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Institutional Innovation by the Asian Infrastructure Investment Bank

  • James RANSDELL (a1)
Abstract

The Asian Infrastructure Investment Bank [AIIB] is the world’s newest multilateral development bank [MDB] and already one of Asia’s largest international organizations by membership. This paper will compare the institutional structure of the AIIB with that of the Asian Development Bank [ADB] to identify areas in which the AIIB has innovated as a matter of international institutional law. In reviewing the constituent documents, bylaws, and operational policies of the two banks, the paper will juxtapose the AIIB and ADB’s approaches to membership, project finance, voting, and governance. It will identify not only innovations, but also the likely implications, positive and negative, thereof. Finally, it will assess the degree to which these innovations may impact the AIIB’s ability to partner with existing MDBs. In particular, the AIIB’s approach to project finance and governance mark a significant break from the status quo, while in other areas it has remained conservative.

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Law Clerk to the Hon. Jane A. Restani, United States Court of International Trade. I wish to thank Professor Dr Neils M. Blokker for his guidance in constructing the thesis from which this paper was derived. The paper was prepared in the author’s personal capacity. All views expressed herein are the author’s own and do not represent the view of any US government entity.

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1. Exceptions include: Stephany GRIFFITH-JONES, Xiaoyun LI, and Stephen SPRATT, “The Asian Infrastructure Investment Bank” (2016) Institute of Development Studies Evidence Report No. 179; REISEN, Helmut , “Will the AIIB and the NDB Help Reform Multilateral Development Banking?” (2015) 6 Global Policy 297 ; WAN, Ming , The Asian Infrastructure Investment Bank (New York: Palgrave Macmillan, 2016) at 58–91 (comparing each bank upon its founding).

2. See e.g. Jianfeng LIU and Yingli PAN, “AIIB’s Advantages and Challenges” Shanghai Economic Review (19 May 2015); Jian WANG, “AIIB Creates a New Model for South-South and North-South Cooperation” Shanghai Economic Review (19 May 2015) ; LI, Yan and WAN, Zhi-hong , “A Study on Sustainable Development at the AIIB: Comparative Analysis of MDBs” (2015) 6 Asia-Pacific Economic Review 23 .

3. LIPSCY, Phillip Y. , “Explaining Institutional Change” (2015) 59 American Journal of Political Science 341 .

4. Rebecca M. NELSON, “Multilateral Development Banks” Congressional Research Service Report R41170 (2 December 2015) at 3. In July 2014, Brazil, Russia, India, China, and South Africa signed the Agreement on the New Development Bank. Ibid., at 17. Agreement on the New Development Bank (2015).

5. The AIIB’s “region” is that “classified as Asia and Oceania by the United Nations”. AIIB, “Report of the Chief Negotiators on the Articles of Agreement of the Asian Infrastructure Investment Bank” (22 May 2015), art.1(2) [Chief Negotiators’ Report]; AIIB Agreement, art.1(2). The ADB’s “region” encompasses the terms of reference for the UN Economic Commission for Asia and the Far East. ADB Charter, art.1. Comparing AIIB and ADB membership rosters at the AIIB’s time of founding, noteworthy differences arise. Geographically, the AIIB had more members from Central Asia and the Middle East, whereas the ADB counted more Southeast Asian and Oceanian members. Geopolitically, fellow BRIC states supported China’s initiative, whereas India and China are the only BRIC states in the ADB. The US and Japan declined to join the AIIB. Both banks’ European participants were roughly the same.

6. HUMPHREY, Chris , “He Who Pays the Piper Calls the Tune” (2017) 12 Review of International Organizations 281 at 286.

7. See Leslie MAASDORP, (2017) 1 September “As the BRICS New Development Bank Turns Two, What Has It Achieved?” World Economic Forum.

8. See CALLAGHAN, Mike and HUBBARD, Paul , “The Asian Infrastructure Investment Bank: Multilateralism on the Silk Road” (2016) 9 China Economic Journal 116 at 133.

9. Asian Infrastructure Investment Bank Articles of Agreement (2015), art. 58 [AIIB Agreement]; Agreement Establishing the Asian Development Bank, 571 UNTS 123 (1966), art. 64 [ADB Charter] (as amended).

10. MISHRA, Rahul , “Asian Infrastructure Investment Bank: An Assessment” (2016) 72 India Quarterly 163 at 167 (citing its “economic as well as political situation [and] abysmal record in dealing with multilateral arrangements”). Diplomatic sources cited North Korea’s unwillingness to disclose financial information. “DPRK Refused Entry to China-led AIIB” Global Capital (27 March 2015).

11. AIIB, “By-laws of the Asian Infrastructure Investment Bank” (2016), s. 4(a) (applications are submitted to the directors, who may forward them for BG consideration).

