1. Overview
The Asian Infrastructure Investment Bank (AIIB or the Bank) strives to operate in accordance with the highest standards of transparency and accountability. To that end, AIIB undertakes to adhere to the rule of law in its organization, operations, and management. This means that AIIB is to be governed within a well-defined external and internal legal framework, that proper legal regulatory mechanisms are put in place to ensure its activities strictly follow this framework, and that it may be held to account for adverse consequences in case of contravention or violation of those legal norms.
2. The Law Governing AIIB
2.1 AIIB under International Law
AIIB is an international organization established by the AIIB Articles of Agreement (entered into force on Dec. 25, 2015), a multilateral treaty, the Parties to which comprise the Membership of the Bank. During the negotiations of the Articles of Agreement, the Chief Negotiators agreed that certain formulations in the text represented general understandings which needed to be recorded. The Chief Negotiators’ Report, adopted in tandem with the final text of the Articles of Agreement, summarizes these understandings, for future reference, when interpreting the Articles of Agreement. Accordingly, AIIB is both constituted and governed by public international law, the sources of which - according to Article 38 of the Statute of the International Court of Justice - include applicable international conventions, customary international law, general principles of law and subsidiary means for the determination of rules of law.
AIIB’s international legal personality exists independently from that of its Members. Under the Articles of Agreement, AIIB possesses full juridical personality and, in particular, the full legal capacity (i) to contract; (ii) to acquire, and dispose of, immovable and movable property; (iii) to institute and respond to legal proceedings; and (iv) to take such other action as may be necessary or useful for its purpose and activities. Operating under public international law, AIIB has, for instance, concluded a Headquarters Agreement with the Government of the People’s Republic of China to define the legal status, privileges and immunities for AIIB’s operation and functioning in China. It has also entered into relationship or cooperation agreements with other development-related international organizations and, in particular, other Multilateral Development Banks (MDBs), to facilitate the fulfilment of its objectives and delivery of its mandate. The Articles of Agreement and the Headquarters Agreement have been registered with the United Nations Secretariat in accordance with Article 102 of the Charter of the United Nations. AIIB has also been granted permanent observer status by the United Nations General Assembly to promote cooperation with the United Nations (UNGA Resolution A/RES/73/216).
Unlike its sovereign Members, AIIB does not possess general competence. In other words, it may only exercise those powers expressly or impliedly bestowed upon it by its Articles of Agreement. In the furtherance of AIIB’s mandate, internal rules are issued by the competent governing bodies of AIIB, as provided in the Articles of Agreement. The resulting organization and effect of such rules are established by AIIB’s Internal Legal Framework (ILF).
2.2 AIIB’s Internal Legal Framework
2.2.1 Overview
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 resolutions on the most important matters of the Bank, and the power of the Board of Directors to establish policies, strategies and regulations governing the Bank’s operations and administration. The Internal Legal Framework is formally established by AIIB’s Directive on the Internal Legal Framework, in accordance with the Articles of Agreement and applicable public international law, including the generally recognized principles of international administrative law.
Together, these form a governance hierarchy, ordering the Board of Governors as the highest, with the Board of Directors subject to the authority of the Board of Governors, and the Board of Directors supervising and being capable of delegating authority to the President. The Articles of Agreement specify that the President is the Chairman of the Board of Directors, chief of staff and legal representative of AIIB. As such, the President may add to the rules established by the Board of Directors, but not detract from or alter them. The Board of Directors and the President have established various Committees, on a formal legal basis, to advise them on issues under their remit and assist them in the supervision and management of the Bank.
Therefore, within AIIB, the Board of Governors adopts the By-Laws of the Bank to complement the Articles of Agreement. It also adopts the Codes of Conduct for Board Officials and Bank Personnel and the Rules for the Election of the President.
The Board of Directors adopts all policies, strategies and regulations governing the Bank’s operations and administration, including the Staff Regulations.
To properly exercise the powers vested in them, the Board of Governors and the Board of Directors adopt their own rules of procedure.
The President adopts Directives, including the Staff Rules. Directives may implement the decisions of the Board of Directors, but they may sometimes be stand-alone initiatives by the President.
Directives may be complemented by Instructions or Guidelines issued under the delegated authority of the President.
