In the final of a three-part examination of China’s Belt and Road initiative, we look at the long-term implications of the project. Some, like permanent infrastructure, are tangible, but a new regional legal landscape could open a pipeline of transactional and dispute work for law firms straddling half the globe.

China’s Belt and Road initiative – a US$900 billion infrastructure spending spree along the old “Silk Road” linking Asia to Europe – has been billed as a once in a lifetime opportunity for emerging economies to upgrade their economic and social development.

Countries in Central and South Asia in particular are seizing opportunities to rejuvenate their obsolete or non-existent energy, water and transport systems. Examples include the first modern ports in Pakistan and Sri Lanka, while Kazakhstan is building state of the art dams.

But the true test of the Belt and Road will be the long-term legacy for countries involved. Roads and railways, though valuable, require constant maintenance. Higher-value infrastructure, such as dams and power plants, can operate for 50-100 years.

A more lasting legacy, from a legal perspective, would be the entrenchment of a fair and equitable rule of law. In Kazakhstan, for example, the proposed Astana International Financial Centre would hear commercial cases under English common law and enforced by independent courts, similar to separate international courts in Dubai, Abu Dhabi and Doha.

The Belt and Road initiative has galvanized law firms across the world. One opportunity is to work in the rarefied atmosphere of high-level, inter-governmental transactions. “Advice is needed to set up and conclude free trade zones and pacts on trade liberalization,” says Nicholas Hanna, a partner at K&L Gates in Singapore.

NICHOLAS HANNA 高盖茨律师事务所 合伙人,新加坡 Partner K&L Gates Singapore

Digging deeper, the Belt and Road offers sophisticated legal work on a truly worldwide project. “We have lawyers who have purposefully been seeking to generate around the Belt and Road initiative, especially in helping MNCs [multinational companies] identify and secure contracts,” says Hanna. “But we also think it is very important to not exclude our global colleagues who can bring their cross-border regulatory and sector-specific knowledge to bear. This is how we truly add value.”

Hanna adds that, given the cross-border nature of the initiative, transactions are inevitably more complex due to regulatory, business landscape and language differences. “Sound legal advice is also key to negotiating sales contracts, arranging syndicated loans or working out tax obligations.”

He points to a recent deal in which the firm advised COSCO Shipping Corporation and Lianyungang Port Holdings Group on the acquisition of a 49% stake in a dry port on the China-Kazakhstan border. “The team of lead lawyers including one partner in Beijing, one counsel in Shanghai and another partner in Singapore,” says Hanna.

Indeed, the hub-and-spoke nature of legal markets – as well as the concentration of financial infrastructure – means a few key jurisdictions are likely to pick up the lion’s share of Belt and Road-related work.

STEPHANIE KEEN 霍金路伟律师事务所 管理合伙人,新加坡 Managing Partner Hogan Lovells Singapore

One of the most interesting expected rivalries is already panning out. While Hong Kong remains a natural gateway to China – “Hong Kong enjoys super-connectivity under ‘one country, two systems’,” outgoing chief executive Leung Chin-ying said in May – Singapore is a natural gateway to elsewhere in Asia. “Singapore’s established capital market makes it the natural infrastructure finance hub for the region,” says Stephanie Keen, Singapore managing partner of Hogan Lovells.


Given Beijing’s dominant role, it is unsurprising that Chinese cities are expected to reap the riches. The Chinese government says it sees Hong Kong as invaluable to the Belt and Road initiative.

“Hong Kong is a global financial trading and shipping centre, home to the regional headquarters of many multinationals and a city extensively connected to the world,” explains Song Ru’an, deputy commissioner of the Chinese Ministry of Foreign Affairs in Hong Kong.

Song, the mainland’s number two official resident in the special administrative region, defines Hong Kong’s prime position through an old Chinese proverb: “The waterfront pavilion catches the moonlight first,” he says, adding that Hong Kong “has developed into an intermediary facilitating two-way co-operation between the mainland and the rest of the world.”

Carrie Lam Cheng Yuet-ngor, who took office as chief executive of Hong Kong on 1 July, wants co-operation agreements with the mainland to build Hong Kong into a financial hub for Belt and Road projects. “We shall also encourage long-term asset funds to invest and finance Belt and Road infrastructure projects, [and] enterprises will be encouraged to use Hong Kong as a platform for insurance and risk management for cross-boundary investments,” she said in April.

Chinese companies, initially mostly state-owned enterprises (SOEs), but later privately owned entities, will need a platform outside China for overseas investment. “Why? Because not all of these companies are very familiar with outbound investments, and many of the Belt and Road countries are not frequent investment destinations,” explains Patrick Yip, national mergers and acquisitions leader at Deloitte, a consultancy.