12. See “AIIB Welcomes New Prospective Members”, aiib.org (23 March 2017).

13. ADB, “By-laws of the Asian Development Bank” (1966), s. 16; OKANO-HEIJMANS, Maaike , Economic Diplomacy: Japan and the Balance of National Interests (Leiden: Martinus Nijhoff Publishers, 2013) at 133.

14. AIIB Agreement, art. 3(2); ADB Charter, art. 3(2).

15. Compare AIIB Agreement, art. 37; with ADB Charter, art. 41 (withdrawal). Compare AIIB Agreement, art. 38; with ADB Charter, art. 42 (suspension).

16. See HUMPHREY, Chris , “Developmental Revolution or Bretton Woods Revisited?”, Overseas Development Institute Working Paper 418, 2015 , at 3.

17. Regarding current AIIB members, see Members and Prospective Members of the Bank, aiib.org (last updated 21 May 2018). The IBRD is not open to non-states, but counts 189 States Parties, not including North Korea. Articles of Agreement of the International Bank for Reconstruction and Development, 2 UNTS 134 (1945), art. II, s. 1(b); Articles of Agreement of the International Monetary Fund, 2 UNTA 40 (1945), art. II, s. 2.

18. AIIB Agreement, arts. 3(1)–(3).

19. These include, e.g. Guam, Hong Kong, Macau, and French Polynesia.

20. ADB Charter, arts. 3(1)–(3).

21. See e.g. Asian Development Bank, “Memorandum of Understanding for Strengthening Cooperation Between Asian Development Bank and Asian Infrastructure Investment Bank” (2 May 2016).

22. European Commission, “The Asian Infrastructure Investment Bank”, EPSC Strategic Notes 1/2015, 2015, at 4.

23. See Callaghan and Hubbard, supra note 8 at 129.

24. STRAND, Jonathan R. , FLORES, Eduardo M. , and TREVATHAN, Michael W. , “China’s Leadership in Global Economic Governance and the Creation of the Asian Infrastructure Investment Bank” (2016) 1 Rising Powers Quarterly 55 at 59.

25. Callaghan and Hubbard, supra note 8 at 129.

26. Ibid. Supra note 5.

27. AIIB Agreement, arts. 5(2)–(3). A Super Majority can lower this to 70%. Chief Negotiators’ Report, supra note 5 at art. 5(2); infra note 140.

28. AIIB Agreement, art. 25(1).

29. ADB Charter, art. 5(1). The Inter-American Development Bank favours regional members even more, leaving a 15.995% non-regional voting share. Agreement Establishing the Inter-American Development Bank, 389 UNTS 69 (1959), s. 4(b).

30. ADB Charter, art. 30(1) (regional members were originally guaranteed 7/10 director seats).

31. Strand et al., supra note 24 at 64; Callaghan and Hubbard, supra note 8 at 129.

32. AIIB Agreement, art. 3(1)(b).

33. Emilio CHIOFALO and Kaori MIYAMOTO, “Official Development Finance for Infrastructure”, OECD Development Co-operation Working Paper 30, 2016 at 4. Other estimates include: $776bn annually from 2016 to 2020, Callaghan and Hubbard, supra note 8, 120; $600bn annually, plus 10–20% to mitigate climate change, Griffith-Jones et al., supra note 1 at 4. But see Reisen, supra note 1 at 300 (noting the difficulty of estimating infrastructure investment gaps); Mishra, supra note 10 at 168 (doubting the number of “investible” projects in Asia).

34. See Chiofalo and Miyamoto, supra note 33 at 4.

35. Ibid., at 13–14 (35% of this is concessional and 65% is non-concessional. At $5.4bn and 59% of its yearly disbursements, ADB was the second-largest MDB infrastructure financier).

36. Ibid., at 18. G20, “MDBs Joint Declaration of Aspirations on Actions to Support Infrastructure” (2016). The ADB’s proportion of lending dedicated to infrastructure exceeds other regional MDBs. Yong Wook LEE, “Institutional Evolution of East Asian Financial Regionalism” (2015) 13 Korean Journal of International Studies 89 at 101.

37. Griffith-Jones et al., supra note 1 at 21; Li and Wan, supra note 2 at 23.

38. Li and Wan, supra note 2 at 25; Griffith-Jones et al., supra note 1 at 4; Humphrey, supra note 16 at 2. See AIIB Agreement, art. 8(ii); ADB Charter, art. 7(ii) (bond financing included among ordinary resources); the AIIB intends to continue this trend. AIIB, “Connecting Asia for the Future: Annual Report and Accounts 2016” (2016) at 22.

39. David FRANCIS, “China Opens Its Bond Market to International Investors” Foreign Policy (3 July 2017).

40. Humphrey, supra note 16 at 10.

41. AIIB Agreement, art. 7(3); ADB Charter, art. 5(7).

42. Figures are in US$.

43. AIIB Agreement, arts. 4(1)–(2). The WB had an 80–20 split in 2014. Griffith-Jones et al., supra note 1 at 26. Paid-in shares must be paid to exercise membership rights. AIIB Agreement, art. 6(2). Callable shares are only payable if necessary to meet bank obligations. AIIB Agreement, art. 6(3). In practice, no MDB has ever made a capital call. ADB, “Capital Structure”, adb.org (last accessed 28 May 2018); Humphrey, supra note 6 at 295.