2.2.2 Legal Instruments Adopted by the Board of Governors
2.2.2.1 By-Laws
The Board of Governors, being AIIB’s highest governing body, is vested with all powers regarding the operations of the Bank. Such powers may be delegated to the Board of Directors, except those provided in Article 23(2) or other provisions of the Articles of Agreement. The Board of Governors has adopted the AIIB By-Laws under the authority of the Articles of Agreement. The AIIB By-Laws are intended to be complementary to the Articles of Agreement, governing matters such as the organization of the annual meeting of the Board of Governors, membership and financial matters of the Bank. The AIIB By-Laws also contain provisions on the terms of service of the Governors, Directors, President, and Vice Presidents of the Bank.
2.2.2.2 Rules of Procedure of the Board of Governors
To complement the Articles of Agreement and the AIIB By-Laws, the Board of Governors has also adopted the Rules of Procedure of the Board of Governors to govern all matters before it. Specifically, the Rules of Procedure of the Board of Governors prescribe procedures for meetings of the Board of Governors, including, among others, the organization of, attendance at, agenda for, and decision-making of the meetings.
2.2.2.3 Codes of Conduct
To establish principles and ethical standards for Officials on the Board of Directors in relation to their status and responsibilities in the Bank, the Board of Governors has adopted a Code of Conduct for Board Officials, which supplements the Articles of Agreement and the By-Laws of the Bank. The Board of Governors has also adopted a Code of Conduct for Bank Personnel, to set out the guidelines and ethical standards for the conduct of Bank Personnel.
2.2.2.4 Rules for the Election of the President
The Board of Governors - vested with the power to elect the President of the Bank under Article 23(2)(vi) of the Articles of Agreement - has adopted the Rules for the Election of the President. The Rules establish qualification criteria of the candidates and assurance mechanisms supporting an “open, transparent and merit-based” selection process, as required by Article 29(1) of the Articles of Agreement. This includes arrangements for nomination, shortlisting, interviews and the conduct of the election itself. It also provides the inclusion of the Bank’s external auditor in the process for the tally of votes.
2.2.3 Legal Instruments Adopted by the Board of Directors
2.2.3.1 Rules of Procedure of the Board of Directors
To properly exercise the powers and authorities vested in it, the Board of Directors has adopted the Rules of Procedure of the Board of Directors. Those Rules are intended to be complementary to the Articles of Agreement and the AIIB By-Laws. The Board of Directors has also established various Committees to facilitate its work to the extent authorized by the Board of Governors, namely the Audit and Risk Committee (ARC), the Budget and Human Resources Committee (BHRC), the Policy and Strategy Committee (PSC) and the Ethics Committee.
2.2.3.2 Policies
Pursuant to Article 26(ii) of the Articles of Agreement, the Board of Directors - responsible for the direction of the general operations of the Bank - establishes the policies of the Bank and takes decisions on major operational and financial policies. These policies are intended to cover all major aspects of the operations of the Bank, ranging from its financing, asset liability management and investment operations, to its international relations, corporate procurement and compensation and benefits for its staff.
2.2.3.3 Strategies
The Board of Directors approved the Bank’s first Corporate Strategy for 2021-2030 in September 2020. The Corporate Strategy defines the Bank’s Mission as “Financing Infrastructure for Tomorrow”, which combines the Bank’s firm commitment to sustainability, with a clear operational focus on (1) Green Infrastructure, (2) Connectivity and Regional Cooperation, (3) Technology-enabled Infrastructure and (4) Private Capital Mobilization.
In addition, the Board of Directors has adopted other strategies for the Bank’s operations, including the Strategy on Mobilizing Private Capital for Infrastructure, Strategy on Financing Operations in Non-Regional Members, Sustainable Cities Strategy, Strategy on Investing in Equity, and strategies in specific sectors, such as the Energy Sector Strategy, Transport Sector Strategy, Water Sector Strategy and Digital Infrastructure Sector Strategy.
2.2.3.4 Staff Regulations
In accordance with Article 30(2) of the Articles of Agreement, the Staff Regulations adopted by the Board of Directors set forth the fundamental conditions of service and the basic rights, duties, and obligations of AIIB and its staff. They establish the broad policies in accordance with which the President shall organize and manage AIIB staff.
