On the afternoon of July 6, 2020 (Beijing Time), Asian Financial Cooperation Association (AFCA) and Abu Dhabi Global Market (ADGM), jointly held the online Belt & Road Investment and Development Roundtable on Legal Institutional Innovation of International Financial Center: Mixed Legal System in Abu Dhabi. Mr. Chen Kewen, Secretary General of AFCA, and Mr. Richard TENG, CEO of Financial Services Regulatory Authority of ADGM, delivered opening speeches in Beijing and Abu Dhabi respectively.
China Belt and Road Portal provides this roundtable discussion with platform support, Law School of Central University of Finance and Economics and Hanqing Advanced Institute of Economics and Finance of Renmin University of China with academic support, and IFC•IIC Federation with intellectual support.
Mr. Chen Kewen, Secretary General of AFCA
Being committed to the idea “Connectivity, Cooperation, Joint Governance and Shared Benefits”, AFCA actively promotes the exchange of financial thoughts and experiences of B&R, carries out relevant financial cooperation research, and formulates relevant financial standards, to make innovations in the investment and financing mode for Belt and Road, Mr. Chen Kewen said. This roundtable discussion can lay a solid foundation for China and other countries’ efforts to develop leading international financial centers. Endeavoring to partner with ADGM, AFCA expects to maximize the economic and financial development and well-being of Asia and MENA region.
Mr. Richard TENG, CEO of Financial Services Regulatory Authority of ADGM
Mr. Richard TENG points out that global economies should guard against xenophobia and temptations to erect artificial walls and withdraw from global trade for short-term economic or political benefits, though social measures including lockdown, social distancing and border controls are important in the fight against Covid-19. At the same time, he applauds China’s efforts to uphold the importance of international trade and investment as critical for inclusive growth and future prosperity of the world.
Under the epidemic situation and global economic changes, the developed economies have been unable to detach their economic growth from the trade and investment of emerging markets given the fact that these markets account for roughly two-thirds of global growth in the past 3 decades. Particularly, the Middle East and Africa region is too important to ignore in the years to come. China’s Belt and Road Initiative has directly benefited MENA region, and strongly supported local economic growth and social development.
As an emerging and leading international financial center in fast growing MENA market, ADGM has been improving its regulatory regime and digital business, and seen huge net inflows even during Covid-19. It has the largest offering of digital licenses available in the region and internationally, including digital banking, digital payment, digital securities offering, digital asset exchanges. Through in-depth cooperation with China, we aim to build ADGM into an investment and financing hub as well as a RMB offshore pilot hub in MENA region to support international and bilateral trade and investment, contributing to the economic recovery and sustainable growth in the regions.
During the meeting, Mr. Huang Zhen, Professor of Law School of Central University of Finance and Economics and Mr. Fu Chenggang, China chief representative of Financial Services Regulatory Authority of ADGM jointly present the theme report on “International Financial Center Construction and mixed Legal System Innovation——Enlightenment from ADGM.” Mr. Gao Xiqing, professor of the Law School of University of International Business and Economics and former vice chairman of CIC and CSRC; Mr. Li Shuguang, president of Graduate School of China University of Political Science and Law and professor of China Europe Law School; Mr. Chen Daofu, deputy director of the Institute of finance of the Development Research Center of The State Council; Mr. Xiao Geng, president of Hong Kong Institute of International Finance and professor of Peking University HSBC Business School; Mr. Su Yigong, professor of Law School of Tsinghua University; and Mr. Chi Tenghui, director of Financial Bureau of Hengqin New Area appraised the report.
Mr. Huang Zhen, Professor of Law School of Central University of Finance and Economics
With the rise of financial technology and the increasingly fierce competition in the global financial industry, China has paid more attention to the influence of legal system on the construction of international financial centers. Through this seminar, from the perspective of the legal system innovation of the international financial center, policy makers and academic circles can explore the mixed legal system, learn from the experience of Abu Dhabi and combine it with China’s free trade area / port building, and law application and risk management of overseas investment of Belt and Road.
China’s free trade port building, and legal application and risk management of the “Belt and Road” overseas investment and financing can also draw lessons from institutional innovation and judicial practice of the leading international financial centers. We also analyze its inherent legal logic and development experience in order to seek empirical support for future decisions.
Abu Dhabi has found a feasible way to establish an international financial center outside the common law region. China, however, finds itself with deficient legal conditions to take part in the international financial competition. The sample study of Abu Dhabi shows that the mixed law model has certain reference value for China to build an inland international financial center. To do so, local governments and financial centers should be given greater autonomy, and be more open-minded to attract top legal talents from around the world.
Mr. Fu Chenggang, China Chief Representative of Financial Services Regulatory Authority of ADGM
Institutional and legal innovation is one of the key elements in the development of international financial centers and free trade ports. The core is to create a fair, open and efficient market environment through orderly and standardized regulation, forming an international, diversified and healthy market ecology. The business environment, including taxation, ownership, regulatory services, human resources, infrastructure and service ecology, is a more critical factor for development.
ADGM has the top institutional guarantee from the Federal Constitution, the Emirati National Law and the Free Zone Law. The common law system can be directly applied in the whole zone. The three authorities, namely the Financial Services Regulatory Authority, the Registration Authority and the Courts, have recruited regulatory officials and professionals around the world to operate efficiently according to international standards and build up the talent pool. In areas such as overseas investment and financing of the “Belt and Road” and the use of RMB in MENA region, ADGM will ensure that its own development is bound up with China’s economic growth, and jointly promotes multilateral investment and financing cooperation among international financial centers.
