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Mitchell, Arthur "Are development lawyers subversives?" [2003] ADBLPRes 2 (22 May 2003)

Are development lawyers subversives?

Remarks
of
Arthur M. Mitchell^*
General Counsel
Asian Development Bank

Annual General Meeting of the London Forum for International Economic Law and Development

Queen Mary College, University of London
May 22-23, 2003

Professor Norton; Ladies and Gentlemen:

It is a great pleasure and honor to speak before this forum today. In some ways, it might even be a bit presumptuous since I have been a “development lawyer” for only five months. Nevertheless, my twenty-seven years as a private sector lawyer has taught me to forge on and to ask as many questions as possible. Since joining the “development community”, I have learned that the Washington Consensus is dead or dying and the Monterey Consensus is in ascendancy. I have also been told that while the laws of economics are universal, the development paradigm changes over time. I have also learned that there seems to be no general theory of development that will tell us with any certainty how economic policies and the legal system affect each other to promote positive change. In this circumstance, what is a lawyer supposed to do? And that leads me to the topic of my presentation today: Are development lawyers subversives?

After reviewing with you some of the work we have done at the ADB, I would like to pose a few questions that I hope will be explored by all of us in the future. Since inception, the ADB has made over 700 interventions through loans and technical assistance that have law as a component. Approximately 70 have law and development as the principal focus. I hope that the lessons learned from these experiences may contribute in some way to a better understanding of international economic law and development.

And I think that you will also see in the course of my remarks that I believe that lawyers have a critical role to play as legal engineers or architects in the development process. But this of course assumes that we know what the client wants and needs. In order to be effective as legal professionals, we have to apply principles to concrete situations. But what principles are we supposed to apply in the development community?

Modern law, it has been argued, is based on three principal characteristics: the development of a system of rules, purposeful human action (or policy) and independence from the nation-state. These propositions are of course based on the analyses done by Weber and Durkheim to explain the rise of capitalism in Western Europe. Following World War II, the leading development paradigm called for the transplanting of many of the legal institutions developed in the West in the hope that similar results would be obtained. Perhaps it is fair to say that, as a general matter, the developing world focused on the U.S as the right model well into the 1960s. In the 1970s, it was Europe, and Japan in the 1980s. In the 1990s, the focus again was on the U.S. and its brand of market capitalism. In the new millennium, social dimensions have grown in importance to economic growth itself. My point in reviewing this bit of history is that the economic strategies countries pursue and the legal recommendations we lawyers make, may very much depend upon the development theories that have currency at any given time. But don’t laws have some basic principles that are universally applicable?

I would like to spend the balance of my time here today describing some of the legal interventions ADB has made and suggest what quantitative and qualitative indicators we have found useful in answering the questions I have posed thus far.

The Office of the General Counsel at the ADB is one of the most unique law firms in the world. In addition to servicing clients in the public and private sectors, we take a major role in designing and implementing law and development projects together with our developing member country (DMC) partners. For over ten years, we have engaged in projects that focus on such diverse areas as public administration, judicial reform, and the revision of commercial laws in the areas insolvency, secured transactions, corporate governance and trade laws. In keeping with the times, we have also taken steps to improve environmental legislation in a number of countries and have become involved in countering money laundering and terrorist financing in the Asian and Pacific Region. Our projects have ranged in size between $60,000 on the low end to over $350,000,000 on the high end. Most of these interventions have involved other project departments in ADB and many other components in addition to law. Most involve only one country while some have a regional focus.

I would like to describe in more detail, three projects that we have deemed very successful and one that was not, but I must remind you that this by no means is a representative sample. Rather these examples provide the basis for some of the lessons we have learned. One serious drawback is that our portfolio of law and development interventions has not been independently evaluated in terms of outcomes, institutional development or sustainability. This is one of the recommendations I intend to make when I return to Manila but I hope that we can draw some tentative conclusions that will be subject to more rigorous testing when a proper evaluation is done.