44. Humphrey, supra note 6 at 289.

45. M. OKOSHI and T. KIKUCHI, “Beijing Holds Sway” Nikkei (23 May 2015).

46. See Humphrey, supra note 6 at 296–7.

47. Humphrey, supra note 16 at 10.

48. AIIB Agreement, art. 4(3)

49. Ibid., art. 5(4).

50. ADB Charter, art. 5(2).

51. Ibid., arts. 4(1), 5(1).

52. ADB, “Investor Presentation (2015)” (May 2015), online: ADB <http://www.adb.org/sites/default/files/page/41282/adb-investor-presentation.pdf> at 8.

53. See ADB BG, Resolution 336: Increase in Authorized Capital Stock and Subscriptions Thereto (2009).

54. AIIB Agreement, art. 12(1); ADB Charter, art. 12(1).

55. AIIB Agreement, art. 12(2).

56. Griffith-Jones et al., supra note 1 at 18.

57. AIIB Agreement, art. 17(1).

58. Griffith-Jones et al., supra note 1 at 27.

59. ADB Charter, art. 19(1)–(2).

60. See e.g. Jake Maxwell WATTS, “Up to 20 Countries Waiting to Join China-Led AIIB” Wall Street Journal (19 September 2015).

61. Wonhyuk LIM and William P. MAKO, “AIIB Business Strategy Decisions”, KDI School Working Paper 15-04, 2015 at 27.

62. Ibid., at 16.

63. Humphrey, supra note 16 at 5.

64. See Yun SUN, “How the International Community Changed China’s AIIB” The Diplomat (31 July 2015).

65. CHIN, Gregory T. , “Asian Infrastructure Investment Bank: Governance Innovation and Prospects” (2016) 22 Global Governance 11 at 20.

66. Watts, supra note 60.

67. See Mishra, supra note 10 at 173.

68. See Griffith-Jones et al., supra note 1 at 22.

69. AIIB BG, “Rules and Regulations of The AIIB Project Preparation Fund” (2016), art. III, s. 3.01(a).

70. Humphrey, supra note 16 at 10–11.

71. See generally ADB, “Regulations of the Technical Assistance Special Fund” (1981).

72. The second special fund, the Agricultural Special Fund (est. 1968), closed in 1973. ADB, “ADB Sustainable Development Timeline” (2011), 3. See also Lim and Mako, supra note 61 at 16.

73. ADB BG, “Resolution 372: Enhancing ADB’s Financial Capacity for Reducing Poverty in Asia and the Pacific” (2015), s. 1 (amended by Res. 381).

74. Asian Development Fund grant resources remain separate. Ibid. No other MDB has done so. ADB, “Frequently Asked Questions: Enhancing ADB’s Financial Capacity by Up to 50% for Reducing Poverty” (31 March 2015).

75. Takehiko NAKAO, “OP-ED: ADB’s New Strategy in Asia” adb.org (10 January 2017) (proposal first discussed in 2013).

76. See ibid. Other MDBs suffered significant losses in the Debt Initiative for Heavily Indebted Poor Countries. See Griffith-Jones, supra note 1 at 22–3.

77. ADB Charter, art. 19(3).

78. See Nakao, supra note 75.

79. Reisen, supra note 1 at 301. See also European Commission, supra note 22 at 2 (China’s bilateral development banks’ joint capital base exceeds $100bn).

80. Callaghan and Hubbard, supra note 8 at 135. See also Lim and Mako, supra note 61 at 28 (arguing 5% MDB, 95% private funding arrangements are possible). But see Chin, supra note 65 at 18 (private financing is currently at one-third of pre-global financial crisis levels); Griffith-Jones, supra note 1 at 26 (50–50 financing splits are most common).

81. Griffith-Jones et al., supra note 1 at 24.

82. Ibid., at 4.

83. Chin, supra note 65 at 20 (statements); AIIB, “Multilateral Banks to Deepen Collaboration with Private Sector to Boost Inclusive, Sustainable Infrastructure”, aiib.org (22 April 2017) (forums). See also AIIB Agreement, art. 11(2)(ii).

84. See Chiofalo and Miyamoto, supra note 33 at 17.

85. Griffith-Jones et al., supra note 1 at 22; Li and Wan, supra note 2 at 24.

86. AIIB Agreement, art. 8(iii). ADB Charter, art. 7(iii). Practice suggests that, like the AIIB, payments on bond- financed ADB loans are included herein. See Li and Wan, supra note 2 at 26.

