A Stern warning in interesting times

A Stern warning in interesting times article image

The Chinese curse, "may you live in interesting times" seems counter-intuitive to Western ears. After all we are constantly bombarded with the notion that our lives need to be 'interesting' to be 'happy and satisfying'. Throughout Chinese history, a happy life was predictable, where there was no war, famine or arbitrary rule. In short, where there is law and order, where disputes would be settled, if not always in your favour, at least applying consistent rules. At the turn of the 20th century, Australia and Argentina were two of the most wealthy countries in the world. Both had abundant natural resources, an expanding well educated population and links to Europe. On paper, neither had an advantage over the other. Australia, however, had a secret weapon. With its stable political history and legal system its citizens felt safe in investing for the future and Australia grew in wealth. Argentina, with a different political and legal culture, saw military coups and the breakdown of law and order and a steady decline in its economic fortunes. Only in the last years of the 20th century, with the overthrow of its military government and the establishment of democracy, has Argentina again found growth. It's a no-brainer that a stable legal and political system is the bedrock of economic growth. This applies in both domestic and international trade. This is why the recent events surrounding the arrest of Stern Hu, a senior Rio Tinto executive, and the apparent involvement of China’s powerful spy agency in Hu's arrest are so disturbing. The suggestion that his arrest is because of revenge over the failure of the Rio-Chinalco deal is hard to resist. Minister for Trade Simon Crean is right when he says that when you trade with another country you are bound by their laws and their courts. But it raises the old perennial question and concern of exporters to the Peoples’ Republic of China: is the the system rigged in favour of the Chinese government? Enforcing an agreement is problematic at best and impossible if government officials prefer that you do not enforce the agreement. It is an issue to consider when drafting contracts: what laws and which courts will adjudicate disputes. If you are exporting to or importing from the PRC, if there is a dispute, which of the laws and courts of the PRC or Australia would you prefer? -James Millea is a senior associate at Argyle Lawyers


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