Case Study: the New Development Bank

1.1?????????Pembentukan BRICS

The establishment of “New Development Bank” was conducted by BRICS on July 15, 2014, in Fortaleza, State of Ceará[1]. On that day, the BRICS states signed the Agreement on New Development Bank as a legal basis of the establishment of the bank (hereinafter stated as ‘NDB’).

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According to the website of NDB, the NDB is a multilateral development bank established by Brazil, Russia, India, China, and South Africa (hereinafter abbreviated as ‘BRICS’) with the purpose of mobilizing resources for infrastructure and sustainable development projects in emerging markets and developing countries (EMDCs).[2]

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1.2?????????Tujuan dan Fungsi

?The objectives of the NDB as a bank formed by BRICS are follows:

1.??????Focusing on several areas such as:

a.?????Clean energy and energy efficiency;

b.?????Transport infrastructure;

c.??????Water and sanitation;

d.?????Digital infrastructure;

e.?????Environmental protection;

f.???????Social infrastructure.

2.?????Building a sustainable future which is make a better world for living for people around the world.

3.?????Supporting infrastructure and sustainable development projects in alignment with the development objectives of our members (which is BRICS

countries) and their commitments under the SDGs (Sustainable Development Goals) and the Paris[3] Agreement[4]. We prioritise high-impact operations that are climate-smart, disaster-resilient, technology-integrated and socially-inclusive.

Moreover, the functions of the NDB as follows:

1.??????Lending bank to all projects that are owned by BRICS countries members and we could check those projects on the website, for instance, below:[5]

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2.?????In legal perspective in commercial banking, I have an opinion that the NDB is a jointly banks or similar with syndication loan which is merged in one bank.

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1.3?????????Status Struktur

The structure of NDB divided with several status, are follows:

1.??????Board of Governors

As the highest decision-making authority, the Board of Governors consists of one Governor at the ministerial level and one alternate appointed by each member country. All the powers of the Bank are vested in the Board of Governors.[6]

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Based on the Board of Governors (hereinafter abbreviated as ‘BOG’) above, we could see each of representative of countries members (BRICS), but due to the information of deed of establishment is limited and not disclosure, it makes me cannot analyze a form of corporation made.

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However, according to general legal principles in company law, I am not sure that the function and status of the BOG are the same as the Board of Directors as an organ of a company. Because in company law, the power that having by Board of Directors is given by shareholders. Hence, it’s more make sense to adjust the BOG as shareholders of the NDB.

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2.?????Board of Directors

The Board of Directors is responsible for the general operations of the Bank and exercises all the powers delegated to it by the Board of Governors.[7]

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The BOD above are clearly explained as each representatives of the BOG. Therefore, the BOD is responsible to representing and acting of behalf of the NDB in and/or out of the court in terms of conducting legal acts.

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3.?????Committees

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The Board of Directors of the NDB appoints the following committees to ensure seamless execution of our work:[8]

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Even though the status of BOG and BOD is matters, but the Committees are also very important in execution and supervision stages. The committees of the NDB are divided by 2 (two) divisions, as follows:

1)?????Audit, Risk and Compliance Committee

2)????Budget, Human Resources and Compensation Committee

The ARCC and BHRCC will be a key to ensuring all projects and needs of the NDB safety and legal. For instance, the ARCC has a duty to compliance all projects in line with the provisions of laws. I could imagine that the BRICS have different legal systems and complex jurisdictions, but the lending of the NDB must be smoothly received and the debtor must be performed.

In addition, I could also imagine if the credit agreement is breached by the borrower and/or project owner. The complexity of mortgage laws of each country and to whom the legal step must be sued are also big legal problems.

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However, in my experiences as a commercial litigator, all conflicts and disputes have to be done in amicable settlement and settled in a dispute body, namely international arbitration.

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4.?????The chart of the Organizational Structure

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On December 15, 2020, the NDB’s Board of Directors approved the Bank’s new organizational structure (image below), which is in the process of being implemented.[9]

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The chart of the Organizational Structure of the NDB can be found in the below picture.

From the above picture, we could see that the structure of the NDB is very tight, rigid, and complex. It is normal due to the lending in banking system, even in global financing, is also very complex and highly regulated.

5.?????Senior management

From the picture as explained in number 4 (four), we could see the differentiation between the BOG, the BOD, and the senior management. The senior management is led by one president and supported by 4 (four) vice presidents with each differently functions.

The senior management of the NDB is led by professional bankers from what I read in each biography.[10] Even so, they are graduated from world-class universities, same as Pelita Harapan University (UPH).

