This book examines in detail:
- the typical deal structures used on transactions under the initiative;
- the many choices of governing law and jurisdictions for dispute resolution;
- why English law is so widely used in Belt & Road deals; and
- where issues can arise when different governing laws and jurisdiction clauses are, by necessity, being used together on projects and where the overlaps and gaps may lie in wait for the unwary party.
Why English law
With regards to Belt & Road transactions, the indications so far are that English law is being widely used for the principle transaction documentation.
English law is widely used in international transactions (often in conjunction with local laws) across a variety of jurisdictions, including many deals in the Middle East, Africa, China, Russia and the CIS. In some cases this is for historical reasons, in others for practical reasons, or sometimes both.
Both historically and currently, a number of major banks and financial institutions are head-quartered in London and so have logically insisted on English law when issuing financing documents. Financing documentation under English law is well developed and the interpretation and practice relating to this area of law is clear and well established.
In addition, English law has fully developed jurisprudence and a universally well respected judicial system, an independent and trustworthy judiciary that is high calibre, dependable and one which possesses high integrity. The judicial system is reasonably efficient and comparatively cheap, at least as regards the costs of Court proceedings themselves.
The competitive challenge of Chinese law as an alternative and what the future might hold.
One obvious question in relation to the Belt & Road initiative is whether over time, Chinese participants will begin to insist on using Chinese law to govern the principal investment documentation. There is some logic behind this, since in many cases it will be the Chinese companies and banks providing the bulk of the financing and so they will often hold the balance of power in negotiations.
However, currently the use of Chinese law for the principal documents on Belt & Road transactions remains limited and English law remains the dominant influence, followed by other similar common law systems such as Hong Kong and New York law. However, that this does not mean that English law offers the perfect solution. Belt & Road transactions will by necessity involve a complex web of different governing laws and jurisdictions and this will always be less than perfect in the event of a problem or dispute, because it throws up the potential for overlapping or even conflicting points at different levels or under different laws.
Time will tell whether the trend towards using English law will change. Much of course will also depend on how quickly Chinese law can continue to develop and adapt to the challenges and opportunities being created by the Belt & Road initiative and how quickly non-Chinese parties can become accustomed to and be comfortable with Chinese law and dispute resolution options in China.
Given the massive proposed scale and reach of Belt & Road, anything and everything is possible and we eagerly wait and watch to see what the future might hold.