Research On The Governance Legal Mechanism Of The Asian Infrastructure Investment Ban

Asian Infrastructure Investment Bank(AIIB)was set up on December 25,2015 and selected Beijing which is the capital of China as its headquarters.It is a multilateral development bank with a mission to improve social and economic outcomes in Asia.By investing in sustainable infrastructure and other productive sectors in Asia and beyond,the AIIB will better connect people,services and markets.This will affect billions of people and build a better future for them.The AIIB considers the importance of regional cooperation to sustain growth and promote economic and social development of the economies in Asia and thereby contribute to regional resilience against potential financial crises and other external shocks in the context of globalization;the AIIB acknowledged the significance of infrastructure development in expanding regional connectivity and improving regional integration,thereby promoting economic growth and sustaining social development for the people in Asia,and contributing to global economic dynamism;the AIIB realized that the considerable long-term need for financing infrastructure development in Asia will be met more adequately by a partnership among existing multilateral development banks and the Asian Infrastructure Investment Bank;it is convinced that the establishment of the Bank as a multilateral financial institution focused on infrastructure development will help to mobilize much needed additional resources from inside and outside Asia and to remove the financing bottlenecks faced by the individual economies in Asia,and will complement the existing multilateral development banks,to promote sustained and stable growth in Asia.As the international influence of the AIIB continues to increase,it is not only a major practical issue but also an important theoretical consideration to explore the internal and external mechanisms related to the AIIB governance.The argument in this paper is that the AIIB governance is different from other international financial institutions.The AIIB should set up internal institutions and divide their functions according to the source of power and the nature of power.There is also a need to ensure the independence of legislation and decision-making operations in the AIIB governance.Besides,The AIIB should establish an internal and external oversight accountability mechanism objectively and fairly under the transparency requirements.AIIB is an international organization established by the AIIB Articles of Agreement,a multilateral treaty,the Parties to which comprise the Membership of the Bank.Accordingly,the AIIB is both constituted,and governed,by public international law,the sources of which include applicable international conventions,customary international law,general principles of law and subsidiary means for the determination of rules of law.Notwithstanding its international legal personality independent of that of its Members,the AIIB unlike States,does not possess general competence.In other words,it may only exercise those powers expressly or impliedly bestowed upon it by the Articles of Agreement.In the furtherance of the AIIB’s mandate,internal legislation is issued by the governance organs of the AIIB,deriving its effect from the Articles of Agreement.The resulting organization and effect of such legislation is established by the AIIB’s Internal Legal Framework.The AIIB’s Internal Legal Framework legally and logically arises from the Articles of Agreement and the roles and competence attributed to the Board of Governors,the Board of Directors and the President.It responds to the authority of the Board of Governors to adopt rules and regulations,and the power of the Board of Directors to establish Policies and adopt the Staff Regulations.It is also established in accordance with the generally recognised principles of international administrative law which derive from public international law which governs the AIIB.This paper provides an in-depth analysis of the connotation of governance.The conclusion is that the perfect governance concept has many aspects and is very complicated.From ancient times to the present,from the middle and the outside,the universal values are not interpreted the same in different circumstances and environments.When different legal subjects are in different ranges and different conditions,their understanding of “governance” also contains their own unique views.In the early days of mankind,the saints proposed to educate the world about social governance.In modern times,corporate governance was born.After the subprime mortgage crisis,bank governance has drawn much more attention than before.International financial institution governance based on human goodness and responsibility.Therefore,the perfect AIIB governance should adhere to the implementation of good ideas and give up bad ideas.The paper conducts a jurisprudential analysis on the governance of the AIIB.It elaborates that as an international financial institution,AIIB has a unique meaning that its perfect governance is different from traditional corporate governance and bank governance.Corporate governance is one of the most important aspects of the legal person system.The core requirement of corporate governance is to establish a governance system that balances the long-term interests of the company and the interests of the owners.The company needs to maximize the overall benefits.However,corporate governance theory has never been able to resolve the conflict of purpose between the owner and the manager.The AIIB governance is not concerned with the aforementioned issues.The AIIB governance is different from corporate governance.On the one hand,the member states of the AIIB are not trying to maximize their own profits,but consciously assume international obligations.They provide sustainable assistance to underdeveloped countries.On the other hand,the purpose of the Bank shall be to foster sustainable economic development,create wealth and improve infrastructure connectivity in Asia by investing in infrastructure and other productive sectors.Although on the surface,the governance structure of the AIIB is very similar to traditional corporate governance,there is no conflict of interest between owners and managers in corporate governance.One of the difficulties in the AIIB governance is how to coordinate different perspectives of different countries.The lending country and the borrowing country are worried that the AIIB governance will not have sufficient independence and transparency,and the defects will make the bank a major member of the country.The leaders of