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Law and Development: Both Science and Art [2003] ADBLPRes 7 (1 October 2003)

Law and Development: Both Science and Art

From public administration to judicial reform to revision of commercial laws, ADB’s Office of the General Counsel is using legal tools as catalysts for economic development

By Arthur M. Mitchell (amitchell@adb.org)
General Counsel

Background

John Maynard Keynes once said that economics is the science of thinking in models, and the art of applying the best model to specific circumstances. It is a challenge to development—to move from a simple faith in our legal models to a system that works in practice.

In essence, law is the tangible and intangible context that links individuals to the community. And it defines responsibilities of individuals to society as much as it defines and protects individual rights.Above political manipulation, it must be evenhanded for the poor and the rich; for both women and men; for minorities across ethnic, cultural, or religious boundaries. In short, it must be a pillar of good governance.

A development lawyer’s job is to help build a responsive and fair legal system. But it is not enough to merely talk about governance, accountability, responsibility, liability, and rule of law without thinking pragmatically about what types of institutions are likely to lead to a better overall legal environnment. Development lawyers are the legal engineers and architects in the development process, applying principles to concrete situations. The question is…what principles?

Are principles built upon a universal theory of justice, or on experience? In development, and at the Asian Development Bank (ADB), our job is to build a legal framework in situations where detailed laws can vary quite considerably. The content of those laws may be universal or particular. But even if they are universal in concept, they certainly are not universal in application, as specific culture and historical experience differ—by region, by nation, and by community. Development banks need to build new ideas for legal reform and regional cooperation based on experience, not merely on theories or models.

A Unique Law Firm

After 37 years, ADB’s comparative advantage is precisely its experience. Over 700 projects have had law as a component. And about 70 have law and development as the principal focus.

The Office of the General Counsel at ADB is one of the most unique law firms in the world. In addition to servicing clients in both public and private sectors, it plays a major role in designing and implementing law and development projects together with ADB’s developing member countries (DMCs). For over 10 years, we have engaged in projects focused on such diverse areas as public administration; judicial reform; and revision of commercial laws in the areas of insolvency, secured transactions, corporate governance, and trade laws.

ADB also helps with environmental legislation in several countries and works to stop money laundering and terrorist financing in Asia and the Pacific. Our projects have ranged in size from $60,000 to more than $350 million. Most ADB interventions encompass other components in addition to law. Most involve only one country, while some have a regional focus. The following are a few examples.

Over the past 5 years, ADB approved five projects for Pakistan valued at more than $350 million. The core is a $330 million Access to Justice Program loan, approved in December 2001. With loan release contingent on policy action, the program includes judicial and police reforms, giving the poor, women, and minorities access to a better, more efficient system of law where police are insulated from political interference. The multifaceted program involves 10 major policy components, enabling an environment conducive to private sector growth as well. The commitment thus far of the Government of Pakistan to the program is encouraging.

Another example is ADB’s early involvement in creating, upgrading, and reforming insolvency law throughout the region. Before it became the norm, and much before the 1997 Asian financial crisis, ADB was involved China (PRC) first approached ADB in 1994 with the onerous task of state enterprise insolvency. Helping train judges, legal personnel, and government officials has all been part of our contribution to what is now the draft insolvency law currently with the National People’s Congress.

Regionally, ADB also assessed insolvency laws in 11 Asian economies between 1997 and 1999. This led to a set of core principles for a well-functioning corporate insol system, used as a tool by governments throughout Asia. Countries involved included PRC, India, Republic of Korea, Japan, Malaysia, Pakistan, Philippines, Singapore, and Thailand, as well as Hongkong, China and Taiper, China. ADB continues to provide advice to Indonesia, Lao People's Democratic Republic, Nepal, Philippines, Thailand, and Viet Nam, as well as in the PRC.

Measuring Success

The point is that cooperation is the way to go, building core principles regionally that can fit individual economies and specific economic situations. And it appears to fit well with ADB’s five subregional groupings. With all stakeholders involved in assessments and discussions, leading to recommendations and action, law and development work well together.

Yes, there have been ADB projects where consultants were limited in their access to systems and information, leading to serious delay and inaction. In one technical assistance project, poor communications over access, drafting instructions, and other advice led to 13 drafts of a law that ultimately failed to meet agreed criteria.

But most succeed. In the PRC, for example, relatively small yet consistent interventions over 7–8 years crystallized experience into discipline. We now know what works in the PRC.

So what’s still needed?

One problem is that, as a general matter, we do not know precisely what it is that we truly know about law and development. We need to go back over our vast experience to measure success not in terms of what fits the theory, but in terms of what worked—what worked in accomplishing our development objectives and what didn’t. This simple, practical approach to lessons learned builds on successes and limits failure.

Bringing all groups affected by legal reform together, including nongovernment organizations, ensures the greatest input and builds better understanding of the relationship between law, reform, and development.

Also, measuring the results of legal reform and building good governance can take a generation. We need to find out how to measure and evaluate in terms of actual impact rather than simple project performance. But this is not a formula for inaction. On the contrary, it’s the beginning of a more focused approach to what we actually do so that we may achieve development effectiveness. This strategy does not mean that we must wait until better metrics are developed before we suggest law and policy interventions, but it does mean that we need to immediately commit resources to properly evaluate our work.

As development lawyers aim for more efficient and responsible governance, smoothing the relationship between the guarantee of individual rights and responsibility to society, they seek a holistic approach, yet with flexibility to adapt to changing needs, to discern what linguists call the “deep structure” of language, as well as law.

Human beings have a long history of borrowing from each other—language, culture, and technology. Legal models have been transplanted everywhere. But our models cannot be developed and refined in the abstract. They must be based on the experience of people with context-specific knowledge. Keeping this in mind as we learn more about our own experience, we hope to use legal tools as a catalyst for economic development.