In 2001, ADB approved its first stand-alone loans for judicial reform. Two policy loans to Pakistan amounting to $330 million are bolstering the Government’s Access to Justice Program, which will strengthen legal protection for all (including supporting gender sensitization) and is specifically designed to empower the poor and other vulnerable groups. ADB’s assistance also includes a $20 million technical assistance loan to translate the program’s legal and policy framework into institutional and organizational arrangements.

The program focuses on judicial and police reforms, and has been designed to improve the accessibility of justice of the poor, women and minorities. As policy-based loans, tranches will only be released by ADB if key policy actions are carried out. For example, judicial reforms include creation of a national judicial policymaking body, increased provincial budget allocations for the high courts, establishment of a small claims courts system, court case management with performance-based incentives to support delay reduction, strengthening of the independence and security of tenure of an ombudsmen, enactment of consumer protection laws, publication of key laws affecting citizens’ rights in Urdu (the national language), establishment of an improved incentive and sanction system for the judiciary, implementation of a program of affirmative opportunity to increase the representation of women in the legal profession and the judiciary, and creation of a legal empowerment fund that will allow the poor to receive free legal advice and advocacy services.

Police reforms include enactment of a new Police Ordinance that provides for the establishment of Public Safety Commissions to insulate the police from political interference and hold the police accountable to the public, creation of an independent complaints authority against the police, independent prosecution services under a phased program, enhancement of police performance and establishment of Citizen Police Liaison Committees.

By helping create a legal and judicial system that can uphold the rule of law, check bureaucratic excesses, and enforce contracts, the program will contribute to an enabling environment for private sector-led growth. It will also provide practical mechanisms to undermine the existing institutional bias of the legal and judicial system against the poor and other excluded groups.

While the Program has been affected by domestic and international political events, not the least of which September 11, the Government has taken some key steps to demonstrate its commitment to the policy, legal and structural reforms under the Program. In a recent nationwide television address, the Prime Minister underlined the need for speedy disposal of cases and improved working conditions for judicial officers. He also reiterated the Government’s commitment to establishing the rule of law for realizing the goals of improving security, curbing lawlessness and creating a conducive environment for the country’s development.

ADB has also done some pioneering work in the area of insolvency. Although insolvency demarcates the limits of extending credit, confronting risk, entrepreneurial venture, and corporate self-determination, and engages all sectors of the economy, it ranks low on most governments’ reform policy agendas. Not so at ADB.

Insolvency has been a focus of ADB’s law and policy reform work since the early 90’s. Before it ever became trendy, and much before the Asian financial crisis, ADB has been contributing to reform in this area. ADB has worked in the People’s Republic of China, with all branches of government on reform of PRC insolvency law and practice. China’s State Economic and Trade Commission (SETC) first approached ADB in 1994 with the onerous task of state enterprise insolvency. ADB worked closely with SETC for several years on this project and made a series of recommendations, most of which are now in the current draft insolvency law of the PRC. SETC asked for a second grant to help train its personnel, judges and others by using state enterprise insolvency case studies designed for judges, legal personnel, and government officials. ADB has recently been working with the National People’s Congress on various aspects of the draft insolvency law.

Between 1997 and 1999, ADB designed and implemented a Regional Technical Assistance to assess the laws and systems of 11 Asian economies, including Hong Kong, China; India, Indonesia; Japan; Korea; Malaysia; Pakistan; Philippines; Singapore; Taipei, China; and Thailand. The assessment led to the development of a set of core principles of a well-functioning corporate insolvency system. The core principles have since been used as a tool to build effective insolvency systems throughout Asia. In this regard, ADB has provided and continues to provide policy and legislative drafting advice to among others, Vietnam, Nepal, PRC, Thailand, Indonesia, the Philippines and Laos.

The core principles also contributed to the work of the United Nations Commission for International Trade Law (UNCITRAL) Working Group on Developing a Legislative Guide to Insolvency Law. In 1999, at its thirty-second session, UNCITRAL had before it a proposal by Australia on possible future work in the area of insolvency law. In great part, Australia’s proposal was spurred by the Asian financial crisis of 1997 and its own strong belief in the importance that an effective insolvency system plays in its economic and financial architecture.

