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Mitchell, Arthur "Investing in Justice" [2005] ADBLPRes 23 (29 November 2005)

Investing in Justice*

Remarks
of
Arthur M. Mitchell
General Counsel
Asian Development Bank

29 November 2005

Honorable Chief Justice Hilario G. Davide Jr., Associate Justices of the Philippine Supreme Court, Chief Justices of the Supreme Courts of participating countries, distinguished members of the Philippine Judiciary and judiciaries of participating countries, your Excellencies and members of the diplomatic corps, development partners, distinguished guests, ladies and gentlemen.

It is both a pleasure and an honor to appear before you today to share some of my thoughts about how the legal profession and the judiciary in particular can contribute to economic and social development.

It is probably accurate to say that humans have been involved in conflict and cooperation since the beginning of history. Books are replete with stories of “glory” in war as well as the agony caused by it. Of course, we do not live in a Hobbesian world of “conflict of all against all, all of the time.” Indeed, cooperation is the more natural state of relations between people, as well as among civil societies and between nation states. But when peace breaks down, the consequences can be devastating, particularly in an era when the possibility of terrorist actions and nuclear events are all too real. It is in keeping the peace and managing conflicts, at the individual level, between various segments of society and between nation states, that the legal system makes its greatest contribution. In other words, there can be no peace or sustainable economic development without the right legal framework.

As part of our law and policy reform (LPR) efforts at the Asian Development Bank (ADB), we actively seek out ways to use law as a tool for development. Over the past ten years, we have supported over 400 projects, including the provision of over 70 cases of technical assistance, that deal with some aspect of law reform. I will not go in to detail here but I can tell you that the results of our activities show that the legal system is one of the most critical institutions in the development paradigm. Yet surprisingly, it is an area that receives very little attention from the broader development community. More specifically, policy-makers in many developing countries place a much higher priority on other pressing issues, such as rising fiscal deficits, weak social safety nets in the face of rising oil prices, fluctuating currencies, health pandemics like the Avian flu and AIDS, and declining employment opportunities.

Rule of law is a public good

In fact, some policy-makers, while not saying so explicitly, take the view that justice can wait---especially in the face of some of the critical problems I have just mentioned. For example, in the Philippines, only 0.8% of the government’s annual budget was allocated to the judiciary in the year 2005. Similar figures can be found in many other countries in Asia. One might ask: If law is so important, why don’t politicians pay more attention to it? I think the answer is that investment in legal systems and reform is based on a shortsighted view of law’s benefit to society. In a society that narrowly views law’s purpose as conflict resolution, there is a tendency to think that only those individuals and groups that are in conflict benefit from investments in the legal system. But the truth is that the law underlies and defines social relations and institutions, and allows society as a whole to function. And just like health and education, the rule of law is a public good that yields benefits to society over the long run. Creating and implementing legal frameworks that establish rule of law leads to greater predictability. Experience tells us that where there is greater predictability, investments in physical and human infrastructure increase. But all too often, and because it is ignored and largely under-funded, the legal system fails to deliver on its promise.

Take, for example, the case of Bangladesh. Each year, there are over 500,000 criminal cases and over 500,000 civil cases that must be resolved. But approximately 80% of both the criminal and civil cases involve some kind of dispute over land----one of the key factors of production. The problem might be attacked by providing the courts with better information technology and case flow management systems but what would happen if the basic questions---involving title to land---were resolved? Rather than tying-up the land in numerous disputes, would it not be more productive to unlock the value that the land contains?

To take another example, those of us who live in the Philippines know that major infrastructure projects often encounter legal challenges that have the net effect of inhibiting speedy economic development. Examples are the light rail transit system,¹ the new passenger terminal at the Ninoy Aquino International Airport,² and the North Rail project.³ Some speculate that affected parties transform simple contractual disputes into constitutional battles in order to bypass lower courts’ jurisdiction and argue their case before the Supreme Court. It is quite laudable that the Supreme Court liberally accords jurisdiction “to original actions involving urgent issues of transcendental importance” that are “normally commenced in the lower courts.”⁴ Yet, inordinate reliance on the highest court suggests that the public has little trust in the lower courts’ capacity to decide cases competently and fairly. We must recognize that this is a consequence of under-investment in the judicial sector and weak institutional development.

Can countries develop in the absence of the rule of law? Those who maintain that developing the legal and judicial system is not crucial to economic development often cite the People’s Republic of China, or PRC, as an example of strong economic development with a weak legal framework. Actually, when PRC embarked on economic reforms in 1978, it experimented with numerous initiatives to foster the development of a market economy. These include revision or adoption of new laws on companies, securities regulation, banking, and administrative licensing. Importantly, the PRC has acceded to the WTO and is earnestly implementing its requirements by changing over 2,000 laws and regulations. While the rule of law needs further improvement, the government is making concerted efforts to provide real implementation of the laws that are on the books. I am happy to report that ADB has assisted many of these initiatives and we continue to work with the PRC on further developing its bankruptcy law, a competition law and better rules to attract foreign investment.