2.2.4 Legal Instruments Adopted by the AIIB President
2.2.4.1 Directives
Directives are binding instructions issued by the President to AIIB staff. They may also serve to delegate authority and attribute responsibilities. Directives may implement a Policy adopted by the Board of Directors or may sometimes be stand-alone initiatives by the President. They are one of the ways in which the President - as chief of staff - ensures that AIIB staff work together in a coordinated, efficient, and confident way that leads to high performance and institutional success.
2.2.4.[1.1] Staff Rules
As one of the key directives, the Staff Rules are adopted by the President and prescribe the legal employment rights of AIIB staff. The Staff Rules - together with the Staff Regulations and Policy on Compensation and Benefits - form the essential employment law of the AIIB. This is complemented by individual contractual provisions, as well as generally recognized principles of international administrative law.
2.2.4.[1.2] Directive on the Internal Legal Framework
The Directive on the Internal Legal Framework is another key Directive issued by the President. This Directive establishes a framework for the development and management of rules, processes, procedures and guidelines that relate to the conduct of activities within and by the Bank, consistent with the Articles of Agreement.
2.2.4.[2] Terms of Reference for Management Committees
To assist him in conducting the business of the Bank, the President has established various Management Committees whose mandates are adopted in their Terms of Reference. These Management Committees include the Executive Committee, the Management Committee, the Special Funds Committee, the Investment Committee, the Risk Committee, the Project Screening Committee, the Asset and Liability Management Committee, the Human Resources Review Committee, the Strategic Information Technology Committee, the Corporate Procurement Committee, the Retirement Plan and Post-Retirement Medical Account Oversight Committee, etc.
2.2.5 Legal Instruments Adopted under the Delegated Authority of the President
Directives - including the Staff Rules - are often supported by Instructions or Guidelines.
An Instruction may contain rules, instructions, procedures or processes to supplement and implement a Directive, or to address additional issues regarding the conduct of the Bank’s activities. An Instruction is issued by a Vice President or Head of Business Unit reporting directly to the President.
A Guideline may contain guidelines or best practices regarding the conduct of the Bank’s activities. A Guideline is issued by a Vice President or Head of Business Unit reporting directly to the President.
An Instruction or Guideline can be updated and changed as often as needed. They cannot, however, revise, amend or contradict any Policy, Staff Regulation, Staff Rule or Directive. Instructions take precedence over Guidelines, and Guidelines shall not interpreted or applied in a manner inconsistent with any Instruction.
3. Regulatory Mechanisms
Within the Internal Legal Framework, AIIB has established various regulatory mechanisms to ensure that the rules and procedures of AIIB are fully observed, and that good governance in accordance with the principles of transparency, openness, and accountability is realized. These mechanisms were established by AIIB’s governing bodies at different levels. For instance, the Board of Directors has established an Audit and Risk Committee (comprising Board Officials and external members) in order to review the Bank’s financial statements and accounting, auditing and financial reporting practices, procedures and issues, and to assess the effectiveness of the Bank’s internal control system.
In addition, the Board of Directors has established an Ethics Committee to consider matters relating to the implementation, interpretation, and application of the Code of Conduct for Board Officials. The President - being the Bank’s chief of staff - has likewise put in place mechanisms to ensure compliance with the Bank’s internal policies and regulations. These include the establishment of an Ethics Office to ensure the implementation of the Code of Conduct for Bank Personnel. An Internal Audit Office (IAO) has also been established under the President’s authority, to evaluate and improve the effectiveness of the Bank’s governance, risk management, and control processes.
4. Accountability and Redress Mechanisms
To enforce the rule of law, AIIB has also set up various accountability mechanisms to ensure that adequate redress is accessible, and that there is accountability in the event of contravention or violation of AIIB rules. In particular, the Board of Directors approved an Accountability Framework in April 2018 to clearly demarcate its role and that of the President in respect of the financing operations of the Bank. The Accountability Framework also sets out the role of the Board of Directors to hold the President accountable for the management of the Bank, including through annual appraisal of the President’s performance in his chairmanship of the Board, and in his management of the Bank toward achieving the mandate set out in the Articles of Agreement.