Part of the success of ADB’s work in insolvency is the holistic approach we have taken. ADB has advocated the following working methodologies: First, that law reform is conducted in consultation with all relevant stakeholders, including the donor community. Second, that the reform of any law must be preceded by a study of that law and other laws. For example, ADB has advocated that the success of any insolvency law system is dependent in part on the secured transactions laws and systems in place in that country. Third, that any law reform must be supported by the strengthening of the implementation system for that law, including policy and legal advice, institution building and training.

In the case of insolvency, ADB has provided training assistance to some of our DMCs including Thailand, Vietnam and Laos. In Thailand, ADB has assisted the Legal Execution Department to develop a long-term training strategy that includes use of the world wide web; the Legal Execution Department is the implementation arm of the Thai Bankruptcy Court.

Now, we are advocating effective mechanisms for dealing with cases of cross-border insolvency so as to promote the objectives of cooperation between Asian courts and other competent authorities; fairer and efficient administration of cross-border insolvencies that protects the interests of all creditors and other interested persons; all of which provides greater legal certainty for trade and investment. Under a $1.5 million regional technical assistance project covering principally, Thailand, Indonesia, Philippines and Korea, the Office of the General Counsel is assisting these countries to assess the advantages of and impediments to adopting a cross-border insolvency protocol. The project is ongoing.

ADB’s grant assistance to the Philippines has been a good example of government ownership, stakeholder participation, and donor coordination. It was processed by the Office of the General Counsel in close consultation with the Philippine Supreme Court. Major components were borrowed from the Action Program for Judicial Reform (APJR), a program developed and adopted by the Supreme Court on the basis of various diagnostic studies on the deficiencies of the judiciary.

Under the project, ADB is

• recommending reforms so that the Judiciary can administer and manage its own budget and administrative organization,
• recommending reforms to improve the transparency and accountability of judicial appointments and promotions, and
• proposing a conceptual framework for judicial education.

The design work has taken almost 18 months. Each stage of work was presented to stakeholders for discussion and revision or validation. Workshops were held around the Philippines to gather the views of the justices of the Supreme Court and other appellate courts, the judges of the trial courts, legal and administrative court personnel, the Judicial and Bar Council, the Philippine Judicial Academy, oversight agencies of the executive department (including the Department of Budget and Management, the National Economic and Development Authority, the Commission on Audit, the Bureau of Treasury, and the Ministry of Justice), legislators from both houses of Congress, the Integrated Bar of the Philippines, academia, the public, and the donor community.

The Draft Final Report is due for stakeholder validation on 19 and 20 June, and the Final Report will be submitted to the Supreme Court in the first week of July. By way of preview, the Report will propose that the financial and administrative controls, which the executive branch currently has over the judiciary, be transferred to the judiciary. It will also propose the necessary resulting changes within the judiciary’s organizational structure, including the devolution of administrative and budget authorities.

One thing we have learned in the course of this work is the importance of sustained engagement by the recipient agency at all levels. For its part, the Supreme Court has contributed real financial and personnel resources to the development and implementation of the APJR generally, and to the project specifically. As an example, the judiciary’s budget funded a large portion of the hard costs for stakeholder consultations. In addition, a permanent Program Management Office was established within the Supreme Court to implement the APJR. It has an approved budget, an institutionalized plantilla, and professionals with years of experience in project processing and implementation.

A concrete result of this Office’s coordination work is the design of World Bank’s Judicial Reform Support Program (JRSP). It will take on board and pilot test some of the ADB’s recommendations on administrative reforms. In fact, as a result of this close coordination, and at World Bank’s invitation, ADB participated just last week in the appraisal of World Bank’s Program. This kind of coordination and consultation will ensure that each new activity – including future ADB assistance to the APJR – builds on and supports previous work.