Some lessons learned

Without sufficient resources invested in the justice sector, the delivery of justice and law enforcement become uncertain. I offer three lessons learned from ADB’s engagement in law and policy reform work to make a case for investing in the justice sector.

First, strengthening legal and judicial institutions makes good economic sense. Studies have found that strong institutions are important to economic growth and social development. Where citizens perceive no predictability in the judiciary’s enforcement of laws, there has been less economic growth.⁵ Another study shows that there is a negative correlation between the perceived levels of corruption and investment.⁶ Yet another study shows that the independence of a country’s supreme court has a positive correlation with economic growth.⁷

Second, poor people face many barriers to exercising their human rights. Among these barriers are laws and policies that discriminate against poor and vulnerable groups, and the inability of these groups to understand the law and enforce their rights. Recognizing these barriers has resulted in programs to improve the poor’s access to justice institutions, support equality of access to justice, and reduce or eliminate discrimination in the courts’ application and enforcement of laws and policies. Resources are needed to improve access to justice, and the competence of judges and court personnel who are called upon to dispense justice fairly.

Third, the rule of law is necessary to thwart the abuse of power. Under the rule of law, government authority may only be exercised in accordance with written laws that are adopted through established procedures. The justice system is integral to safeguarding society against corrupt acts and arbitrary rulings that diminish predictability—predictability that allows businesses and investors to plan ahead and permits markets to work effectively.

Opportunities in an era of deepening regional integration

Investing in the legal and judicial sector takes on added significance now that ties among countries in the Asian and Pacific region are deepening. Economic cooperation is leading to deeper integration in terms of infrastructure, trade and investment, finance, and the provision of regional public goods. New legal institutions and arrangements will be needed to keep the peace and manage the relationships and shared resources between regional actors. Legal professionals can help create the foundation for a deeper level of integration, by drawing on each other’s experience in dealing with specific problems that reach beyond national borders. Let me give you a few examples.

One area where greater regional cooperation is expected is competition law and policy. The cross-border implications of anticompetitive practices will likely be the subject of greater regional attention as the volume of international trade rises.⁸ Competition laws across the region share many common features, but are not uniformly enforced. Justice institutions and legal professionals that have a thorough understanding of competition policy and correctly apply competition law to concrete cases can help the domestic economy realize the benefits of integrating into international trade and investment patterns.

Another focal point is regional security and peace. Transnational terrorism and organized crime are now sensitive regional concerns. Trade and investment in the region are negatively affected by signs that key infrastructure and transportation are vulnerable to terrorist attacks. Failure to combat organized criminal activities such as money laundering will prove costly. Inclusion in the Financial Action Task Force’s (FATF) list of states without adequate anti-money laundering institutional frameworks have hampered countries’ abilities to attract necessary foreign investment. Regional cooperation can help such countries address these issues.

Yet another area of interest is environmental law and policy. In the Greater Mekong Subregion, where much of ADB’s intraregional integration work is ongoing, countries have entered into agreements that concern the management of shared natural resources such as water. In South Asia, countries are proposing arrangements that will allow them to cooperate in managing oil and gas resources in the region. These arrangements suggest that environmental laws and their enforcement by domestic courts will be increasingly harmonized in the future. It should be noted that the Philippine Supreme Court has already made a contribution in shaping regional jurisprudence on environmental and natural resource law. One of its most famous and celebrated cases, Oposa v. Factoran,⁹ has been cited as precedent in another jurisdiction within the Asian and Pacific region.¹⁰ In that case, the Supreme Court "announced a powerful and influential exposition of intergenerational rights in the context of environmental protection."¹¹

How can this and other such trailblazing work be discussed and adapted in order to deepen regional integration? One idea is to establish centers of judicial excellence. These centers can offer facilities or services through which judiciaries throughout the region may share lessons learned. Many institutions can benefit by observing and applying the techniques developed by a peer institution at the top of its field. This can be especially important in developing or transitional societies, where a lack of resources and tight control by elite networks discourage institutions from taking risks. Perhaps we can discuss how the region can establish such a judicial center of excellence in the remaining days of the conference.

Conclusion

In conclusion, I think that we all recognize that legal institutions are vital for economic and social development. Appropriate laws are necessary but equally important is how they are implemented. No one questions the importance of investing in health or education. We must now widen the horizons of our political leaders and policy-makers to help them realize that long-term investment in the system of justice is just as important as health and education because it is the means by which we, as citizens, can take advantage of incentives to cooperate and find ways to mitigate the negative effects of our conflicts.

Thank you. Maraming salamat po.