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July 2009

Peter Drysdale’s weekly editorial for the East Asia Forum, along with related postings to that blog and enormous media attention in Australia and elsewhere, focuses ‘on the continuing detention of Rio Tinto executive, Stern Hu, in Shanghai on allegations of espionage’. Drysdale signposts some future analysis of ‘the legal framework under which Hu’s detention has taken place’. He also emphasises that we need ‘a cooperative framework—bilaterally, regionally and globally‘ for ‘China’s authorities to avoid damage to the reliability of markets and for Australia to avoid the perception of investment protectionism’. The most pressing legal (and diplomatic) issues concern China’s criminal justice system, especially when ‘national security’ is allegedly involved. But we need already to consider some broader ramifications, including how we think about FDI legislation and (increasingly intertwined) investment treaty protections.

In short, most agree that the Chinese government got annoyed when Australia itself invoked national security interests to restrict Minmetals bid for OZ Minerals back in March 2009. Then it got really annoyed when Chinalco’s bid for Rio Tinto fell through, even though the Australian government wasn’t directly involved. And so, one story goes, Stern Hu has been arrested to send a message – in the hope that Australia (and other potential host states) will be think twice before invoking national security exceptions to restrict future FDI from China. The China-watchers are better placed to decide whether this is really the motivation behind his arrest. My point here is rather that we should not be surprised that host states may be increasingly tempted to invoke exceptions to limit FDI at the outset, which in turn generates risks of (over-)reactions by home states, as we may be witnessing in Hu’s case. And the initial temptation may arise due to proliferating investor-state arbitration provisions in investment treaties, because those later restrict their room to invoke national security or other limits once the FDI has been approved.

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A recent issue of the Japan Commercial Arbitration Association (JCAA) Newsletter is largely devoted to these topics (No 22, July 2009). Sydney Law School and ANJeL are privileged to host not only one of Japan’s doyens in ICA (and other cross-border dispute resolution, especially WTO procedures), Professor Yasuhei Taniguchi (over July-August 2009). We also welcome (over September – March 2010) Kokushikan University Professor Tatsuya Nakamura, a leader of Japan’s ‘new generation’ of arbitration specialists who heads JCAA’s Arbitration Department.

They have already got me thinking further about Arb-Med (arbitrators encouraging parties to settle their dispute), in the context also of interesting new JCAA Rules focused more specifically on Mediation. Both developments are important for Australia, presently reviewing its legislative and institutional framework for international commercial arbitration (ICA), as well as for many other Asia-Pacific countries intensely interested nowadays in efficient mechanisms to resolve cross-border disputes.

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Australia and Japan face a remarkably similar challenge. Few international arbitrations have their seat in either country, despite various initiatives undertaken over the last decade or two. Both Australia and Japan probably need to adapt quite radical measures to overcome remaining barriers to attracting international arbitration activity to their respective shores. This shared problem is serious not just because their arbitrators, lawyers, institutions or local economies miss out on business – after all, at least the arbitrators and lawyers can still earn fees by deploying their skills in arbitrations further abroad. The problem is serious also because low levels of international arbitration activity in both countries limit the potential to develop domestic arbitration, ADR more generally, and indeed effective civil procedure.

Despite the shared challenge, however, quite radical solutions for each country may differ somewhat. Expedited arbitration procedures may be a particular selling point for Australia, but not Japan. Caucusing in Arb-Med may work in Japan, but not Australia. And Japan may have more scope than Australia to develop international arbitration through a ‘whole-of-government’ approach that promotes investment arbitration provisions, for example, even in treaties with other developed countries.

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This is the title of our translated and edited collection of essays written in Japanese over the last two decades by a leading legal sociologist in East Asia and world-wide, Professor Takao Tanase (in press, forthcoming January 2010 from Edward Elgar). Leon Wolff and I hope to present an outline at the Inaugural East Asian Law and Society Conference to be held on 5-6 February 2010 at the University of Hong Kong, supported by a Collaborative Research Network within the (originally US-based) Law and Society Association.

Tanase’s empirically-based critique of legal legalism is important not only for the United States, which tends to represent an extreme case. It also helps in assessing developments in East Asian countries increasingly exposed or attracted to American views of how law does and should relate to society, including Japan - but also perhaps China (see eg Tanase, 27(3) Mich J Int’l Law, 2006). Tanase’s neo-communitarian critique also presents a challenge to liberalism more generally, making his reassessment particularly timely for two reasons. First, the Global Financial Crisis was prompted partly by a particular liberal vision of how markets do or should operate. Secondly, countries like Japan have now experienced a decade of reform discussions and initiatives allegedly aimed at “Americanising” the judicial system and the legal profession.

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At the JSAA-ICJLE conference held at UNSW over 13-16 July 2009, I presented a pathbreaking comparative introduction into how the Japanese government delivers legal services, especially the central government in its high volume of litigated cases. (I also contributed to a panel discussion on ""Bridging the Gap between Japanese Language and Japanese Legal Studies" - click here for abstracts and Powerpoints.)

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This presentation was based on a draft paper co-authored with Ritsumeikan University Associate Professor Stephen Green, a former lawyer for the Australian government and joint ANJeL-in-Japan Program Convenor, and Meiji University political scientist Professor Shinichi Nishikawa. We are bringing together a detailed manuscript for a law journal, as well as a shorter version for the next proposed book by Wolff, Nottage & Anderson (eds) Who Judges Japanese Law? Popular Participation in Japan’s Legal Process. Our analysis begins to fill a significant gap in the literature comparing Japan’s legal profession. This lacuna is all the more surprising, given Japan’s efforts at comprehensive reform of its judicial system underway since 2001.

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This is the sub-title to a fascinating recent book by University of Wollongong CAPSTRAN Research Fellow, Dr Christine de Matos, Imposing Peace and Prosperity (Australian Scholarly Publishing, North Melbourne, 2008, ISBN 1740971612 ix + 427 pp). This eminently readable work is based on her PhD dissertation submitted to the University of Western Sydney in 2003. But those readers (like myself) who do not specialise in history per se may like to fast-forward first to her “Concluding Thoughts” in Chapter 8, “The Context of Australian Policy Towards the Japanese Labour Movement” (pp 328-9):

The United States came to promote a capital-led economic recovery in postwar Japan, while the Chifley government [in Australia, 1945-9] favoured a labour-led one. These essential differences could never be reconciled in terms of Allied labour policy in Japan. A labour-led recovery was essential to the pragmatic Australian aims of security, trade and maintenance of ‘White Australia’. A labour-led recovery would negate the traditional fear held towards a ‘yellow’ nation, once economically and militarily powerful, yet a nation with low living standards and an exploited workforce deemed inimical to living standards and jobs in Australia and Australian regional trade ambitions. For the United States, the Japanese labour movement was too radical, too militant and too political – thus the free rein given to labour was, after 1947, tightly drawn back. For Australia, the Japanese labour movement was not radical enough, or sincere enough, or had developed roots deep enough to play its integral role in Australian policy – a role for which permission and approval was never sought. Japanese workers were, in the end, not trusted by a nation steeped in suspicion, fear and insecurity. The United States enacted a controlled and superficial revolution from above; Australia envisaged the conditions and structures from outside that would, over time, nurture a controlled but penetrating revolution from below. Time was what Australian policy demanded; time was what US policy was not willing to concede.

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Japanese Law in Asia-Pacific Socio-Economic Context
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