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Regulation

[The following is a longer and un-footnoted draft of a sixth Policy Digest prepared for a Sydney Southeast Asia Centre joint research project and an ASEAN Secretariat project on harmonising consumer protection law.]

1. Introduction

Recalling or withdrawing consumer products from the marketplace or taking other “corrective action” regarding actually or potentially unsafe or sub-standard products are important parts of consumer law and practice. Manufacturers and other suppliers can be incentivized to monitor the ongoing safety of their products after delivery into the supply chain for consumers, and then undertake corrective action to minimize harm, by private law mechanisms (such as tort claims for negligence brought by consumers) or reputational considerations (loss of customer goodwill etc). However, especially in developing countries experiencing problems with access to justice through the courts or limited media or NGO activity with respect to consumer affairs, public regulation relating to recalls has become significant.

National laws in ASEAN Member States (AMSs) mostly now provide for regulators to require suppliers to undertake mandatory recalls, under specific legislation enacted for (higher-risk) sectors such as automobiles, health products or foods, and/or under general consumer protection laws. In the shadow of such powers, regulators can also more effectively encourage or negotiate with suppliers to undertake (semi-)voluntary recalls. Sometimes suppliers even decide to undertake (purely) voluntary recalls, even without prior consultation with regulators or knowing their extent of their mandatory recall powers.

However, AMSs still lack general consumer protection laws that oblige suppliers to notify regulators when they undertake such voluntary recalls, as required by amendments in 1986 in Australia and 2013 in New Zealand. Nor do such laws in AMSs impose a broader product accident or hazard reporting duty on suppliers, even if the latter have not yet initiated a recall, as required in Australia since 2010 as well as the EU since 2001, Japan since 2006, Canada since 2010, and the US. Both types of obligations can encourage and assist suppliers to undertake recalls more effectively, through drawing on the technical expertise and communication networks of the consumer regulators.

Especially if AMSs take the first step of amending their national consumer protection laws to require suppliers to notify regulators about voluntary recalls, but even now given the mandatory recall powers generally available to regulators, it becomes important to define what is meant “recall” or whatever broader term (like “corrective action”) may be used in the relevant legislation, and provide guidance on when and how to undertake such remedial action effectively. In many major economies that have introduced duties on suppliers to make disclosures to regulators, on top of legislation providing for the latter’s back-up powers to order mandatory recalls, guidelines have recently been published or updated that elaborate quite extensively on rather sparse legislative provisions relating to recalls. These include quite detailed guidelines or handbooks publicized recently by authorities in the EU, the US, Australia, and Japan (although only in Japanese). By contrast, there is little publically-available guidance provided in AMSs. For example, the “Guidelines on Product Defect Reporting and Recall Procedures” are issued by the Health Sciences Authority of Singapore as a relatively short (undated) webpage, and anyway only relate to health products.

This Policy Digest therefore compares such recent guidance materials to identify key components and features that might be elaborated into “ASEAN Recall Guidelines” for consumer products generally. Although aimed primarily at suppliers and regulators, facilitating also evolving information-sharing platforms such as the ASEAN Product Alert website assembling national reports on some mandatory and voluntary recalls, such Guidelines aim also to benefit consumers. Accordingly, peak consumer associations or relevant NGOs should be closely consulted in elaborating such ASEAN Recall Guidelines.

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[The following is a longer and un-footnoted draft of a fifth Policy Digest prepared for a Sydney Southeast Asia Centre joint research project and an ASEAN Secretariat project on harmonising consumer protection law. It is highly relevant also to Japan in light of Kanebo's large-scale recall of some of its skin-whitening products across the region as well as in Japan in 2013.]

1. Introduction

Consumer goods associated with higher risks, and often also extent of harm, tend to generate public regulatory interventions. Food is one example, for which nation states have often legislation quite early on. However, national legislation and implementation is increasingly impacted by international law, particularly World Trade Organization (WTO) or bilateral and regional free trade agreements agreements insist that food safety measures be based on rational and proportionate public health risk assessments, and not constitute disguised trade barriers. This is facilitated by such agreements expressly stating such requirements will be presumed to be satisfied if the national measures are based on food standards agreed in the Codex Alimentarius, administered by two United Nations bodies. The Codex process has remained relatively unpoliticised, based instead on scientific risk assessments, partly because most countries both export and import foods but also because food is a necessity for everyone. This backdrop has also made it easier for other international and regional bodies, including ASEAN and APEC, to collaborate with national regulators and the private sector to develop shared food safety standards in Southeast Asia and world-wide.

Pharmaceuticals and, more recently and in a less interventionist way, cosmetics (goods without, necessarily, any medicinal properties) have also tended to generate regulatory regimes at the national level. At the international level, however, the WTO’s 1994 Technical Barriers to Trade (TBT) Agreement does not expressly create a presumption of conformity from adhering to standards set by specified bodies, when national regulators introduce measures applicable to imports. There is no counterpart to the Codex process; different countries and regions maintain more disparate approaches to assessing and regulating non-food sectors, partly because they may not be exporting as much as importing certain types of goods.

Overall, moreover, the United States (US) often adopts more lenient regulatory regimes compared to the European Union (EU). This is particularly noticeable with respect to cosmetics: the US relies much more on voluntary industry self-regulation (plus more threat of private lawsuits for product liability), whereas the EU favours more interventionist public regulation. Nonetheless, the EU’s 1976 Cosmetics Directive aimed to balance consumer protection with harmonized standards to facilitate cross-border trade, especially within and into Europe. Because the regulatory regime remains stricter than in the US, and EU’s cosmetics manufacturers are more likely to sell into the more regulated European markets than American manufacturers, the EU can also support European manufacturers by encouraging countries and regions in other parts of the world to “trade up” to the EU rather than laxer US regulatory approach, when developing their own laws and practices. Already, by 2004, the lists of ingredients set under the 1976 EU Cosmetics Directive had been adopted by 30 countries, including countries in South America party to the Mercosur and Andean Pact regional arrangements. Other countries, including China and India, have reproduced significant features of the EU model.