Furthermore, many Belt and Road projects will be carried out in countries with a less developed legal system. “Hong Kong laws could be popular choices to be chosen by parties to be the governing law of the key finance documentation,” says David Lam, a Hong Kong partner with King & Wood Mallesons.

林永耀 DAVID LAM 金杜律师事务所 合伙人,香港 Partner King & Wood Mallesons Hong Kong

The government is also pursuing legislation more friendly to Belt and Road activities. In its last Budget, it announced it would introduce bills to create open-ended fund company structures in Hong Kong and grant tax incentives for qualifying corporate treasury centres.

In 2016, the Hong Kong Monetary Authority – the territory’s de facto central bank – launched the Infrastructure Financing Facilitation Office (IFFO), a platform to facilitate infrastructure investments and their financing. The IFFO’s partners include banks, investment funds, pensions, major Chinese and Hong Kong companies, accounting firms, consultancies and several law firms.

“There is a huge financing need for projects to materialize in relation to the Belt and Road initiative,” says Lam from King & Wood Mallesons, one of the IFFO legal partner firms. (The others are Allen & Overy, Clifford Chance, Mayer Brown JSM and Pinsent Masons.)

“Our banking team is already working on a number of financing deals, and we expect that we will work on more such financing deals in relation to the Belt and Road initiative,” adds Lam. “We expect that our partnership and collaboration with IFFO will allow us to play a role in shaping the market.”


While Hong Kong’s self-styled position as a “super-connector” for the Belt and Road initiative between China and the rest of the world will create advantages, there will be plenty of regional competition. Singapore, for example, has long been a connection to Southeast Asia.

“Since the initiative was launched in 2014, we have advised on several Sino-Southeast Asian deals that were triggered by China’s push on Belt and Road,” says Hanna at K&L Gates. “We have been inundated to pitch for such related work as well.”

Although relations between China and Singapore have cooled recently – the two countries have disagreed over the legitimacy of China’s territorial rights to South China Sea islands – the legal relationship is expected to thrive.

“The most exciting opportunity that Belt and Road presents from Singapore’s perspective is the increased third-party investment that will come as a result of the region’s improved infrastructure and connectivity, an opportunity largely not connected to its relationship with China,” says Keen from Hogan Lovells.

She acknowledges that a better relationship between the two nations might have allowed Singapore to more directly benefit from the initiative, but points out that direct investment into Singapore’s infrastructure by China was always likely to be minimal.

“The more vital opportunity that the initiative presents Singapore is one of augmenting its position as the financial and business hub in a region, which will be more developed, connected and economically active,” adds Keen.

Like Hong Kong, Singapore is both an advanced economy and has a small domestic market, so inward infrastructure investment will be negligible. However, Singapore’s established capital market makes it a natural infrastructure finance hub for the region.

“The scale and size of investment that the Belt and Road requires will necessitate investment from the private sector, and there will be huge demand for funding from Singapore-based banks to ensure the success of the initiative,” says Keen.

This will provide finance lawyers in the Singapore legal market with opportunities to advise banks on how to structure and document debt products, she notes. “The use of Singapore as a regional financial hub to support Belt and Road projects in the region is already evident, with a tranche of the Bank of China’s US$3 billion bond sale in 2015 being denominated in Singapore dollars and sold via Singaporean banks.”

The internationalization prompted by Belt and Road has law firms in places like Singapore looking beyond their traditional jurisdictions. “We have increased our presence across China to position ourselves in the strategic jurisdictions across which Belt and Road will span,” says Keen.

She says this is not only to take advantage of immediate deals, but also as part of the firm’s long-term strategy. “We believe Central Asia could potentially become a key economic market, and we want to illustrate to clients that we have the capabilities to guide them through the regulatory complexities of the relevant countries.”

Law firms have no illusions about the difficulties to be encountered in such frontier markets. “Many of the jurisdictions are yet to develop mature legal systems,” notes Keen, “and this necessitates that more stringent wording is used to address deal and operational uncertainties – such as corruption and political risk – together with financial risks for investors.”


A combination of infrastructure projects and developing-nation legal systems usually means a thriving trade in commercial disputes. “Inherent in the vastness of Belt and Road is the fact that it will include a large number of countries with underdeveloped, misunderstood, complex or politically partial legal systems,” observes Neil Cuthbert, a partner with Dentons in Dubai. “In some cases, all of the above,” he adds.

Clients and their lawyers are bound to differ over such a broad range of jurisdictions, Cuthbert says. “Where some parties will be well versed in the use of international legal standards, others may feel more secure and confident sticking with their local law regimes. Conflict-of-laws issues are also likely to feature regularly in legal structuring of projects.”