87. AIIB Agreement, art. 18.

88. ADB Charter, arts. 33(2), 40(3) (Governors must approve net income allocation).

89. See e.g. ADB BG, “Resolution 374: Allocation of Net Income” (4 May 2015).

90. AIIB, “Project Preparation Special Fund: Auditor’s Report for 2017” (10 April 2018), 1.

91. See Humphrey, supra note 16 at 5.

92. AIIB, “AIIB Approves its First Equity Investment” (15 June 2017) ($150m, Indian project).

93. Griffith-Jones et al., supra note 1 at 23.

94. AIIB Agreement, arts. 12(1)–(2).

95. Ibid., art. 13(11).

96. ADB Charter, art. 14(xiii).

97. Ibid., art. 12(4).

98. Ibid., art. 12(3). Li and Wan, supra note 2 at 26 (ADB followed this limitation in practice).

99. Li and Wan, supra note 2 at 24.

100. ADB Charter, art. 11(iii).

101. Humphrey, supra note 16 at 16.

102. Lim and Mako, supra note 61 at 18.

103. Humphrey, supra note 16 at 5.

104. Ali Burak GÜVEN, “The World Bank and Emerging Powers” (2017) 22 New Political Economy 496 at 500.

105. Liu and Pan, supra note 2.

106. Ibid. (one reason China uses the WB); Humphrey, supra note 16 at 3; ibid. (desirability of development knowledge).

107. ADB Charter, art. 5(1); ADB By-Laws, supra note 13 at s. 16.

108. AIIB Agreement, art. 5(2).

109. See Manoj KUMAR and Izumi NAKAGAWA, “China’s Influence over AIIB a Concern ahead of Founders’ Meeting” Reuters (13 April 2015).

110. Chief Negotiators’ Report, supra note 5 at art. 5(2).

111. See Strand et al., supra note 24 at 64.

112. Ibid.

113. ADB Charter, art. 5(3). BG Resolutions typically specify the terms and conditions.

114. AIIB Agreement, art. 5(3).

115. Compare AIIB Agreement, arts. 6(1), 6(5)(a); with ADB Charter, art.6 (1).

116. Compare AIIB Agreement, art. 6(5)(b); with ADB Charter, art. 6(2).

117. See Adriana E. ABDENUR, “The New Multilateral Development Banks and the Future of Development” (November 2015) UN University Centre for Policy Research, 4; Chief Negotiators’ Report, supra note 5 at art. 6(5).

118. See e.g. Bob DAVIS and Lingling WEI, “China Forgoes Veto at New Bank to Win Key European Nations’ Support” Wall Street Journal (23 March 2015); Nelson, supra note 4 at 12; Chin, supra note 65 at 13.

119. See Strand et al., supra note 24 at 64.

120. AIIB Agreement, art. 28(1)(ii); ADB Charter, art. 33(1)(ii).

121. Compare AIIB Agreement, art. 28(1)(i); with ADB Charter, art. 33(1)(i). Basic Votes avoid straightforward corporate shareholder-style arrangements, Strand et al., supra note 24 at 63, and boost smaller members’ votes, Callaghan and Hubbard, supra note 8 at 129.

122. AIIB Agreement, arts. 28(1)(iii), 58. See Strand et al., supra note 24 at 63; Callaghan and Hubbard, supra note 8 at 129.

123. India, the second-largest shareholder, holds 8.71% (86,387 votes).

124. See AIIB, “Members and Prospective Members of the Bank” (15 May 2017).

125. See Rebecca LIAO, “Out of the Bretton Woods” Foreign Affairs (27 July 2015).

126. ADB, “ADB Annual Report 2016: Members, Capital Stock, and Voting Power” (2017).

127. AIIB Agreement, art. 6(2).

128. See supra note 115.

129. ADB Charter, art. 42; ADB By-Laws, supra note 13 at s. 17.

130. See Humphrey, supra note 16 at 27.

131. Governors can delegate many duties to the non-plenary BD, but not powers “expressly given to” governors by the constituent document. AIIB Agreement, art. 23(2)(xi); ADB Charter, art. 28(2)(xii). Votes described in this section are such specifically assigned powers.

132. AIIB Agreement, art. 22(1); ADB Charter, art. 27(1). Representatives are usually Secretaries of Treasury, Ministers of Finance, or Central Bank Governors. Nelson, supra note 4 at 12.

133. Lee, supra note 36 at 93. One exception might be the UN Development Programme; however, it is not traditionally labelled a “bank”. See Phillip LIPSCY, “Who’s Afraid of the AIIB” Foreign Affairs (7 May 2015).

134. AIIB Agreement, art. 24(2); ADB Charter, art. 29(2).

135. AIIB Agreement, art. 28(2)(i).

136. ADB Charter, art. 33(2).

137. AIIB, “Rules of Procedure of the Board of Governors” (2016), s. 11.

138. This is also the trend globally. N. BLOKKER, “Asian and Pacific International Organizations” Grotius Center Working Paper 2016/052-PIL, 23.