Furthermore, although this is not widely known, the EU model has been adopted in Southeast Asia through the “Agreement on the ASEAN Harmonized Cosmetics Regulatory Scheme”. This was signed in 2003 to advance the ASEAN Free Trade Area program, albeit also against the backdrop of the WTO’s TBT Agreement. Schedule A creates the ASEAN Mutual Recognition Arrangement of Product Registration Approvals for Cosmetics, allowing individual ASEAN Member States (AMSs) to agree with other AMSs to allow, without further requirements, the import of products that satisfy the regulatory requirements of the other state(s). However, any such mutual recognition agreements (anyway possible under the TBT Agreement) were envisaged as a temporary step towards harmonizing cosmetics regulation in the region. More importantly, under the 2003 Agreement (Art 2(3)) the AMSs committed to implement by 1 January 2008 the “ASEAN Cosmetics Directive” (ACD) set out in Schedule B. This closely tracks the EU Directive, including by requiring the AMSs to “adopt the Cosmetics Ingredients Listings of the EU Cosmetics Directive 76/768/EEC including the latest amendments”. Supported by the ASEAN-EU Programme for Regional Integration Support, by early 2008 six AMSs had started implementing the ASEAN Directive into their national laws, followed by Thailand, Cambodia, Laos and Myanmar a year and half later, and finally Indonesia from 2013. The ACD regime has therefore been described as “one of the first concrete instances of economic integration between ASEAN countries”.

Meanwhile, however, the EU itself replaced its Directive in 2009 with a Cosmetics Regulation, which on 11 July 2013 came into direct effect in the (now 27) EU member states, rather than having to be implemented by national legislation – sometimes not straightforwardly – as occurs when harmonisation is attempted by means of a Directive. The EU Regulation similarly attempts to enhance cross-border trade through harmonisation, expanding consumer choice while respecting public health, for example by adding new requirements to label cosmetics (such as suncreens) that include nano-particles.

Part 2 below therefore takes a closer link at key features of the ACD, including some differences that remain compared to the original EU model (and especially the US regulatory regime), as well as implementation and other challenges. As elaborated in Part 3, as well as various concrete improvements that could be made to this approach for harmonizing consumer product safety law, the model might eventually be extended to other sectors and anyway is relevant to general consumer regulators, even if the primary jurisdiction over cosmetics usually remains with health officials.

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[The following is a longer and un-footnoted draft of a fourth Policy Digest prepared for a Sydney Southeast Asia Centre joint research project and an ASEAN Secretariat project on harmonising consumer protection law.]

1. Introduction

Public regulation of food safety is typically an early and major priority for law reformers at the national level, given potentially high risks and degrees of harm from unsafe foods. For products that present lower risks, for which it is more difficult to mobilize political resources to regulate, product liability regimes can also incentivise manufacturers to consider food safety – especially if potential harm is extensive, liability is strict, and court systems work effectively. Further incentives can come from reputational effects, in the context of growing (social) media coverage of food safety concerns. Nonetheless, as outlined in Part 2 below, serious food safety failures continue to occur in both developing and developed countries.

General food laws have been enacted in ASEAN Member States (AMSs). As shown in a recent comparison of Indonesia, Malaysia, Thailand and Singapore, they generally impose criminal and/or administrative sanctions for food adulteration, foods injurious to health, food unfit for human consumption, insanitary facilities, and false labeling or deceptive advertising. (Indonesia’s Food Act 1996 further provides specific civil remedies for consumers harmed by unsafe food.) Yet enforcement is problematic: “Food quality and safety standards are usually strictly followed for exportable food commodities, but not always enforced for food destined for the domestic market”.

In addition, such food laws tend to fall under the jurisdiction of ministries of agriculture and/or health. To minimize conflicts of interest, namely agriculture ministries favouring suppliers rather than consumers, there is a tendency to establish independent food agencies, as in the United States (US, although the agriculture department still regulates some products) or Myanmar (within the Health Ministry). This is especially true for risk assessment functions, as in the European Union (EU) since 2002, and Japan since 2003 (for risk management if harm eventuates, Japan’s agriculture ministry still regulates farm safety while the health ministry deals with the subsequent supply chain).

However, other government departments are also increasingly involved in food safety regulation. On the one hand, ministries of commerce or trade get involved because international treaties now require science-based, proportionate regulation of import safety, preferably based on internationally agreed standards, as outlined in Part 3 below. On the other hand, there is existing and potential scope for consumer affairs regulators to become (more) involved in food safety regulation, even though they may constitute smaller and more recently created public authorities, because:

• they often have or share responsibility for enforcing food standards set by other departments (as seen in the Consumer Protection Laws enacted in Vietnam in 2010 and Myanmar in 2013);
• consumer regulators may also be given a coordinating role, or “back-up” powers to regulate if a harmful food product falls outside the jurisdiction of other agencies (eg konnyaku jelly snacks in Japan until the Consumer Affairs Agency was established in 2009);
• consumer regulators may have powers to bring representative actions (as in Thailand) or order compensation (as in Myanmar) on behalf of consumers harmed by non-compliant foods.

