THE ASEAN WAY AND THE RULE OF LAW

Address by Rodolfo C. Severino, Secretary-General of the Association of Southeast Asian Nations, at the International Law Conference on ASEAN Legal Systems and Regional Integration sponsored by the Asia-Europe Institute and the Faculty of Law, University of Malaya

Kuala Lumpur, 3 September 2001

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I wish to thank the Asia-Europe Institute and the Faculty of Law of the University of Malaya for inviting me to participate in this important conference on this very interesting subject. Above all, I thank them for organizing the conference. We in ASEAN have much to learn from Europe on laying the legal foundations for regional integration and cooperation, and we need the lawyers of ASEAN to guide us in this.

I believe that it is about time that people looked upon ASEAN in terms of legal obligations and norms. People are not used to doing so, because ASEAN has never been associated with international law and treaties. ASEAN has

always been regarded as a group of sovereign nations operating on the basis of ad hoc understandings and informal procedures rather than within the framework of binding agreements arrived at through formal processes.

Indeed, ASEAN has often been contrasted with the European Union – in somewhat facile fashion – in those terms. The EU regulates the relationship between the Union and its members and the cooperative arrangements among its members largely through agreements with the force of law. ASEAN has been cooperating through informal understandings that impose no legally binding obligations.

This is a bit of an oversimplification, of course. It is true to a substantial extent, although not entirely. Certainly, it was entirely true in ASEAN’s early years. ASEAN’s founding document, the Bangkok Declaration of August 1967, was a mere declaration of two pages setting forth the ends and means of ASEAN and of Southeast Asian cooperation. The foreign ministers of the five founding states signed it. It required no ratification. It certainly was no Treaty of Rome.

The slow, cautious start of ASEAN was understandable.

The five

founding members still nursed historic animosities toward and suspicions of one another. It required remarkable statesmanship and a veritable act of faith on the part of ASEAN’s founders to see beyond those animosities and suspicions -deeply embedded legacies of history -- and articulate and commit themselves to a shared vision and common aspirations. tentative. ASEAN’s start was, inevitably,

With the hindsight of history, we can say that this aspect of the ASEAN

Way has served Southeast Asia well. By not forcing its incredibly diverse and mutually suspicious members into legally binding standards, ASEAN has done the remarkable job of moving its members from animosity to the close cooperative relationship that they enjoy today, a relationship in which violent conflict is all but unthinkable. ASEAN well. We can say that the ASEAN Way has served

Even today, thirty-four years after its founding, ASEAN adheres to the evolutionary approach, relying largely on patient consensus-building to arrive at informal understandings or loose agreements. delicately manage the legacies of history. With the recent entry of new members, ASEAN seems to be, in a way, starting over in terms of having to

It is not just a matter of history; it is also a matter of culture. Southeast Asians’ way of dealing with one another has been through manifestations of goodwill and the slow winning and giving of trust. And the way to arrive at agreements has been through consultation and consensus – mushawara and mufakat – rather than across-the-table negotiations involving bargaining and give-andtake that result in deals enforceable in a court of law. Let us not exaggerate this distinction. gradual. processes. Much consultation and consensus-building goes into the making of the European Union, which has, in any case, been itself painstakingly Personal chemistry and trust are also important for European Southeast Asians can and do engage in hard bargaining and

exchanges of concessions. But historical circumstances and culture can provide at least a partial explanation for ASEAN’s avoidance, particularly in its early days, of legally binding agreements.

The First Treaty

ASEAN did not conclude a legally binding treaty until the first ASEAN Summit in Bali in 1976 – the Treaty of Amity and Cooperation in Southeast Asia – almost nine years after ASEAN’s founding. The fact that it took nine years for ASEAN to convene its first summit meeting itself speaks volumes about the ASEAN Way.

It took another ten years for ASEAN to produce another agreement that carried some measure of legal obligation. This was the 1977 Preferential Trading Arrangements. Yet another ten years were to pass before ASEAN was to conclude, at the third ASEAN Summit in 1987, the Agreement for the Promotion and Protection of Investments and the agreement on the standstill and rollback of non-tariff barriers, both of which conferred legal rights and obligations upon their signatories.

In the intervening period, three industrial cooperation schemes were agreed upon – the ASEAN Industrial Projects (1980), the ASEAN Industrial Complementation (1981), the ASEAN Industrial Joint Ventures (1983) – and, later, the Brand-to-Brand Complementation Scheme (1988). And there were the 1977 ASEAN currency swap arrangement, the 1979 agreement on the food security reserve, the 1985 agreement on the mutual recognition of drivers’ licenses, and the 1986 establishment of the petroleum security reserve.

These were relatively minor agreements of a workaday, practical nature. The swap arrangement has been revivified and expanded under the 1998 Chiang Mai Initiative. I suppose the agreement on drivers’ licenses continues to be observed. The industrial cooperation agreements have been superseded by the ASEAN Industrial Cooperation scheme of 1996, which remains active. The food security and petroleum security arrangements have never been invoked. These are rather obscure agreements, but they demonstrate the need for binding instruments if economic cooperation is to have substance and real effect.