139. Compare, e.g. AIIB Agreement, art. 38(1); with ADB Charter, art. 41(1) (member suspension); AIIB Agreement, art. 41; with ADB Charter, art. 45(1) (terminating bank operations); AIIB Agreement, art. 43; with ADB Charter, art. 47(1) (distributing assets upon termination).

140. The AIIB Agreement coined the “Super Majority” label. AIIB Agreement, art. 28(2)(ii). For the ADB, see e.g. ADB Charter, art. 4(3).

141. AIIB Agreement, art. 28(2)(iii). Special Majority votes include: arts. 3(2) (admitting non-IBRD states); 7(1) (issuing shares other than at par value); 11(2)(vi) (financing outside listed types); 16(8) (establishing subsidiary organs).

142. ADB Charter, art. 34(2).

143. AIIB Agreement, art. 29(2).

144. AIIB Agreement, art. 53(2); ADB Charter, art. 59(2).

145. AIIB Agreement, art. 53(1); ADB Charter, art. 59(1).

146. Callaghan and Hubbard, supra note 8 at 130.

147. AIIB Agreement, art. 5(2) (though not below 70%).

148. Ibid., art. 11(1)(b).

149. Ibid., art. 11(2)(vi).

150. Compare AIIB Agreement, art. 25(2); with ADB Charter, art. 30(1)(ii).

151. See supra note 150.

152. Compare AIIB Agreement, art. 16(8); with ADB Charter, art. 29(4).

153. AIIB Agreement, art. 29(1).

154. ADB Charter, art. 34(1).

155. ADB, “Past ADB Presidents”, adb.org (accessed 15 May 2017). SCHERMERS, Henry G. and BLOKKER, Niels M. , International Institutional Law (Leiden: Martinus Nijhoff Publishers, 2011) at §352. Similarly, WB Presidents have always been American and IMF Presidents have always been European. See Rajiv BISWAS, “Reshaping the Financial Architecture for Development Finance”, London School of Economics Working Paper 2/2015, 2015 at 4; Callaghan and Hubbard, supra note 8 at 130. The IMF Presidency was first contested in 2016. CHESTERMAN, Simon , “Asia’s Ambivalence About International Law & Institutions” (2016) 27 European Journal of International Law 945 .

156. Callaghan and Hubbard, supra note 8 at 130.

157. XIAO, Ren , “China as an Institution-Builder” (2016) 29 The Pacific Review 435 at 439.

158. See CHOW, Daniel C.K. , “Why China Established the AIIB”, (2016) 49 Vanderbilt Journal of Transnational Law 1255 .

159. Enda CURRAN, “China’s New Bank Offers Fresh Approach to Old Problems” Bloomberg (26 March 2015).

160. See Davis and Wei, supra note 118; Rebecca M. NELSON and Martin A. WEISS, “IMF Reforms”, Congressional Research Service Report R42844 (9 April 2015), 5.

161. Annmaree O’KEEFFE, Jonathan PRYKE, and Hannah WURF, “Strengthening the Asian Development Bank in 21st Century Asia”, Lowy Institute for International Policy, February 2017 at 13.

162. Lee, supra note 36 at 99. Lee indicates that China proposed greater control over day-to-day decisions, supra note 36 at 100.

163. Kumar and Nakagawa, supra note 109.

164. See Biswas, supra note 155 at 3; Callaghan and Hubbard, supra note 8 at 117 (noting China’s larger veto power, compared with existing MDBs).

165. See Sun, supra note 64.

166. See Blokker, supra note 138 at 17.

167. See e.g. Abdenur, supra note 117 at 4; Mishra, supra note 10 at 172–3.

168. Chin, supra note 65 at 13; Kumar and Nakagawa, supra note 109.

169. See e.g. Davis and Wei, supra note 118.

170. AIIB Agreement, art. 26(iii)–(iv) (directors’ duties).

171. See Callaghan and Hubbard, supra note 8 at 131.

172. Abdenur, supra note 117 at 4.

173. See e.g. Watts, supra note 60.

174. AIIB Agreement, art. 50.

175. Chow, supra note 158 at 30.

176. See “AIIB to be lean, clean and green, Chinese officials say” Xinhua (13 April 2015) (“Lean is cost effective; clean, this bank will have zero-tolerance on corruption; green means it is going to promote the economy”).

177. Callaghan and Hubbard, supra note 8 at 134.

178. See e.g. ibid., at 135; Strand et al., supra note 24 at 62; Lim and Mako, supra note 61 at 26; WU, Chien-Huei , “Global Economic Governance in the Wake of AIIB” (2017) 18 Journal of World Investment and Trade 24 .

179. European Commission, supra note 22 at 4.

180. AIIB Agreement, art. 23; ADB Charter, art. 28 (describing powers). AIIB Agreement, art. 24(1); ADB Charter, art. 29(1) (prescribing annual and “as-required” meetings).