Consumer regulators also develop helpful expertise in consumer behaviour and risk communication more generally, which is valuable for law-making related also to food nutrition (i.e. “healthy eating”) – a broader contemporary policy concern than food safety (i.e. avoiding food-borne illnesses). As explained by the Consumers International regional representative at the inaugural ASEAN Consumer Protection Conference, held in Vietnam over 8-9 November 2014, promoting healthy diets is a priority because adverse health effects associated with obesity are now spreading to Southeast Asia. In addition, consumer regulators can assist other government authorities in developing effective schemes for oversight of “food safety auditing” by private inspectors, already widely used in global food supply chains and likely to be further facilitated through international agreements on trade in services, yet potentially creating conflicts of interests for the auditors which may impact adversely on consumers.

Accordingly, there is a need to expand capacity in food-related health issues among consumer regulators in AMSs. They need enhanced opportunities to engage with other national regulators (with shared or primary responsibility for food safety regulation) as well as the growing numbers of international, inter-governmental or public-private partnership organisations involved in generating shared food safety standards in the region. This is especially important given that the ASEAN Economic Community (AEC) project, promoting free trade in goods and services by 2015, includes harmonisation of agri-food standards as a priority action item (as elaborated in Part 3).

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Chulalongkorn University’s ASEAN Studies Centre will sponsor this major international conference in Bangkok over 28-29 July 2015, with collaboration from and at the downtown venue of the Department of International Trade Promotion within Thailand’s Ministry of Commerce. The key organiser is the immediate past Dean of Law at Chula, Prof Sakda Thanitcul, assisted by Prof Luke Nottage, immediate past Associate Dean (International) at the University of Sydney Law School and a visiting professor at Chula for parts of 2015. Other speakers include Professor Geraint Howells, renowned consumer product safety law expert and presently Dean of Law at the City University of Hong Kong, as well as the following other country reporters:

1. Singapore: Mr. Lawrence Teh (lawrence.teh@rodyk.com)
2. Vietnam: Mr. Jim Dao (Jim.D@tilleke.com)
3. Cambodia: Mr. Ly Tayseng (tayseng@hbslaw.asia)
4. Laos: Mr. Sornpheth Douangdy (Sornpheth.douangdy@la.pwc.com)
5. Myanmar: Prof. Dr. Khin Mar Yee (dr.khinmaryee.ygn@gmail.com)
6. Malaysia: Mr. Lim Chee Wee (lcw@skrine.com)
7. Indonesia: Mr. Riza Buditomo (Riza.Fadhli.Buditomo@bakernet.com)
8. Philippines: Prof. Emmanuel Lombos (emlombos@syciplaw.com)
9. Brunei: Prof. Dr. Colin Ong (onglegal@gmail.com)

Country reporters will summarise key features in their respective jurisdictions, elaborating eg from Jocelyn Kellam (ed) Product Liability in the Asia-Pacific (3rd ed 2009), but focus on new developments in private law, public regulation, enforcement and media coverage of product safety issues. The conference also draws on my research for a smaller project, focusing on free trade agreement aspects, for the Sydney Southeast Asia Centre.

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The second stage conference for the book project critically comparing and assessing "Independent Directors in Asia" is hosted by co-editor A/Prof Dan Puchniak at the National University of Singapore Law Faculty over 26-27 February 2015. In addition to comprehensive reports from different countries in the region, including one co-authored by myself and Sydney Law School colleague Fady Aoun regarding Australia), the project will include a chapter comparing significant case studies from various jurisdictions, based on short (1000-word) contributions from experts in various jurisdictions. Below is the (unfootnoted) text of Mr Aoun's contribution on a very significant corporate collapse in Australia in 2001.

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[The following is an un-footnoted longer draft of one of two Policy Digests prepared for a Sydney Southeast Asia Centre joint research project and an ASEAN Secretariat conference on consumer protection law in Hanoi over 8-9 December 2014. The footnoted final version is available at: http://www.asean.org/resources/publications/item/consumer-protection-digests-and-case-studies-a-policy-guide-volume-1?category_id=382]

1. Overview
Consumer product safety is a major contemporary concern for developing, middle-income and developed economies. ASEAN, through its Committee on Consumer Protection (ACCP), has recognised this as a priority topic for international collaboration, as trade in goods accelerates through the region with its major trading partners world-wide. Part 2 of this Digest highlights the policy challenge. Part 3 shows how market and even private law incentives are unlikely to provide sufficient incentives for manufacturers to produce safe products; some minimum regulatory standards are needed. Part 4 focuses on regulatory powers to force recalls of unsafe goods, but also requirements for suppliers to notify national regulators about ‘voluntary’ recalls. It also outlines recall information disclosure efforts underway nationally, regionally (notably within the European Union, EU, but also through ACCP since early 2011), and now internationally (especially through the Organization for Economic Cooperation and Development, OECD, since late 2012). This Digest suggests there is scope already for greater engagement by ACCP and individual ASEAN member states particularly with the OECD initiative in this field. Part 5 also urges broader information-sharing as the OECD clearing-house expands over the next few years, as well as with product safety incident reporting systems already developed particularly in the EU and the United States (US).

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Requirements or inducements for (especially listed) company boards to adopt a minimum number or proportion of "independent" directors (IDs), who are not executives as well as free from other relationships that might impede their capacity to exercise independent judgement on behalf of the company as whole, are spreading through the Asian region. This is rather curious, as many countries (including in fact Australia) have a tradition of large non-institutional blockholders, which typically have the capacity and incentive to exercise shareholder rights to extract information and influence the management and direction of the company. The need for IDs is therefore reduced, compared to countries with more dispersed shareholders, such as the US and especially the UK. However, blockholders can take advantage of dispersed shareholders, so the latter (or policy-makers more generally) may still press to have more IDs on boards. Yet blockholders can be expected to lobby to resist such measures, and anyway the impact of IDs on corporate performance may be less in such jurisdictions.

