How we can triumph in Asean integration

Our law students cannot even visualize what Southeast Asia’s integration demands. I posited this last week after judging a national essay contest where 30 percent of the writers could only propose to expand study of United-Nations-related law, and 94 percent could not vividly illustrate a cross-border legal problem.

Imagine a simple contract. Our law classes presume it will be between two Filipinos, under Philippine law and taken to a Philippine court if disputed.

What if we make one party Malaysian? If the contract is important enough, the Filipino must verify his legal capacity to sign. Is the Malaysian entity validly incorporated (and legally existing)? Do special regulations such as currency controls or industry permits apply? These would be routine questions, but the Filipino now understandably pauses. And there are quirky country-specific issues, from how Indonesia requires certain financial contracts to be in Bahasa Indonesia to how one should authenticate a Chinese company chop or seal.

The complexity can grow exponentially. What if the Malaysian requests a “neutral” English law contract instead of Philippine law, as English and New York law are deemed the best developed for international commerce? Now the Filipino would ideally want an English-trained lawyer to examine the validity of the contract itself, independent of the Malaysian’s capacity to sign. He would also want the Malaysian to formally appoint an agent in London to receive English court process. He might also suggest that disputes be resolved in arbitration in Singapore instead of before an English judge. And then the contract might involve approval from a Singapore parent corporation, a finance subsidiary in a third country with a favorable tax treaty, collateral in six other countries, an Iranian party that raises concerns regarding US sanctions and a German party that cannot join such sanctions under German antiboycott laws, and an American party who triggers new US tax reporting rules.

And that is merely mindset. Going to technical skills such as complex contract drafting, we must be humbly challenged by our need to catch up with London and New York. For example, if one cannot tweak every section of the Loan Market Association template, the global standard document agreed by over 500 financial institutions and law firms that is five times longer than a typical Manila loan agreement, then, objectively, one cannot claim to know banking law in an integrated region. Harvard Law School’s classes span antitrust, bankruptcy, China and Japan, collateral arrangements, corporate governance, financial regulation, international trade, mergers and acquisitions, private equity and hedge funds, securities, and even an elective on sports contracts. Our government mandated curriculum has just one generic, bookish corporate law subject. Lack of exposure to derivatives and venture capital contracts readily constricts our bank treasury products and investment in tech startups.

If these surprise you, then you are not prepared for the legal side of Southeast Asian integration because you cannot even visualize it. To be fair, many cannot because it is often the English- and New-York-licensed lawyers in the English and US firms who lead multijurisdictional transactions, while others see only their country’s segment. Many Filipino law students will practice Philippine law in the Philippines and not encounter foreign elements day to day. Nevertheless, they need to at least be aware.

Even veterans stumble in unfamiliar foreign contexts. A head of legal asked me if I knew the Singaporean “banking law” firm recommended by his counterparty. I did not, three Singaporean banking lawyers I asked did not, the tiny law firm did not even list banking as a specialty on its website; its office was not in Singapore’s financial district, yet it was charging what the largest English firm would. My friend chose his own Philippine firm but still accepted the Singaporean firm and its crazy fee. A Filipino client praised an American lawyer for his ability to be on three conference calls at the same time, which is not a positive skill if one thinks about it. Portions of international securities underwriting contracts in Manila seem thrice as long as those in Jakarta, and one wonders what additional terms are imposed.

Our law students must accept that the mandated curriculum is outdated and take responsibility for their own futures. For example, one broadly interested in investment funds should at least read “Barbarians at the Gate” and “When Genius Failed,” awarded novels on the largest 1980s private equity buyout and the largest 1990s hedge fund failure. He should keep an open mind, find internships and scholarships in the international centers for the field, make friends across the region, and simply take every opportunity to travel while one has the luxury of school breaks. We would be so great a nation if we could add all these new skills and contacts to our innate facility with English, flexible thinking and agreeable dispositions—ironically the very traits our memory-driven law curriculum destroys.

The Filipino’s potential to thrive in cross-border arenas rings true in every profession from advertising to architecture. But what will never work is the typical defensive response of thumping one’s chest, making the blanket claim that Filipinos are as good as anyone else, openly disrespecting our overseas professionals’ hard-won knowledge as inapplicable back home, and then citing with all superficial nationalism Manny Pacquiao and the current Fil-Am on “American Idol” as proof that we will rule the world.

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