Gao Xiqing, Professor of The Law School of University of International Business and Economics and Former Vice Chairman of CIC and CSRC
LLSV theoretical framework and empirical test of legal finance over time needs to be further examined on its reliability and suitability, since the hypothesis and data of 20 years ago may not be applicable to today’s situation.
The relationship between legal system and the development of international financial centers needs to be further studied. By referring to the law system and economic development of more countries, we need to figure out whether good legal system leads to stronger economic growth or the other way around so that other countries have to accept certain influential legal system. In a country as vast as China, it is particularly necessary to study the legal system building of a specific region from a multinational perspective.
The legislation, judicature and law enforcement need to be considered in a unified way. The global common law and statutory law are becoming increasingly integrated and inclusive. Especially in the Company Law and the Securities Law, the separate and mixed financial regulation model also have irregular distribution in the civil law and common law countries. The environment of demand is an important dimension for adopting legal systems. In addition to the demands brought by scientific and technological innovation and economic development, the relatively high predictability and transparency of common law system is another factor that promotes demand. The Arbitration Mechanism which has been effective in China can be used in relevant legal innovation and legal transplant practice.
Mr. Li Shuguang, President of Graduate School of China University of Political Science and Law and Professor of China Europe Law School
The success of the ADGM model lies in the combination of financial regulation and legal transplantation. The regulatory “autonomy” of the financial free zone is the premise of “judge-made law” in the common law.
The key supporting factors behind the ADGM model are the financial credit, the game of financial policy competition and the innovation of financial business. These factors make the common law system more consistent with and support the high liquidity and innovation of the financial industry in product design, property right boundary and trading freedom.
The mixed legal system will bring up three challenges: high institutional cost, high unpredictability caused by the incompatibility between two systems, and the low efficiency that comes with judicial interpretation and precedents. The Chinese Civil Code cannot fully cover the current situation in financial field. Can the mixed legal system be introduced as a supplement?
Furthermore, ADGM’s international and professional talent allocation fundamentally guarantees its successful operation.
There is still a chance that cases in Abu Dhabi can help China better build its IFC, but it does not come easy and would put our rule of law to the test. Facing global changes and challenges, could China be more open and further reform its legal, regulatory and judicial system? The answer to this question would decide China’s next step. The Abu Dhabi model would only be helpful to China under a more open and progressive social, political and economical environment.
Mr. Chen Daofu, Deputy Director of The Institute of Finance of The Development Research Center of The State Council
There are world’s leading international financial centers in both common law and civil law countries, so the relationship between legal system and the development of international financial centers needs to be further discussed. Case study method can be applied to tackle the specific issues, for example, on law, judicature, law enforcement and supervision, faced by Shanghai in the process of building IFC, so as to improve efficiency and applicability. More legal experiments can be done in areas such as Hengqin and Hainan.
Mr. Xiao Geng, President of Hong Kong Institute of International Finance and Professor of Peking University HSBC Business School
The legal system has three most important functions: one is to define property rights in wealth creation; the second is to play an efficient role in trading platforms of exchanges, banks and various financial institutions; the third is to resolve property rights disputes.
These three aspects are one of the biggest challenges facing China at present. If disputes cannot be settled well, it’s hard to attract investors to come. Many practices in Hong Kong and Abu Dhabi are worth learning from. For offshore financial centers to succeed in drawing investors, the three functions must be fulfilled: clear definition of property rights, fair and transparent trading platform, and fair and just settlement of property rights disputes.
Mr. Su Yigong, Professor of Law School of Tsinghua University
The professor emphasizes the use of local resources of law in the development of international financial centers and financial law. Future law reform in China needs to consider the role of judges being a human factor. It is essential for judges to apply their understanding of justice and fairness to judicial practice.
Mr. Chi Tenghui, Director of Financial Bureau of Hengqin New Area
The Abu Dhabi model has a strong reference value for Macao’s economic transformation and its cooperation with Hengqin. As a space carrier, Hengqin develops modern financial service industry. Macao applies the advanced international legal system in the cooperation zone under the authorization of the central government. The key to financial integration between the two places is to reduce the difficulty of docking that comes with the differences in the financial legal system and financial supervision system. Based on the Abu Dhabi model and obtaining national authorization and Macao legislative support, an applicable general legal system is chosen and part of mature financial regulatory system is adopted. In this case, we can realize international integration in legal and regulatory system, and boost the development of Macao and Guangdong-Hong Kong-Macao Greater Bay Area.
Professor Wang Changyun and Qiu Zhigang, President and Vice President of Hanqing Advanced Institute of Economics and Finance in Renmin University of China; Mrs. Zhang Qian, Deputy Secretary General of China Insurance Asset Management Association, Mr. Yu Jiantuo, Deputy Secretary General of China Development Research Foundation; Mr. Fu Hao, Director of International Department of Shanghai Stock Exchange, and other guests shared their research and thoughts through online discussion and views submission. More than 50 experts from government departments, regulatory agencies, international organizations, think tanks, universities and companies attended the roundtable.
Mr. Fu Chenggang, China chief representative of Financial Services Regulatory Authority of ADGM chaired the meeting, and Mrs. Pang Kuixia, Deputy Secretary General of AFCA, wrapped up the discussion.
About Abu Dhabi Global Market
Abu Dhabi Global Market (ADGM) is an international financial center located on Al Maryah Island in the United Arab Emirates, established by UAE Federal Decree. It is an independent free zone jurisdiction, comprised of three independent authorities, the Registration Authority (RA), Financial Services Regulatory Authority (FSRA) and the ADGM Courts. ADGM aims to build a “Belt and Road” investment and financing center that radiates the Middle East and North Africa (MENA), and serves important institutions and major projects in China and UAE; build a RMB offshore center that radiates MENA region and promote the economic and financial cooperation between the two countries.
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