This backdrop may explain the difficulties in introducing requirements for IDs into Japan, despite calls for more IDs in the wake of corporate failures (such as Olympus) and the enactment of the Companies Reform Act on 20 June 2014 (after extensive deliberations). But it is also consistent with the history and reality of IDs in Australia's listed companies. Below is the Abstract for a detailed draft paper comparing Australian developments, co-authored with my colleague Fady Aoun, for the Berlin conference / book project on "IDs in Japan and other Major Asian Jurisdictions" (click here for a PDF of our Powerpoints), as well as the third joint research conference for USydney, UGeneva, Harvard and Renmin Law Schools (hosted in Beijing over 11-12 July: click here for an audio file of my 13-minute presentation by video link).

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On 8 June 2013 the Sydney Morning Herald reported that Volkswagen Australia would be formally recalling Golf and other Volkswagen-made models that had suddenly lost power. The family of one driver and the driver of a truck that rear-ended her Golf vehicle are arguing before the coroner that this was a possible cause for her fatal accident. Over 300 other owners of Volkswagen-made vehicles have also reported problems. Similar concerns about some of Volkswagen’s direct-shift gearboxes had led to formal recalls of some models as early as 2009 in the USA, then in China, Singapore, Japan, Malaysia and Taiwan. However, Volkswagen reportedly stated that Australia does not have the same gearboxes, and instead had initially undertaken a program involving its dealers. Marketing experts have criticised the recall recently commenced in Australia, suggesting that Volkswagen will have suffered extensive damage to its brands by not acting publically earlier to address consumer concerns – in addition to the estimated $170m in direct repair costs.

It will probably come as no surprise that Volkswagen conducted recalls more promptly in the USA. Toyota suffered extensive adverse publicity there relating especially to problems instead involving sudden acceleration, generating recalls of over 10 million vehicles over 2009-2011 and a recently-finalised $1.6b class action settlement. Nor should it be surprising that Volkswagen undertook a recall in Japan. Japanese consumers have become increasingly sensitive about product safety issues, especially since 2000 - when Mitsubishi Motors was found to have been conducting illegal clandestine recalls over an extended period. The delay in Australia is disturbing, especially given the increased attention otherwise being paid to consumer protection since “re-harmonisation” pursuant to the Australian Consumer Law (ACL) reforms enacted in 2010.

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Japan’s is well underway on the path to completing its first comprehensive reform of contract law since enactment of the Civil Code in 1896. A driving force has been Takashi Uchida, a prominent participant in Japan’s intense discussions over contract law theory in the early 1990s. He resigned in 2007 as Professor of Civil Law at the University of Tokyo in order to spearhead deliberations within the Legislative Council (hosei shingikai) of the Ministry of Justice (MoJ), now charged with recommending specific reforms.

At the Council’s first Working Group meeting on 22 November 2009, one member reportedly suggested that deliberations should proceed “without paying too much attention to ‘the Basic Policy for the Law of Obligation Reform’ (draft proposals by [the] Japanese Civil Code (Law of Obligations) Reform Commission)” because it had been confirmed that the Working Group’s deliberations should start “from zero”. However, the Draft Proposals (DP) published in April 2009 by that semi-private Reform Commission, along with a detailed five-volume commentary written by its members, were clearly intended to frame the subsequent debate in the formal Working Group arena – and have mostly achieved that effect.

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This is a rich book, written by Cornell Law School's Professor Annelise Riles (University of Chicago Press, 2011, xii+295 pages). It is full of ideas and observations drawn partly from extensive fieldwork – particularly in Tokyo over 1997-2001 (p. ix), just as Japan was implementing its “Big Bang” reforms aimed at making its financial markets more “free, fair and global” (p. 120). It deserves careful reading, and re-reading, by those researching Japan as well as those interested in financial markets, regulatory theory, contract law, international commercial law, socio-legal studies and anthropology more generally.

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Written by Joel Rheuben (University of Tokyo)

After facing more than a year of deadlock in the Diet and a legislative agenda monopolised by earthquake recovery measures and the increase in the consumption tax, the outgoing Democratic Party of Japan (DPJ) Government has left in its wake a mess of unfinished business in a number of legislative areas. One of these areas is public law reform. The DPJ had been elected in 2009 on a platform of change after the long reign of the Liberal Democratic Party (LDP), and had promised a new era of government transparency and accountability. Behind the early pageantry of the “Government Revitalization Unit”, in which ministers publicly grilled senior civil servants over their agencies’ expenditure, the DPJ worked diligently to bring about much-needed change in matters such as local government, the civil service, freedom of information and administrative appeals.

With a more than comfortable majority in the House of Representatives and the passage of several of the more critical recovery measures out of the way, it remains to be seen which, if any, of the DPJ’s public law reforms the presumptive prime minister, Shinzo Abe, will run with. The LDP’s election manifesto calls for “administrative reform”, but is short on detail. However, the tenor of Mr Abe’s previous prime ministership (from September 2006 to September 2007) gives an indication of Mr Abe’s likely priorities.