In furtherance of the Board of Directors’ supervision of the management and the operation of the Bank on a regular basis, AIIB has put in place an Oversight Mechanism, comprising the functions of the Complaints-resolution, Evaluation and Integrity Unit (CEIU), external audit function, as well as dispute resolution mechanisms to address challenges by Bank staff against administrative decisions of the Bank which adversely affect them directly and personally.
AIIB has also established a sanction mechanism for firms and individuals that are found to have engaged in specified forms of fraud, corruption, and other Prohibited Practices in connection with Bank-financed projects. To ensure compliance with its Environment and Social Policy, AIIB has also established a Project-affected People’s Mechanism to receive submissions from people who believe they have been or are likely to be adversely affected by AIIB’s failure to implement the Policy.
In addition, AIIB has established an Administrative Review Procedure to address disputes with its staff in relation to their employment with the Bank. It also uses institutional arbitration clauses widely with AIIB’s corporate procurement counterparties. With regard to its financing of projects, AIIB includes dispute resolution clauses, and in particular, consents to arbitration as the exclusive means of resolving disputes in its sovereign agreements.
5. Legal Department
5.1 Overview
The mission of the Legal Department (LEG) is to sustain the Bank’s mandate-based multilateral development financing by protecting the Bank’s international legal status, helping the Bank make good decisions, and safeguarding the Bank against legal risks through authoritative, actionable, and impartial legal advice and services. LEG provides advice to the Bank’s management and governing bodies on all legal aspects of the Bank’s investment, financial, institutional, and administrative activities. Among many other things, LEG supports the drafting and negotiation of all legal agreements, assists in the preparation of the Bank’s policies and directives, oversees the privileges and immunities of the Bank and issues legal opinions to the Bank’s management and governing bodies. It helps to ensure that the Bank’s activities and operations are consistent with its Articles of Agreement and other legal instruments, including its Internal Legal Framework and, where appropriate, with the norms and principles of public international law and the best practices of international financial institutions/multilateral development banks.
In addition to performing its routine legal functions, LEG carries out legal outreach on a regular basis, to promote the rule of law and cultivate a legal culture within AIIB. This includes organizing legal conferences and seminars to discuss the most relevant issues affecting AIIB’s functioning as an international organization and, in particular, as a multilateral development bank.
The General Counsel is responsible for managing LEG and leading the planning, implementation, and supervision of the work of LEG. The General Counsel reports directly to the President and - as a member of the Executive Committee and several other Management Committees - participates in the decision-making of the Bank. The General Counsel provides legal advice and support to the Board of Governors and the Board of Directors, including through participation in all formal or informal meetings held by them. In addition, the General Counsel maintains regular contact and interactions with legal counsel at other international organizations in general, and at other international financial institutions in particular. Notably, the General Counsel attends the Annual Meeting of the General Counsel of International Financial Institutions to exchange views and discuss issues of concern to all international financial institutions.
LEG is divided into the LEG Front Office and three specialist units: the Public Sector Operations Unit (PSO Unit), the Private Sector Investment & Treasury Operations Unit (PSI&TO Unit) and the Institutional & Administrative Unit (I&A Unit). Under the overall authority and oversight of the General Counsel, these units are responsible for advising on the investment operations, finance-related, and institutional and administrative functions of the Bank, respectively.
The General Counsel, together with chief counsels, senior counsels, counsels, associate counsels and legal associates trained in multiple jurisdictions under different legal systems provides advice and other legal services independently. This independent role constitutes an essential hallmark of the rule of law in the management of the Bank. It serves to ensure that the Bank operates in conformity with the principles, objectives, and goals established by the Articles of Agreement.
Legal interns are recruited on a regular basis to support the work of LEG. In all its work, LEG is supported by legal secretaries.
5.2 Composition and Functions of LEG
5.2.1 Public Sector Operations Unit
The Public Sector Operations Unit (PSO Unit) provides legal services to AIIB’s public sector investment operations, which include: (a) loans to or with the guarantee of a Member; and (b) guarantees that: (i) cover debt service defaults under a loan that are caused by a government’s failure to meet a specific obligation in relation to a project or by a borrower’s failure to make a payment under the loan; and (ii) is accompanied by a Member Indemnity. It is responsible for advising the Investment Vice Presidencies and coordinating with the Risk Management Department, the Policy and Strategy Vice Presidency, and the Corporate Secretary Vice Presidency on project-related matters. The PSO Unit also advises various committees comprising members of Bank Management, including the Investment Committee, the Risk Committee, and the Operations Procurement Committee.