1.4?????????Keanggotaan[11]

The membership of the NDB has begun on June 23, 2022, where Mr. Marcos Troyjo, President of the New Development Bank (NDB), reported on the Bank’s achievements to the Leaders of Brazil, Russia, India, China, and South Africa at the 14th BRICS Summit, held in a virtual format under the chairmanship of the Government of the People’s Republic of China. This year’s BRICS Summit was convened under the theme “Foster High-quality BRICS Partnership, Usher in a New Era for Global Development”.

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Mr. Marcos Troyjo, as President of the NDB stated as follows:

1.???????“NDB has become a symbol of what emerging economies can achieve together.”

2.??????“Over the next five years, we expect to approve USD 30 billion in new projects. 40% of the projects we support will go to climate change mitigation and adaptation.”

3.??????“Building the NDB as a premier development bank for emerging economies. That’s our goal. That’s what we are working for.”

Also, In the XIV BRICS Summit Beijing Declaration, the Leaders noted the Bank’s progress as follows:

“We congratulate New Development Bank (NDB) on its relocation to its permanent headquarters building in Shanghai as well as the opening of NDB’s regional office in India. We welcome the decisions on admission of four new members to the NDB and look forward to further membership expansion in a gradual and balanced manner in terms of geographic representation and comprising of both developed and developing countries, to enhance the NDB’s international influence as well as the representation and voice of EMDCs in global governance. We support the NDB’s goals of attaining the highest possible credit rating and institutional development. We appreciate the vital role of the NDB in addressing the impact of the pandemic and assisting in the economic recovery in member countries. We note the second General Strategy approved by the Board of Governors at its annual meeting and look forward to its smooth implementation. We encourage the Bank to follow the member-led and demand-driven principle, mobilize financing from diversified sources, enhance innovation and knowledge exchange, assist member countries in achieving sustainable development goals, and further improve efficiency and effectiveness to fulfill its mandate, aiming to be a premier multilateral development institution.”

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1.5?????????Kesimpulan?

Jumping to my conclusion is the NDB formed and established to strengthen the developments and infrastructure projects in each member country, such as Brazil, Russia, India, China, and South Africa (BRICS). It’s a very good movement in this world due to the Covid-19 pandemic that causing many countries financially broken and some countries had high inflation. The hegemony of European countries (for instance where the United Kingdom went out of the EU) and the United States of America must be fought in a good way unless the BRICS still do so.

In Indonesia’s perspective, the concept of the New Development Bank is a very good example to do so because we have 4 (four) banks that are categories in the First Book (Buku I) such as Bank Nasional Indonesia (BNI), Bank BRI, Bank Mandiri, dan Bank BTN.

Considering that we will be facing the ASEAN community in 2025 or in the next 2 (two) years, our entrepreneurs and local companies must be financially healthy or solvent to export and/or expand their businesses to another region of ASEAN. Therefore, I have the legal opinion that the Indonesian government have a big potency to do so.

Footnotes:

[1] Ceará?is one of the 26 states of Brazil, located in the northeastern part of the country, on the Atlantic coast. (Source: https://en.wikipedia.org/wiki/Cear%C3%A1).

[2] The History of New Development Bank. (Source: https://www.ndb.int/about-ndb/).

[3] The Paris Agreement is a?legally binding international treaty on climate change. It was adopted by 196 Parties at the UN Climate Change Conference (COP21) in Paris, France, on 12 December 2015. It entered into force on 4 November 2016. (Source: https://unfccc.int/process-and-meetings/the-paris-agreement).

[4] Based on the Paris Agreement, Article 7, The Paris Agreement aims to strengthen the global climate change response by increasing the ability of all to adapt to adverse impacts of climate change and foster climate resilience. It defines a?global goal on adaptation?– the goal is:

·??????to enhance adaptive capacity and resilience;

·??????to reduce vulnerability, with a view to contributing to sustainable development;

and ensuring an adequate adaptation response in the context of the goal of holding average global warming well below 2 degrees C and pursuing efforts to hold it below 1.5 degrees C. (Source: https://unfccc.int/topics/adaptation-and-resilience/the-big-picture/new-elements-and-dimensions-of-adaptation-under-the-paris-agreement-article-7).

[5] The projects of NDB (Source: https://www.ndb.int/projects/all-projects/).

[6] The board of Governors of NDB (Source: https://www.ndb.int/governance/boards/).

[7] The board of Directors of NDB (Source: https://www.ndb.int/governance/boards/).

[8] The Committees of NDB (Source: https://www.ndb.int/governance/boards/).

[9] The organizational structure of the NDB (Source: https://www.ndb.int/governance/organisational-structure/).

[10] The senior management of the NDB (Source: https://www.ndb.int/governance/senior-management/).

[11] The membership of the NDB (Source: https://www.ndb.int/event/ndb-at-14th-brics-summit/).?