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As NZ lawyer Daniel Kalderimis points out recently, concerns about treaty-based investor-state arbitration (ISA) have been:

stirred up by the release of an “Open Letter from Lawyers to the Negotiators of the Trans-Pacific Partnership Urging the Rejection of Investor-State Dispute Settlement” on 8 May 2012. The letter is backed by well-meaning, and several well-known, signatories; most of whom are not especially well-informed about investor-state arbitration. The fact of the letter is welcome, as the issues are important. But the letter itself contains several overstatements and does not make a balanced contribution to the debate.

Another oddity about the "Open Letter" is that it refers generically to "Investor-State Dispute Settlement" (ISDS) and ends by calling on "all governments engaged in the TPP [Trans-Pacific Partnership FTA] negotiations to follow Australia’s example by rejecting the Investor-State dispute mechanism and reasserting the integrity of our domestic legal processes". ISDS incorporates both ISA (where the parties agree to be bound by the arbitrators' decision) and investor-state mediation ("ISM") or conciliation procedures (where the parties agree to negotiate a settlement but are not obliged to accept any proposals made by the third-party neutral mediator). At least the rest of the "Open Letter" indicates that the primary objection is to binding ISA.

By contrast, the "Gillard Government Trade Policy Statement" (April 2011) simply eschews ISDS in Australia's future treaties, including the TPP. Perhaps the Statement meant only ISA, which allows greater inroads into host state sovereignty, given that overall it draws on the Productivity Commission's recommendations from a 2010 Trade Policy Review report. But, by seemingly eschewing all forms of ISA, the Statement seems to go beyond the Commission's recommendation on ISA itself.

Hopefully the Australian government, other states involved in FTA negotiations (such as the TPP) and those who wish to improve the ISA system (such as myself) or abandon it altogether (as do some signatories to the Open Letter) will not simply transpose their objections over to ISM too. There is significant scope for mediating investor-state disputes, and indeed the Draft Rules on ISM published recently by the International Bar Association (IBA) are a valuable guide to conducting mediation more effectively. Below I set out some preliminary analysis of those Draft Rules, prepared for the Law Council of Australia but representing my own personal views - particularly regarding the scope for arbitrators to adopt them as a means of settling ISA claims earlier and more effectively (ie 'Arb-Med'). A fully-footnoted version of my views is available on request, and I encourage feedback.

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Professor Vivienne Bath and myself are guest editors and authors of two articles for this special issue, the first dedicated the Sydney Law Review to developments in or across Asian legal systems. The issue also includes an article on Indonesian law co-authored by Dr Simon Butt, presently serving as Director of the Centre for Asian and Pacific Law at the University of Sydney (CAPLUS).

The special issue contains the following nine contributions, with full-text PDF versions freely downloadable from the Sydney Law Review webpage:

Introduction: Asian Investment and Finance Law
Vivienne Bath and Luke Nottage

Articles:
Corporate Rescue in Asia - Trends and Challenges
Andrew Godwin
Lessons from Product Safety Regulation for Reforming Consumer Credit Markets in Japan and Beyond?
Luke Nottage and Souichirou Kozuka
Embracing Sharia-Compliant Products through Regulatory Amendment to Achieve Parity of Treatment
Kerrie Sadiq and Ann Black
Between Piety and Prudence: State Syariah and the Regulation of Islamic Banking in Indonesia
Tim Lindsey
Reining in Regional Governments? Local Taxes and Investment in Decentralised Indonesia
Simon Butt and Nicholas Parsons
Foreign Investment, the National Interest and National Security - Foreign Direct Investment in Australia and China
Vivienne Bath
Responding to Industrial Unrest in China: Prospects for Strengthening the Role of Collective Bargaining
Sarah Biddulph
The Influence of the WTO over China’s Intellectual Property Regime
Natalie P Stoianoff

Book Review: The Derivative Action in Asia: A Comparative and Functional Approach [edited by Harald Baum, Dan Puchniak and Michael Ewing-Chow, Cambridge University Press, 2012]
Luke Nottage and Fady Aoun

Vivienne Bath and I also reproduce below the text of our Introduction (omitting footnote references). It outlines and commemorates the long and strong tradition of engagement with Asian legal systems on the part of Sydney Law School, CAPLUS and the Australian Network for Japanese Law (ANJeL).

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By: Simon Butt and Luke Nottage (University of Sydney Law School)

[with a shorter version at http://www.eastasiaforum.org/]

Professor Chris Findlay recently wrote on the East Asia Forum about ‘Australia’s FDI challenges in the Asian Century’, highlighting problems reported recently by ANZ Bank and Qantas in the region. His proposals including ‘innovation in negotiating modalities’, including a possible new plurilateral agreement in the WTO that would cover all investments (not just in some services sectors). That’s a nice idea, but it’s proving hard enough to complete the current round of Doha Round negotiations. In light also of recent problems in Indonesia, the Australian government should meanwhile reconsider its abrupt policy shift last April regarding an important protection found in most of its bilateral and regional Free Trade Agreements (FTAs) and bilateral investment agreements (BITs): investor-state arbitration (ISA).

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[Updated 18 April, with a shorter version also on the East Asia Forum blog.]

A few years ago I began a research project into how the Japanese government manages its public and private law cases, working with a former LLM student from Kyushu University and experienced Australian government lawyer, Associate Professor Stephen Green (now at Doshisha University Law Faculty in Tokyo). Our paper was published last year in the Asia Pacific Law and Policy Journal. The second half of the paper is also under review for a special issue of the International Journal of the Legal Profession, focusing on the remarkably under-researched field of government lawyering.

On 6 February this year I stopped over in Seoul to visit prosecutors in Korea's Ministry of Justice (MoJ), partly to begin comparing how Korea manages similar litigation. Information kindly provided in interviews and follow-up correspondence reveals considerable similarities, but also some significant differences compared to Japan. The backdrop and issues in Australia regarding government litigation services diverge even further, but there is much scope for mutual learning.