181. ADB Charter, arts. 32(1) (resident status), 31(ii) (directors’ powers), 37(1) (headquarters).

182. Chow, supra note 158 at 23 (“periodically” interpreted as “quarterly”). The EIB’s non-resident directors meet ten times per year. MARTINEZ-DIAZ, Leonardo , “Boards of Directors in International Organizations” (2009) 4 Review of International Organizations 383 at 398.

183. AIIB Agreement, art. 27(1).

184. Callaghan and Hubbard, supra note 8 at 131 (EIB is the only other MDB with non-resident directors); World Bank, “Status Report FY09” (2009), i (WB declined to adopt a non-resident BD); Takatoshi ITO, “The Future of the AIIB”, Center on Japanese Economy and Business Working Paper, 2015 at 5 (Japan requires a resident BD); Lee, supra note 36 at 103 (resident BDs are “a minimum condition for institutional autonomy”). But see Humphrey, supra note 16 at 6 (arguing that resident directors have little development impact).

185. See e.g. Davis and Wei, supra note 118; Chin, supra note 65 at 16 (the Zedillo Commission Report estimates that the IDB BD costs about $70m annually); Humphrey, supra note 16 at 20 (percentage of MDBs’ net income needed for administrative costs, including directors and staff, ranges from 194% (IBRD) to 27.5% (EBRD)). The ADB has one of the lowest administrative expenses to core capital ratios among MDBs. ADB, “Budget of the Asian Development Bank for 2017” (2016) at app. 5 s.11.

186. Lee, supra note 36 at 102.

187. Chin, supra note 65 at 16.

188. See Callaghan and Hubbard, supra note 8 at 131–2.

189. Chin, supra note 65 at 17. ADB is likewise pursuing such efficiencies. ADB, “ADB Environmental Operational Directions 2013–2020” (2013), 14.

190. AIIB Agreement, art. 32(1).

191. Humphrey, supra note 16 at 6.

192. AIIB, “Operational Policy on Financing” (last updated 21 March 2017), s. 3.5.1 ftn.16.

193. AIIB Agreement, art. 29(1)–(2).

194. Blokker, supra note 138 at 30.

195. ADB Charter, art. 34(2).

196. AIIB, “AIIB Open for Business” (16 January 2016); Chin, supra note 65 at 14.

197. AIIB Agreement, art. 30(1). AIIB By-Laws, supra note 11 at Sec.12.

198. AIIB Agreement, art. 30(2).

199. Compare AIIB Agreement, art. 30(3); with ADB Charter, art. 34(6) (universal recruitment). Compare AIIB Agreement, art. 29(1); with ADB Charter, art. 34(1) (President’s nationality).

200. AIIB Agreement, art. 34(1); ADB Charter, art. 39(1).

201. See e.g. Davis and Wei, supra note 118.

202. Ana Sofi BARROS, “Governance as Responsibility”, University of Leuven, Belgium, PhD thesis, (2017) at 242–3.

203. AIIB Agreement, art. 25(5)–(6).

204. See Barros, supra note 202 at 244–6.

205. AIIB Agreement, sch. B, arts. 5–6.

206. Smaller shareholders typically form coalitions to elect directors. Coalition decision-making generally reflects individual members’ relative quotas. Barros, supra note 202 at 233–4.

207. AIIB Agreement, sch. B, arts. 3, 7–8.

208. Ibid., art. 9.

209. See Barros, supra note 202 at 234–5.

210. ADB Charter, art. 34(1)–(2) (President); 35 (Vice Presidents). ADB By-Laws, supra note 13 at s. 6 (employment terms).

211. ADB Charter, art. 30(3).

212. Ibid., annex B, s. A, art. 2 (regional, BG Resolution 27 lowered from 10%) and s. B, art. 2 (non- regional, BG Resolution 37 lowered from 25%).

213. Ibid., annex B, s. A, art. 1 (regional) and s. B, art. 1 (non-regional).

214. AIIB Annual Report, supra note 38 at 11.

215. AIIB Agreement, arts. 29(1) (President), 30(1) (Vice-Presidents).

216. See Chow, supra note 158 at 23.

217. AIIB, “Code of Conduct for Bank Personnel” (January 2016) at s. 22. The rule applicable to bank directors differs materially.

218. Ibid., at s. 38.

219. ADB Charter, art. 34(5). “Staff Regulations of the Asian Infrastructure Investment Bank” (2016).

220. AIIB Agreement, at art. 5(1)–(2) (emphasis added).

221. AIIB Annual Report, supra note 38 at 10; “Staff Regulations of the AIIB” (2016), arts. 6–7(1); ADB, “Professional Staff Information Guide” (2010), 11 (thereafter allowing extension or conversion to “regular status”).

222. AIIB Agreement, at art. 7(3)(ii).

223. Ibid., at art. 13. The second round of public consultations concluded on 26 March 2018, but a final draft of the complaints handling mechanism has not yet been issued. AIIB, “Complaints Handling Mechanism” (28 May 2018).