It was the conclusion, at the ASEAN Summit of 1992, of the agreement on the Common Effective Preferential Tariff for the ASEAN Free Trade Area, simply known as AFTA, that was to give substance to – indeed, we could say, launched -- the economic integration of ASEAN. The agreement is very much alive. Its timetable has, in fact, been accelerated, and it is basically on track. Under this agreement, the first six signatories to the AFTA treaty – that is, the first six members of ASEAN – are legally committed to reducing tariffs on their trade with one another, with a few exceptions, to a range of zero to five percent by the beginning of 2002 or, in some cases, the beginning of 2003. The newer members are given a little more time. The tariff reductions are to be carried out through national legal enactments by each party to the agreement in accordance with an agreed schedule. More recently, the ASEAN countries agreed, formally, on an arrangement to govern delays in the inclusion of products in the AFTA scheme or suspensions of AFTA concessions under very stringent conditions.

In legally committing ASEAN’s members to reduce and eventually remove tariff barriers between them, AFTA is the first substantial step toward integrating the ASEAN market, integration that ASEAN countries have recognized as essential for making their production and commercial processes more efficient, bringing down costs, encouraging investments, and, in general, strengthening their economic competitiveness. Obviously, the AFTA commitments have to be legally binding if they are to be credible both to the member-states themselves and to the business sector.

Extending the Logic

ASEAN has extended this logic beyond trade in goods to the equally

important realm of trade in services, like transportation, telecommunications, financial services, construction and tourism. At the summit of December 1995, ASEAN concluded the Framework Agreement on Services. The agreement is to be given flesh through sector-by-sector negotiations. The resulting agreements will be legally binding upon the parties.

At the same summit of 1995, ASEAN entered into an agreement committing its members to undertake national measures to protect intellectual property, a move that would address another deterrent to investment as well as encourage industrial and scientific innovation.

In October 1998, ASEAN decided to allow the freer flow of investments through the ASEAN Investment Area agreement, under which each country legally undertakes to open up its industrial sector to investments from other ASEAN countries and accord national treatment to such investors.

As further measures to facilitate trade and encourage investments, ASEAN concluded, at the summit of December 1998, framework agreements on mutual recognition arrangements and goods-in-transit. The framework agreement on mutual recognition is to be carried out by agreed arrangements on specific product groups, under which ASEAN countries are obligated to recognize results of conformity assessments issued by any one of them, such as test reports, product certifications or registration approvals. Negotiations on such arrangements are at various stages today. The framework agreement on

goods-in-transit is to be put into effect through nine legally binding protocols, four of which have already been concluded. Agreements on multi-modal and inter-state transport are being worked out.

Meanwhile, in 1996, ASEAN agreed on a mechanism and rules for settling disputes arising from any of the economic agreements binding the association.

On the security front, ASEAN’s leaders signed, at their summit in 1995, the Southeast Asia Nuclear Weapons-Free Zone treaty legally committing their states not to “develop, manufacture or otherwise acquire, possess or have control over nuclear weapons,” station nuclear weapons within or transport them through the treaty’s zone of application, or test or use nuclear weapons. The ASEAN states are obligated not to allow others to do so (except for port calls and airfield transit) in their respective territories. dump nuclear waste in the zone. nuclear energy. They pledged not to They also undertook certain obligations

pertaining to the non-proliferation of nuclear weapons and the peaceful uses of

Legal Foundations for Integration

Two things are to be noted about the legally binding agreements that ASEAN has concluded thus far. The first is that they are overwhelmingly economic in nature. The second is that, since the conclusion of the CEPT/AFTA agreement in 1992, ASEAN has entered into such agreements with increasing frequency. This may be an indication of ASEAN’s growing realization that closer regional economic integration requires basing it on binding legal foundations if integration is to be stable, credible and effective. The commitments undertaken must be clear, firm and enforceable, and those making them cannot lightly back out of them.

As ASEAN moves into further integration, we can expect an expanded number of binding undertakings. The e-ASEAN framework agreement, which

the ASEAN leaders signed in November 2000, may require legally binding agreements on such things as the authentication of signatures, the use of electronic documents in business transactions, privacy and confidentiality, and so on. The further deepening of ASEAN economic integration, involving tariff nomenclatures, product standards, policy coordination, banking and finance, transportation and telecommunications, would surely need agreements in these areas – clear and enforceable ones -- and soon.

More broadly and fundamentally, ASEAN countries will have to harmonize domestic laws and regulations that govern trade and investment. This is to make sure that the regional market is a level playing field. It is to ensure that differences in domestic laws and regulations on “fair trade,” competition policy, government procurement and product standards are not used to frustrate the purposes of AFTA and the benefits of an integrated market. It is to provide the harmonized regional investment regime that investors increasingly require.

I have a sense that this developing rules-based economic regime will gradually extend to other areas of ASEAN cooperation. After all, ASEAN is more than an economic association. Already, a binding, landmark agreement dealing with the haze that periodically arises from land and forest fires in parts of ASEAN is nearing completion and may be signed soon. I foresee ASEAN undertaking legal obligations related to such transnational regional problems as the marine environment, the preservation of biodiversity, money-laundering, trafficking in human beings, drug-trafficking and piracy.

I thus envision ASEAN as evolving into a more rules-based association – although, I hope, not excessively so. As the experience of the EU shows, regional agreements may need national legislation to carry them out. Already, the CEPT/AFTA agreement, as well as the agreement on intellectual property,

requires legal enactments by the national governments in order to take effect. This would help strengthen the national legal systems of the member-states as well as the rule of law in the region as a whole.

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