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On behalf of the University of Sydney, please let me welcome you all to this international conference, on ‘Socio-legal norms in preventing and managing disasters in Japan: Asia-Pacific and interdisciplinary perspectives’, by acknowledging the many people and organizations that have made it possible. I thank especially our many speakers, session chairs and other participants here today – including Consul-General Kohara (who will soon add a few words to open the conference) and several others who will be joining us later (by Skype from Japan and the US, as well as the Federal Minister for Emergency Services and Adelaide University’s new Pro Vice-Chancellor (Int’l) Professor Kent Anderson, who will give closing speeches tomorrow).

I also gratefully acknowledge our main sponsor, the Japan Foundation Sydney, which last year requested applications for joint research events on this important topic; and the other participating institutions – the Law Faculty of Tohoku University (one of USydney’s longstanding partners in Japan) and various USydney-related organisations that have come together to provide matching funding: the Law School and its Centre for Asian and Pacific Law (CAPLUS), the Australian Network for Japanese Law (ANJeL, centred on the Law Schools at USydney, ANU and Bond University), the new China Studies Centre, the Department of Japanese Studies, and the Office of the Deputy Vice-Chancellor (Int’l).

May I also single out our fine administrative support staff: Dale Nouwens (Law School Events Coordinator) and Melanie Trezise (ANJeL Executive Coordinator). I truly appreciate their help, especially as I will need to step outside this conference occasionally over the next few days. As the relevant Associate Dean, I also need to keep an eye on the Orientation Program for new International Students in the Law School, which will be taking place in parallel in the lecture theatre across the corridor.

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A second set of presentation titles, abstracts and (links to) bios for the conference on “Socio-legal Norms in Preventing and Managing Disasters in Japan: Asia-Pacific and Interdisciplinary Perspectives” is now available below. Those of [1] Luke Nottage (Sydney Law School) and [2] Julius Weitzdoerfer (MPI Hamburg), further analysing Japan’s regulatory framework and responses to the “3-11” disasters from a socio-legal perspective, have already been uploaded on this blog here. Postings related to the presentation by Kent Anderson (ANU/Adelaide), on the demographics of the disasters and some subsequent surprising continuities, can be found on the (highly recommended) East Asia Forum blog.

The conference registration webpage and PDF flyer are also now available here. There are various discounts (eg half price for ‘early-birds’, ANJeL and AJS-NSW members, full-time academics and students; free for staff of the sponsoring/participating organisations) and the final session is gratis and open to the public. There are also links to the websites of the Japan Red Cross and Consulate-General of Japan, which are welcoming donations for the massive and ongoing disaster relief in East Japan. Please spread the word among your friends and colleagues!

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The "3-11 triple disasters" that afflicted Japan on 11 March 2011 have highlighted broader regulatory issues facing countries particularly in the Asia-Pacific region, including Japan's FTA negotiation program. A few months after "3-11", the Japan Foundation established a special grant program calling for collaborative research conferences on disaster prevention and management - seeking applications by end-September, with decisions to be reached by end-October and conferences to be concluded by March 2012. An application by a consortium led by the University of Sydney Law School was successful, allowing a major international conference to take place in the new Sydney Law School premises over Friday 1 March and Saturday 2 March 2012. Other sponsors of this event are the University's Japanese Studies Department and the new China Studies Centre, the Centre for Asian and Pacific Law at the University of Sydney (CAPLUS), the Australian Network for Japanese Law (ANJeL), and the Law Faculty of Tohoku University (one of the University of Sydney's longstanding partner institutions).

The conference will commemorate the first anniversary of the 3-11 disasters, and also represents ANJeL's tenth international conference on diverse aspects of Japanese Law. It will examine regulatory issues from a variety of social science perspectives, focusing on Japan but comparing Australia (of course, especially in the wake of January's devastating floods in Queensland), New Zealand (especially issues highlighted by the Christchurch earthquake), Indonesia (the Aceh tsunami), China and the USA (especially earthquakes and nuclear power issues).

Please "save the date", and keep an eye on the ANJeL website and the Sydney Law School "events" website for forthcoming registration and other details.

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In an article published in the Zeitschrift für Japanisches Recht / Journal of Japanese Law [“Die Haftung für Nuklearschäden nach japanischem Atomrecht – Rechtsprobleme der Reaktorkatastrophe von Fukushima I” (Liability for Nuclear Damages pursuant to Japanese Atomic Law – Legal Problems Arising from the Fukushima I Nuclear Accident) (ZJapanR 31, 2011)] Julius Weitzdörfer, Research Associate with the Japan Unit of the Max Planck Institute for Comparative and International Private Law (and JSPS Visiting Researcher at Kyoto University Law Faculty), examines the legal challenges currently facing the Japanese judiciary, government and economy in the aftermath of the nuclear disaster. The article (in German along with an English abstract) can be downloaded here, and shorter summary by the author is reproduced below (from the MPI website).

Luke Nottage (also now at Kyoto University Law Faculty, as a Visiting Scholar over October-November) then adds a broader perspective on the disasters afflicting Japan since 11 March 2011, based on his presentation at Tohoku University in Sendai over 14-15 October.

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[This guest blog by Micah Burch, Senior Lecturer at Sydney Law School, draws on our joint research for the project, "Fostering a Common Culture in Cross-Border Dispute Resolution: Australia, Japan and the Asia-Pacific", supported by the Commonwealth through the Australia-Japan Foundation which is part of the Department of Foreign Affairs and Trade. We have subsequently co-authored a related paper entitled "Novel Treaty-Based Approaches to Resolving International Investment and Tax Disputes in the Asia-Pacific Region" (October 4, 2011) Sydney Law School Research Paper No. 11/66, available here.]