the AIIB are concerned that excessive disclosure will interfere with the bank’s normal financing and aid behavior;External monitors want to build oversight accountability mechanisms to prevent inappropriate intervention by powerful countries.The AIIB governance is different from bank governance.The main reason that bank governance is different from corporate governance is that large financial institutions may cause systemic financial risks by profit-seeking.This requires the state to conduct financial supervision of commercial banks.Although the AIIB’s financing,credit and agency services are similar to commercial banks,the AIIB is not seeking to maximize business benefits.The aid project itself is not a high-risk,high-yield investment behavior.The AIIB will not increase the risk of the entire international financial system due to external factors.Moreover,there is no unified global regulatory body to supervise and hold international financial institutions such as AIIB and World Bank.The Asian Infrastructure Investment Bank Article of Agreement provides for the Board of Governors,the Board of Directors and the President of the AIIB governance.This paper discusses the practice and academic theories of existing international financial institutions,and conducts deep analysis and evaluation of the Board of Governors,the Board of Directors and the Administrative Managers.Although the power of the Board of Directors and the President is increased,as the volume of AIIB business increases,it should be established a system that meets the requirements of perfect governance.The procedural matters of the Board of Directors are rather vague,such as the term of the Board of Directors,the chairman of the Board of Directors,Observers of the AIIB,etc.This shows that member states do not want to adversely affect their rights in the process of the AIIB governance,but the vague policy may be controversial in the future.The rules of reference of the Board of Governors in AIIB Article of Agreement are relatively clear.For example,the Board of Governors may deduct appeals from interpretations or applications of this Agreement given by the Board of Directors.This shows that the AIIB governance values the concept of power review and power relief.The Board of Governors also has the power to elect the President,suspend or remove him from office,and determine his remuneration and other conditions of service.It is the institutional innovation of the AIIB that is different from the existing international financial institutions.Other international financial institutions generally appoint the president’s appointment to the board of directors,which reduces the balance of power within the bank and increases the possibility of black-box operations.The AIIB has pioneered the non-resident board system,which has greatly reduced the inefficiency caused by the huge expenditures and powers of the existing international financial institutions on the board of directors.On the other hand,this system effectively restricts the abuse of power by directors.It is widely criticized that the country which has board seat is often able to get more aid in World Bank.The AIIB Board of Directors has the authority to direct and supervise executive management.However,governance innovation has enabled the AIIB to structurally avoid many of the institutional difficulties that may be encountered in the future.This article compares the relevant documents of the World Bank and other institutions with the powers of the board of directors,and enumerates the legal issues that the AIIB’s board of directors may encounter in the performance of their duties.It is proposed to strengthen the independence of the AIIB.Although AIIB is an independent international legal entity,it is inevitable as an international institution to be lobbied and influenced by various countries and organizations.From the perspective of the voting rights of the AIIB,it is more scientific and reasonable than other international financial institutions.The AIIB has just been established.The conditions for its stable development are China’s substantial veto power,which will vary with the size of the AIIB.The expansion and the increase in member states have gradually been diluted,reflecting the fact that the the AIIB governance is more focused on fairness than other institutions.In addition,the non-resident board of directors has made bank decrees more uniform,and this system reduces the inevitable exchange of political and economic interests between the powerful countries.It is ensuring that the AIIB perfect governance of the above organizational structure is not enough.AIIB should establish an effective internal oversight accountability mechanism and an external oversight accountability mechanism,and attach importance to the transparency of the AIIB.AIIB’s internal oversight accountability mechanism includes three aspects: hierarchical accountability,supervisory accountability and administrative accountability.AIIB should avoid the issues that the World Bank has ever found.Such as power overlap,power shirking and inaction.The external supervision accountability mechanism of the AIIB also includes three aspects: peers accountability,public reputational accountability,and market accountability.The Bank should pay attention to the professional assessment reports of other international organizations.public reputational has the greatest international influence on the AIIB in the long run.Market accountability is a mechanism for reconciling the relationship between aid providers and aid consumers.The AIIB should guarantee the rights of market participants such as shareholders,recipients and investors.Because of the unique connotation of the AIIB governance and the institutional design concept different from existing international financial institutions,The possibility of building a fully effective governance system in the short term is negligible.The AIIB has a long way to go in terms of system construction,detailed division of powers and responsibilities,independence guarantees and transparency.The AIIB has achieved certain achievements since its establishment,but there are still places for reform.In the AIIB governance,there will be no resolutions of the board of directors without the common vision of different member states.Without the joint efforts of the board of directors and the executive management,there will be no efficient and orderly operations.The soul of the AIIB is its purpose.Uninterrupted action is a necessary condition for achieving its objectives.The oversight accountability mechanism fundamentally guarantees the sustainable development and prosperity of the AIIB.