform, what is it attempting to accomplish. This is particularly the case if it is a comprehensive law reform that represents a dramatic change from previous practice, particularly in those countries where there has been a lot of law reform going on in recent years. The human absorptive capacity of the legal system is the source of greatest concern þ a point that was made by Dr. Hassan about the environmental law area. Many, many years after the passage of important new environmental laws, they are not being effectively enforced because of a lack knowledge, a lack of understanding within the governments and within the public. So the education of lawyers is an important point, as was also pointed out by Professor Mochtar in his remarks. I am afraid that, at this point, we have to wind up our discussions and one of the prerogatives of serving as the moderator is that I get the opportunity to say the last words. One of the things that I come away from our discussion with is the realization that there is a unique opportunity at this time for encouraging and making progress towards legal harmonization in priority areas. The time may not have been ripe in the past because many Asian governments were focusing on national development issues, were wary from a recent colonial past of "external" solutions, and may have been concerned about economic hegemony in the sense of law harmonization possibly favoring the commercial interests of a dominant regional or non-regional power such as the United States or Japan. I think those concerns are less severe at this point of time, as more of the Asian economies have grown to a larger scale and to greater strength. So this may be a particular moment of opportunity. What is the institutional framework that is necessary or desirable to move ahead? At one level one could create specialized institutions to encourage legal harmonization, but there does not seem to be a political will to do that. My view is that probably that is not the way to proceed. As noted in our discussions, it is necessary that there be a broad constituency involved. It may well be that the APEC and ADB and the points of contact between those two organizations represent the most fruitful line for further pursuing this subject. I welcome each of you to give further thought to some of the subjects that we have talked about, to be in continuing contact with people here at the Bank, in the Office of the General Counsel, and to speak with your colleagues back home - whether they be colleagues in private law practice, or colleagues in government or in the academic environment - as to what contributions they can make towards work on legal harmonization. We have tried to get our arms around a very large subject this afternoon and I do not think we have encompassed it all. I can provide you with some assurance that the subject will not end here as an area of interest and activity for this institution. I want to thank Professor Mochtar, Michael Ryland and Sukjo Kim for their participation and their investment of time, effort and intellectual energy in this subject for the seminar today. As I have indicated, this is not an ending. I will continue to pester them to serve as advisers and sources of guidance to the Bank in this area. Let me again thank you for your participation.
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