Much was made (in tax treaty circles, at least) three years ago when, after decades of mounting discussion, the Organisation for Economic Co-operation and Development (OECD) included in its model tax treaty a provision requiring arbitration. The controversial provision (Article 25(5) of the OECD Model Tax Convention on Income and on Capital (2003)) takes the substantial step of requiring states to arbitrate tax disputes arising under the treaty if they remain unresolved after two years of negotiation between the two competent authorities. While arbitration is a generally accepted facet of international commercial dispute resolution worldwide, including now throughout Asia, dispute resolution under bilateral tax treaties has been relatively undeveloped. But there are now signs of change.

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[Updated 3 August 2011]

Justice Oliver Wendell Holmes famously remarked in Northern Securities Co v United States 193 US 197 (1904) that:

“Great cases like hard cases make bad law. For great cases are called great, not by reason of their importance... but because of some accident of immediate overwhelming interest which appeals to the feelings and distorts the judgment”.

We might take this reasoning a step further: big cases make or entrench bad policy. A contemporary example is the request for arbitration (in Singapore) initiated on 27 June by tobacco giant Philip Morris Asia (PM) against Australia, pursuant to the 1993 “Agreement between the Government of Australia and the Government of Hong Kong for the Promotion and Protection of Investments”. PM seems to be alleging that proposed legislation mandating plain packaging of cigarettes amounts to “expropriation” of its trademarks (Art 6) and possibly a violation of “fair and equitable treatment” obligations (Art 2(2)).

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[Adapted on 10 April for the East Asia Forum blog]

The shift since the 1990s in the self-image of many bengoshi lawyers outlined in my previous posting, underpinned also by the slowly changing nature of their work generally as well as the emergence of corporate law firms, helps explain the quite swift enactment of the 2004 Law to Promote the Use of Out-of-Court Dispute Resolution Procedures (translated here), driven also by a Judicial Reform Council (JRC) recommendation in 2001. After a slow start, the Law also seemed to be gaining some traction in promoting privately-supplied ADR services.

However, Court-annexed mediation and recent improvements in the litigation process itself leave a formidable competitor. And the conservative backlash among bengoshi in electing their new JFBA President is likely to further dampen the emergence of private ADR services and institutions. Especially now, that only seems probable if and when private suppliers develop niche markets like more facilitative (not evaluative) forms of ADR - a characteristic of ADR in Australia that has impressed ANJeL Visiting Professor Tatsuya Nakamura (see his columns in Japanese reproduced here) - and if litigation costs balloon like they have in countries like Australia.

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Japanese bengoshi lawyers, as the most influential group within the legal profession, stand at a crossroads. Overall, through the overarching Japan Federation of Bar Associations (JFBA), their work and attitudes have become more amenable to collaborating with the judiciary and even public prosecutors in implementing reforms to the litigation system; to increasing the numbers allowed to pass the National Legal Examination as the gateway to careers as a lawyer, judge or prosecutor; and even to allowing Japan's many "quasi-lawyers" to expand their legal practice, as well as more promotion of privately-supplied ADR services. Reforms in all these areas were propelled by the Judicial Reform Council's final recommendations to the Prime Minister in 2001, but they were consistent with the trajectory of bengoshi as a whole. However, the controversial election of a new JFBA President may derail all this, with implications also for related initiatives such as Japan's new postgraduate "Law School" programs inaugurated in 2004.

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Happy New Year of the Tiger!

Registrations are now open for the 2nd ANJeL Australia Japan Business Law Update seminar: Saturday 13 February 2010 2-5.30pm at the Kasumigaseki building of Ernst & Young in Tokyo (http://shinnihon.vo.llnwd.net/o25/image/aboutus/eytax_access_mapE.gif).

Learn about post-GFC financial markets reg and (yes) the amended Australia-Japan double tax treaty. And even get 3 MCLD/PLD credits. Just A$200 – with no GST chargeable! At least some of us will follow up with an informal (PAYG) dinner.

For more details and registration please visit: http://www.usyd.edu.au/news/law/457.html?eventcategoryid=39&eventid=5139

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Imagine an international regime with these institutional features:

1. Virtually free trade in goods and services, including a "mutual recognition" system whereby compliance with regulatory requirements in one jurisdiction (eg qualifications to practice law or requirements to offering securities to the public) basically means exemption from compliance with regulations in the other jurisdiction. And for sensitive areas, such as food safety, there is a trans-national regulator.

2. Virtually free movement of capital, underpinned by private sector and governmental initiatives.

3. Permanent residence available to nationals from the other jurisdiction (and strong pressure to maintain flexible rules about multiple nationality).

4. Treaties for regulatory cooperation, simple enforcement of judgments (a court ruling in one jurisdiction is treated virtually identically to a ruling of a local court), and to avoid double taxation (including a system for taxpayer-initiated arbitration among the member states).

5. Government commitment to harmonising business law more widely, eg now for consumer and competition law.

No, the answer is not the obvious one: I am NOT talking about the European Union (EU). I am referring to the Trans-Tasman framework built up between Australia and New Zealand, particularly over the last decade, sometimes through treaties (binding in international law) but sometimes in softer ways (eg parallel legislation in each country). And since both countries are actively pursuing bilateral and now some regional Free Trade Agreements (FTAs), especially in the Asia-Pacific region, can't at least some of these Trans-Tasman initiatives become a template for a broader "Asia Pacific Community"?