224. See Chow, supra note 158 at 24.

225. See e.g. Blokker, supra note 138 at 24, 27.

226. See Callaghan and Hubbard, supra note 8 at 122–3.

227. Blokker, supra note 138 at 27.

228. Compare AIIB Agreement, art. 31(3); with ADB Charter, art. 36(3); with 1945 Charter of the United Nations, 1 UNTS 16 (1945), art. 100.

229. Compare AIIB Agreement, art. 50; with ADB Charter, art. 55.

230. AIIB Agreement, art. 50(i).

231. See Biswas, supra note 155 at 9 (citing Transparency International’s Corruption Perceptions Index).

232. Strand et al., supra note 24 at 62.

233. By using “member”, rather than “Member State”, the AIIB allows entities such as Taiwan to exercise control, if admitted. Compare AIIB Agreement, art. 13(3); with ADB Charter, art. 14(iii).

234. Compare AIIB Agreement, art. 13(2); with ADB Charter, art. 14(i).

235. Compare AIIB Agreement, art. 13(5)–(6); with ADB Charter, art. 14(v)–(vi).

236. Compare AIIB Agreement, art. 13(7); with ADB Charter, art. 14(vii).

237. Compare AIIB Agreement, art. 13(11); with ADB Charter, art. 14(xiii).

238. Compare AIIB Agreement, art. 13(10); with ADB Charter, art. 14(xii).

239. See Ito, supra note 184 at 4. Japan is ineligible for ADB loans.

240. Compare AIIB Agreement, art. 13(9); with ADB Charter, art. 14(xi).

241. Compare AIIB Agreement, art. 13(1); with ADB Charter, art. 14(xiv). See AIIB Agreement, art. 9(1).

242. Compare AIIB Agreement, art. 13(8); with ADB Charter, art. 14(iix) (directors, by a two-thirds vote, can extend procurement to non-members).

243. Watts, supra note 60.

244. See Sun, supra note 64; Wang, supra note 2. This dampens predictions that the AIIB will funnel work to Chinese state-owned enterprises. Chow, supra note 158 at 27.

245. Griffith-Jones et al., supra note 1 at 19.

246. AIIB, “Procurement Policy” (2016), s. 5.7.

247. Compare AIIB Agreement, art. 13(4); with ADB Charter, art. 14(ii). The AIIB Agreement reproduces these purposes. AIIB Agreement, art. 2(ii). See also Laura HENRY, “Ensuring Accountability for Environmental and Social Policies in the AIIB” (2015) 18 Korea University Law Review 37 at 55; Wu, supra note 178 at 24.

248. AIIB Agreement, art. 31(2).

249. Chow, supra note 158 at 25.

250. See e.g. AIIB, “Project Document of the AIIB: India: Andhra Pradesh 24x7 Power for All Project” (14 April 2017), 24 (co-financed); AIIB, “Project Document of the AIIB: Bangladesh: Natural Gas Infrastructure and Efficiency Improvement Project” (27 March 2017), para. 54 (self-financed, ADB standards).

251. AIIB, “Project Document of the AIIB: Oman: Duqm Port Commercial Terminal and Operational Zone Development Project” (8 December 2016) at paras. 46–7.

252. AIIB, “AIIB Environmental and Social Framework” (2016), para. 8 (human rights, general reference), 15 (labour rights, more specific) [AIIB-ESF]. See also A. KÄMPF, “New Environmental and Social Standards at the Wolrd Bank [sic] and the AIIB”, Deutsches Institut für Menschenrechte Position Nr. 4 (2016) (translation), 2 (evaluating AIIB labour standards).

253. ADB Charter, art. 14(x).

254. Ibid., art. 14(viii).

255. Ibid., art. 14(iv).

256. AIIB-ESF, supra note 252 at paras. 69–70.

257. AIIB Agreement, art. 31(2); ADB Charter, art. 36(2).

258. Humphrey, supra note 16 at 2.

259. Chief Negotiators’ Report, supra note 5 at art. 13(4).

260. Cf. Amitav ACHARYA, “‘Alternative’ Regional Institutions in Asia?” (2015) 2 Georgetown Journal of Asian Affairs: Policy Forum 4.

261. See Chiofalo and Miyamoto, supra note 33 at 16 (reproducing 2014 figures).

262. Callaghan and Hubbard, supra note 8 at 124.

263. Chief Negotiators’ Report, supra note 5 at art. 13(4).

264. Ito, supra note 184 at 5.

265. See Henry, supra note 247 at 55.

266. See e.g. AIIB, “AIIB Launches Final Round of Consultation on Draft Energy Strategy”, aiib.org, 24 January 2017.

267. See e.g. AIIB Agreement, art. 34 (transparency policy); Henry, supra note 247 at 55.

268. Callaghan and Hubbard, supra note 8 at 133–6; Humphrey, supra note 16 at 10. See also Reisen, supra note 1 at 302 (on average, ADB projects require seven years from proposal to completion).