In contrast, I would like to tell you about a project where Government ownership, political will and the interaction between the Government’s counterpart team, the consultants and ADB did not go as smoothly. These were the key issues in one of ADB’s largest technical assistance grants on anti-corruption ($1 million). For that project, a qualified and experienced team of consultants was engaged to lead a series of activities including extensive workshops throughout the country, establishment of a new website, media awareness raising campaigns through published articles, radio and television programs, and study tours in several countries. These activities were expected to yield insights, which would then be applied in the drafting of a new law to combat corruption.

The counterpart team came from the legal drafting division of the Government’s Ministry of Justice. The head of the counterpart team adopted the view early in the project that the consultants were employees over whom he had complete authority. Resulting problems included abandonment of courses of action previously agreed with the consultants and attempts to restrict the consultants’ access to other divisions of the Government, legislature and relevant NGOs. All of this in turn greatly increased the chances of the project and the draft law going nowhere. In large part, the communication difficulties were a consequence of a mismatch between the unrealistically ambitious aspirations of ADB and other donors for quick reform, and the strength of the vested interests is the recipient country.

The draft law – the final product of the project – suffered directly. The counterpart team had generated a total of 13 drafts. Detailed drafting instructions and substantive advice were largely ignored. ADB and the consultants saw only a few of the drafts. The final draft that was submitted to Parliament was considered by the consultants to be barely acceptable if it was passed without major changes. Parliament recently passed the law, one and a half years later with substantial changes. Effectiveness of the law remains to be seen.

1. Since neither the ADB nor other IFIs (to the best of my knowledge) have been subjected to an independent and systematic evaluation of our law and development initiatives, we do not have a clear idea about, in a general sense, what works, when, where and under what conditions. But we have certain intuitive knowledge based on our past experiences. In other words, we have a good sense of what works in particular cases but obviously more study needs to be done.
2. We should consider using the “scientific method” more effectively in our work. We should identify critical variables that affect outcomes and make judgments about what works based on evidence. This is not a new insight. Theorists of law and development have been talking about this for a long time but we practitioners rarely put it into practice.
3. As the agenda of the development community has moved away from economic growth as its focus towards more emphasis on a broad variety of social dimensions, it is much more difficult to measure outcomes. This is an issue that cuts across all projects in the development community and is equally problematic for law and policy interventions.
4. Progress in social dimensions, while vital, can only be measured over a very long time. It appears that we are able to achieve more recognizable successes when we focus on commercial laws and regulations in comparison to public administration or judicial reform.
5. While it is certainly true that projects must be tailored to individual countries and must be compatible with local cultures, we must recognize that people and cultures change. Our job is not to force them to change but to suggest ways in which they may want to change if they wish to achieve a certain specific objectives. Our focus is on the institutions and rules that govern human interactions. All of this is done with the concurrence of the government - indeed, it is the government that is often the focus of the intervention but increasingly, this process involves other stakeholders in a society such as NGOs and the people directly affected.
6. In terms of implementation, it is wise to identify the local players, such as individuals in government ministries, judges, private practitioners, entrepreneurs and NGOs who are likely to develop an “ownership” interest in the project. Authoritative champions of reform need to be identified both at a leadership level and in everyday working positions. They will manage the process, sustain it and help monitor the outcomes over time.

No matter what the economic environment and despite differences in history, culture and customs, in all countries there will be a tension between the proper scope for individual initiative and collective action (hence the relative roles of the market vs. government). The legal system and its techniques are among the most important tools that societies use to find the right balance between the two. In developed countries, lawyers help keep the system running smoothly. When we engage the developing world, lawyers become subversive of the “existing order” because it is that very “existing order” – and poverty in particular – that must be changed for the better.

Lawyers need not limit themselves to providing technical expertise on narrow questions. The poor may not become entrepreneurs overnight but their inability to participate in the formal economy is a hallmark of the developing world. What would happen if the risks and costs associated with participation were dramatically reduced? How much would such an occurrence contribute to development? These are the sorts of issues that lawyers are equipped to address. Human beings are unique among the creatures of the earth in that we can perceive our circumstances correctly and imagine how they might be different. To my mind, that is the highest calling of a lawyer in today’s world.

Thank you.