NEIL CUTHBERT 大成律师事务所 合伙人,迪拜 Partner Dentons Dubai

Rimsky Yuen Kwok-keung, Hong Kong’s Secretary for Justice, told the Asia-Pacific Alternative Dispute Resolution Conference in October 2016 that “given the likely increase of commercial and investment activities, the demand for dispute resolution services, including arbitration, is bound to increase”.

Yuen said Belt and Road was an opportunity to harmonize international arbitration law, and suggested the current international arbitration regime, in particular the UNCITRAL Model Law and the New York Convention, should be adapted to the specific needs arising from the initiative.

Disputes emerging from Belt and Road projects are expected to boost the third-party dispute resolution business in not only obvious places such as Singapore and Hong Kong, but also in Shanghai, Dubai, London and perhaps even Astana, in Kazakhstan. “It is known that often investors are distrustful of the system of state courts of the countries in which they intend to invest their capital,” says Maxim Tafintsev, chairman of the Russian Asian Legal Association, a Moscow-based advocacy group.

“It is necessary to develop international commercial arbitration in Asian countries,” he adds, citing geographical convenience. “Asian arbitration venues, such as the Kuala Lumpur Regional Arbitration Centre, have a great potential to become the main arbitration centre for foreign trade participants from Russia.”

In May, the Singapore International Commercial Court (SICC), part of Singapore’s High Court, received an unexpected boost from the Supreme People’s Court of China when it issued a list of 10 reference cases – the equivalent of precedent – to assist the Chinese lower courts in deciding cases related to Belt and Road.

The cases referenced included a landmark decision in December 2016 by the Nanjing Intermediate People’s Court, which recognized a Singapore High Court money judgment in favour of the plaintiff when the defendant failed to enter an appearance in the Singapore action.

“The Nanjing decision was the first time a Chinese court had, absent a treaty obligation, recognized and enforced a foreign court judgment on the basis of the principle of reciprocity,” says Tan Chuan Thye, a partner with Rajah & Tann in Singapore. “It is a timely step as the Belt and Road initiative gathers momentum.”


The Belt and Road momentum has fuelled enthusiasm in some of the most difficult corners of the world. “To date, there is evidence that the Belt and Road policy has encouraged Chinese contractors and investors to consider outbound projects in Iraq, particularly as a result of various Iraqi-Chinese government agreements and initiatives,” says Tom Calvert, a partner with the Confluent law firm in Baghdad.

“However, it is the fundamental investment climate factors in a particular jurisdiction, such as legal environment, security and government support for foreign investment, that are often the most critical factors to support inbound investment,” he says.

The signs are positive enough for Confluent to have developed a Chinese-language capability. “This has been important to allow strong communication with, and access to, local information for, the increasing number of Chinese and Asian companies that are active or exploring new investment opportunities in Iraq,” says Calvert, who worked previously in the Middle East. “In Iraq the improving economy and security situation and increasing willingness of the government to support projects, such as through the issue of sovereign guarantees and investment licences, has also strongly contributed to a natural increase in foreign investment interest in Iraq.”

Belt and Road is also prompting new geopolitical alliances. Russia, China and Mongolia have jointly developed an economic corridor within the initiative. “The objectives are to provide conditions for the development and expansion of trilateral co-operation, increasing trade, and ensuring the competitiveness of products, facilitating cross-border transport, attracting investments, deepening regional economic integration, and strengthening humanitarian contacts,” says Tafintsev.

Russian law firms are “extremely interested” in large-scale projects that will be implemented within the Belt and Road framework, he adds, noting his association is lobbying to promote the initiative in governmental circles in Russia and the former Soviet bloc, as well as Europe, the US and Asia.

“Russia has historically been an important strategic partner of Asian countries,” says Tafintsev, “and, thanks to its capabilities, can become an active participant, including [in] the development of tourism [and] co-operation in the sphere of intellectual property.”

The initiative is also sparking interest in unexpected practice areas. Abdul Rahman BMH, managing director of the Singapore-based Abdul Rahman Law Corporation, used Islamic finance structures to facilitate the project financing of a low-cost housing development in Malaysia.

“It was a project that had no direct links with Belt and Road,” acknowledges Rahman. “Nevertheless, the suitability of the structure as an option for micro-financing and community-based financing could be applied in the various Belt and Road projects throughout the world. The project can be replicated easily anywhere as the financing method pools resources from the community.”

As Belt and Road expands and develops, natural entrepreneurism will fill up many of the interstices between the official mega-projects. As Belt and Road resembles less of a point-to-point entity and more of a circle that girds the earth, the land and sea routes will become truly endless. The world’s legal community is banking on Belt and Road’s timelessness – and infinite possibilities.

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