269. Humphrey, supra note 16 at 26.

270. Lim and Mako, supra note 61 at 25.

271. Ibid.

272. Humphrey, supra note 16 at 27.

273. Chin, supra note 65 at 21.

274. Callaghan and Hubbard, supra note 8 at 133.

275. Chin, supra note 65 at 21.

276. Griffith-Jones et al., supra note 1 at 20.

277. Henry, supra note 247 at 41–2.

278. Callaghan and Hubbard, supra note 8 at 133 (bilateral development institutions); Chow, supra note 158 at 26 (bilateral trade agreements).

279. Chiofalo and Miyamoto, supra note 33 at 6.

280. See Griffith-Jones et al., supra note 1 at 31; Wu, supra note 178 at 23.

281. Chin, supra note 65 at 21.

282. Ibid., at 14–15.

283. Humphrey, supra note 16 at 6.

284. Chin, supra note 65 at 21.

285. Griffith-Jones et al., supra note 1 at 19–20.

286. Ibid., at 20. The WB’s “programme for results” takes this approach. Lim and Mako, supra note 61 at 24.

287. See Lim and Mako, supra note 61 at 26.

288. Compare e.g. ADB, “Safeguard Policy Statement” (2009), para. 59 [ADB-S.P.S.]; with AIIB-ESF, supra note 252 at para. 62 (implementation monitoring). But see Chow, supra note 158 at 25 (Indonesian statement that AIIB imposes looser environmental requirements).

289. Compare e.g. ADB-S.P.S., supra note 288 at paras. 65–7; with AIIB-ESF, supra note 252 at para. 13 (similar project categories and obligations for intermediaries, but AIIB does not mention due diligence review).

290. ADB-S.P.S., supra note 288 at para. 37.

291. See e.g. Juan D. QUINTERO, Alberto NINIO, and Paula J. POSAS, “Use of Country Systems for Environmental Safeguards”, The World Bank Group, 22 February 2011 at 3.

292. Environmental Operation, supra note 189 at 10.

293. Ibid.

294. See supra notes 69–70.

295. Compare ADB-S.P.S., supra note 288 at para. 71; with AIIB-ESF, supra note 252 at para. 10.

296. AIIB-ESF, supra note 252 at para. 12.

297. Environmental Operation, supra note 189 at 17. See ADB-S.P.S., supra note 288 at para. 41 (legalistic safeguard implementation increases transaction costs).

298. ADB-S.P.S., supra note 288 at para. 37.

299. Ibid., at para. 20; Humphrey, supra note 16 at 6 (praising integration of country systems).

300. AIIB-ESF, supra note 252 at paras. 52–6.

301. Ibid., at para. 12.

302. See Kämpf, supra note 252 at 1–2; Gala LARSEN and Sean GILBERT, “Asian Infrastructure Investment Bank Releases New Environmental and Social Standards” World Resources Institute (4 March 2016).

303. See Larsen and Gilbert, supra note 302.

304. Humphrey, supra note 16 at 4.

305. Biswas, supra note 155 at 3; Güven, supra note 104 at 20; Strand et al., supra note 24 at 58–60 (arguing that changes to WB and ADB voting shares had minimal effect).

306. See also Strand et al., supra note 24 at 61 (in existing MDBs, this might have informed China’s preference for special operations funds, which permit more direct control).

307. This would increase developing country board members. WB, “World Bank Doc. 32381v2”, Attachment F (untitled, undated options paper), online: <http://documents.worldbank.org/curated/en/694761468142485381/pdf/323810v2.pdf>

308. See ibid., at paras. 13–16.

309. AIIB Agreement, art. 53(1).

310. Nelson and Weiss, supra note 160 at 1; Davis and Wei, supra note 118; World Bank, supra note 307 at Attachment E. One Chinese commentator implies that China’s one-party state would avoid such delays. See Li and Wan, supra note 2 at 25.

311. See World Bank, supra note 307 at para. 10.

312. AIIB Agreement, arts. 5(4), 53(2)(iii); ADB Charter, arts. 5(2), 59(2)(iii). See Articles of Agreement of the International Finance Corporation, 264 UNTS 118 (1955) (as amended), art. II, s. 2(d), art. VII(b)(ii); Reisen, supra note 1 at 299.

313. See World Bank, supra note 307 at attachment G.

314. AIIB Agreement, art. 4(3); ADB Charter, art. 4(3).

315. See supra note 43.

* Law Clerk to the Hon. Jane A. Restani, United States Court of International Trade. I wish to thank Professor Dr Neils M. Blokker for his guidance in constructing the thesis from which this paper was derived. The paper was prepared in the author’s personal capacity. All views expressed herein are the author’s own and do not represent the view of any US government entity.

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Asian Journal of International Law
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