Preparations are underway for the 2nd Belt and Road Forum for International Cooperation scheduled later this month in Beijing. Delegates from over 100 countries, particularly from the business community, are expected to attend. There will be 12 sub-forums focusing on practical cooperation, and legal issues concerning the BRI may also be discussed. In this context, harmonization of international law with the Chinese legal system, dispute resolution, enforcement of international arbitration awards in China and public policy amalgamating into the ‘Rule of Law’ and not ‘ Rule by Law’ merit international attention.
Rule of Law connotes that the authority and influence of law in society, especially when viewed as a constraint on individual and institutional behavior. It is the principle whereby all members of a society (including those in government) are considered equal subject to publicly disclosed legal codes and processes. Thus the Rule of Law implies that every person including law makers, the law enforcement officials and the judiciary is subject to the law of the land. Although this concept is understood and practiced by modern states, it traces its origin to civilizations of Greece, Rome, India and China.
In China, in 3rd century BC, the concept was ‘Rule by Law’ instead of ‘Rule of Law’. The approach has not seen reasonable transformation even today as the judiciary in China is still subservient to the leadership of the Communist Party. There is no doctrine of ‘Separation of Powers’ in China as compared to other modern democracies.
The BRI has deep footprints in the daily life of the Eurasian continent and touching parts of Africa with a vision to spread worldwide. This may ramify into serious security issues and sovereignty concerns necessitating the harmonization of international laws and dispute resolution mechanisms which are knocking at the very doors of BRI.
The BRI’s legal spreadsheet encompasses Common law countries, Civil law countries, Sharia law countries and those with a hybrid continental legal system. Therefore, it can be safely assumed that while one of the contracting parties will be China, the other party shall be from a non Chinese legal system. The primary note of concern pivots around the fact how much of the Chinese legal system is understood and agreed upon by the BRI member countries in terms of the contents, culture, language, rationale and ethics.
The BRI contracts as known today are not necessarily transparent. The tendering process is not open to all and the participants are mostly Chinese companies. This raises issues of reciprocity in terms of international trade and commerce and concerns over unilateral advantage to the Chinese Economy. If that be so, the rule of law within such a system is bound to be skewed exclusively in favour of the Chinese legal system.
In terms of dispute resolution through arbitration, the important consideration is that China joined the New York Convention 1958 for Recognition and Enforcement of Foreign Awards in 1986. However, the wild horse of ‘public policy’ dominates the Chinese legal domain i.e. an award which is considered against the public policy of the state may not be enforceable. In essence, what is against ‘public policy’, depending on the facts and circumstances of a particular case, the award holder is not sure if his award can be challenged by the judgment debtor in Chinese Courts. Further ‘judicial precedents’ or the ‘doctrine of stare decisis’, which is an integral part of the Constitution of India being a common law country, a reasonable forecast can be made as to the fate of a foreign award awaiting enforcement. The same cannot be expected in China which places the non Chinese contracting party into a zone of uncertainty in terms of enforcement of international arbitration awards.
The smaller countries in terms of their geopolitical positioning vis-a-vis China needs to be careful of the terms of the contracts that they submit to. The ‘sugar coated’ attraction of Chinese investments should not lead to ‘debt traps’, a form of surrender of economic sovereignty to China.
China needs to respect and harmonize its legal system, processes and procedures and design suitable diplomatic and legal solutions to any legal issues arising from the implementation of the BRI. Further, Beijing would also have to keep in mind that its disregard for the arbitration on the South China Sea may come to haunt it.
Therefore, if this forum in Beijing with the theme of “Belt and Road Cooperation, Shaping a Brighter Shared Future”, legal issues would have to be taken on a primary footing and prevent adopting a reactionary approach. A forward looking harmonized legal system for the BRI ensuring ‘Rule of Law’ and discard ‘Rule by Law’.
Dr. Madhumita Kothari is Managing Partner Juris International, New Delhi.