5.2.2 Private Sector Investment & Treasury Operations Unit
The Private Sector Investment & Treasury Operations Unit (PSI&TO Unit) provides legal services to support AIIB’s private sector investment and treasury operations. It is responsible for advising the Investment Vice Presidencies, the Risk Management Department, the Internal Audit Office, and the Chief Financial Officer (who oversees the Office of the Treasurer and the Office of the Controller). The PSI&TO Unit also advises the Investment Committee, the Risk Committee, and the Asset and Liability Management Committee of Management. In particular, the PSI&TO Unit delivers legal and policy advice in connection with AIIB’s private sector operations, such as loans, guarantees and equity transactions, and provides legal, regulatory and policy advice in connection with AIIB’s funding, derivatives, liquid asset management and other treasury operations.
5.2.3 Institutional & Administrative Unit
The Institutional & Administrative Unit (I&A Unit) provides advice on the legal aspects of AIIB’s institutional and administrative activities. It is responsible for advising the Office of the President, the Policy and Strategy Vice Presidency, the Corporate Secretary Vice Presidency, the Administration Vice Presidency, the Complaints-resolution, Evaluation and Integrity Unit (CEIU), and the Ethics Office. The I&A Unit also advises the Budget and Human Resources Committee (BHRC) and the Ethics Committee of the Board of Directors, the Human Resources Review Committee, the Strategic Information Technology Committee (SITC), the Corporate Procurement Committee, and the Retirement Plan and Post-Retirement Medical Account Oversight Committee of the Management. Through its legal advice, the I&A Unit contributes to a wide range of the Bank’s functions and activities, including membership, governance, Board operations, privileges and immunities of the Bank and Bank Personnel, global presence, human resources management, corporate procurement, communications, information technology, corporate security, facilities management, record and information management, personal data privacy, ethics, integrity and ombuds functions, institutional engagement and partnerships and the Multilateral Cooperation Center for Development Finance (MCDF) related activities.
5.2.4 LEG Front Office
The LEG Front Office is responsible for ensuring that all necessary legal support and services to implement AIIB’s broad development and investment agenda are provided appropriately, independently, in a timely manner and consistent with the Bank’s Articles of Agreement and Internal Legal Framework. Moreover, the LEG Front Office advises clients on matters concerning AIIB’s Operational Policy on International Relations, and coordinates with Investment Operations departments and Strategy, Policy and Budget Department on this theme. The LEG Front Office also provides advice on legal aspects of other policies, namely the Environmental and Social Framework, as well as strategic institutional priorities, such as climate and biodiversity, as well as on Special Funds. Furthermore, the LEG Front Office provides advice on legal and reputational risks with respect to complaints received in the context of AIIB financed operations, including matters pertaining to the Project-affected People's Mechanism (PPM). In addition, the LEG Front Office manages the initial phase of the Legal Associates Program, including the selection, appointment, and training of new legal associates. It also drives the legal information and knowledge management function and departmental learning and development, including through the organization of talks and lectures.
5.3 Legal Outreach
5.3.1 Overview
To promote the rule of law and cultivate a legal culture within the AIIB region, LEG conducts legal outreach, such as organizing legal conferences, seminars, lectures, and workshops on a wide range of subjects relevant to the Bank’s operations. LEG manages the Law and Development Information Series (LDIs), in which local and international law firms, arbitration centers and other relevant organizations and individuals are invited to present their knowledge and expertise in a specific, relevant field to the Bank’s operations.
In addition, AIIB lawyers attend legal training on a regular basis, and maintain close contact with professional associations at both national and international levels.
5.3.2 Archive: AIIB Legal Conferences
5.3.3 Archive: AIIB Law Lectures
5.3.4 Archive: AIIB Yearbook of International Law
5.3.5 Archive: AIIB Legal Seminar Series