This question is particularly timely as the new DPJ-led government in Japan, has declared its support not only for the WTO system but also for FTAs, particularly in the Asian region. It also advocates improvements in food and consumer product safety measures. Whether or not Australia is considered part of Asia, either by Japan or itself, the two countries are continuing bilateral FTA negotiations in the context of growing involvement in regional arrangements in the Asia-Pacific region. Such developments constitute one theme at the NZ Centre for International Economic Law conference, “Trade Agreements: Where Do We Go From Here?”, over 22-23 October 2009 in Wellington. Below is an edited introduction to my four-part paper, now available in further updated form as a Sydney Law School Research Paper. Powerpoint slides are also available in PDF here.

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This is the grand title of a modest Sydney Law School Research Paper (No 09/71) updating and editing another collection of my blog postings both here and on the East Asia Forum. Freely downloadable via http://ssrn.com/abstract=1446523, it is based mainly on developments from the end of 2008 through to mid-2009.

Many topics are important not only within Australia and Japan, but also potentially for bilateral relations (for example, as novel dimensions to the FTA or 'Economic Partnership Agreement' already under negotiation between these two countries). Several topics (for example, the state of economics as a discipline after the GFC, neo-communitarian perspectives on comparative law and society, the legacy of the post-War Occupation of Japan) also address more broadly how we should (re)conceptualise law, economics and public policy particularly in the Asia-Pacific context.

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[Originally posted, with full hyperlinks and various Comments, at http://eastasiaforum.org/author/lukenottage/]

Japan appeared finally to have recovered from its own financial crisis a decade ago, albeit at the cost of much accumulated government debt. But now the country has been hit by the collapse of its export markets and the rapid rise of the yen, following recession in the US and increasingly world-wide. Professor Iwao Nakatani, former Chairman of Sony, urges a radical shift in economic policy in Japan and elsewhere - from policy ‘based on neo-conservative economics and the philosophy of small government to one based on Keynesianism and welfare state ideology’.

Some may remain sceptical that Japan ever really embraced the former philosophy, and its ascendancy was certainly never as pronounced as in the US, the UK or then Australia - where market liberalisation tended to be linked closely to race politics (Mark Davis, The Land of Plenty, MUP 2008). But deregulation of alcohol distribution is one of Japan’s many transformations over the last decade. It is also the flipside of ever-stricter rules on drink driving, although they also reflect a broader trend towards criminalisation of socio-economic deviance (evident eg in product safety or consumer credit re-regulation).

On the other hand, deregulation is most notable in terms of where you can buy alcohol to celebrate this New Year of the Ox, namely vending machines and those ubiquitous convenience stores. It is less notable in what you pay especially for certain beer-substitutes, which mainly reflects differential tax rates. In fact, such rates may well violate WTO law. Yet there is probably not enough financial reward for potential beer exporters to encourage their home governments to sue Japan. So an implication may be for FTA negotiators (even those now from Australia) to seek some offsetting advantage in their overall bilateral deal with Japan. Yet that would further undermine the entire multilateral WTO framework.

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[Originally posted, with full hyperlinks, at http://eastasiaforum.org/author/lukenottage/]

If you are one of those many more short-term visitors to Japan nowadays, and even if you are an old hand, watch out for signs setting out various rules that may be unexpected or new. Like these two signs:

http://eastasiaforum.org/wp-content/uploads/2008/11/download.jpg?w=225

The bigger one to the bottom left is one of many signs we see increasingly around Japan in English (and sometimes now Chinese or Korean). The text is small but reads: “In the Beautification Enforcement Areas you will be fined up to 30,000 yen for littering regardless of your nationality or status”. The kind of prohibition and penalty you might expect in Singapore. Not in Japan, where local communities have long taken pride in being tidy – although that has not excluded individuals or dodgy firms from dumping their rubbish in distant communities! But what is meant by the round blue sign up on the right?

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All my blogs over July-October 2008, posted originally with full hyperlinks at http://eastasiaforum.org/author/lukenottage/], have been edited and updated as:

Nottage, Luke R., 'Economics, Politics, Public Policy and Law in Japan, Australasia and the Pacific: Corporate Governance, Financial Crisis, and Consumer Product Safety in 2008' (November 3, 2008) Sydney Law School Research Paper No. 08/134, Available at SSRN: http://ssrn.com/abstract=1295064 (and forthcoming, early 2009, in Ritsumeikan Law Review)

Some of the individual topics focused more directly on Japanese Law, asterisked below, are also available on this USydney blog:

* 1. Taking the Australia-Japan FTA negotiations to new levels
* 2. Whaling: What can law add to science, economics, ethics and politics?
3. Australia also should ‘Rail at Australian’s Tabloid Trash’ about Japan
* 4. Consumer over-indebtedness in Japan, Australia and the US
* 5. Dodgy foods and Chinese dumplings in Japan
* 6. FDI and corporate governance in Japan
* 7. Investor-state arbitration for Indonesia, Australia and Japan
8. Rivals: China, India and Japan – economic, not Olympic?
* 9. The politics of Japan’s new Takeovers Guidelines
* 10. Tables turned in Japanese and US financial markets
* 11. Lessons from Japan for the US financial crisis
* 12. The financial crisis - and loansharks in Japan and NZ
* 13. Consequences of melamine-laced milk for China, NZ, Japan and beyond
14. Political dynasties in Japan, the US, Australia … but not NZ?
* 15. A New Consumer Agency for Japan?

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Japanese Law in Asia-Pacific Socio-Economic Context
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