Expanding BRICS bloc poised to challenge the international order

Stephen Mulrenan, IBA Asia CorrespondentMonday 6 November 2023

Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates are set to join the BRICS geopolitical bloc from the start of 2024, the largest such expansion and the first in 13 years. Previously, the bloc consisted of Brazil, Russia, India, China and South Africa. Despite the group’s growth, more than 40 other developing nations who have requested to join must wait.

The decision was made at the 15th BRICS Summit in Johannesburg in August, where the other major issue on the agenda was reducing dependence on the US dollar. ‘While progress on the latter was modest in the final declaration, the expansion was surprising’, says Carol Monteiro de Carvalho, Co-Chair of the IBA International Trade and Customs Law Committee and a partner at Monteiro & Weiss Trade in Rio de Janeiro.

Many countries also used the occasion to voice their growing disenchantment with the prevailing, Western-led international system, exacerbated by the Covid-19 pandemic, when life-saving vaccines were hoarded by developed nations. ‘BRICS has become an attractive magnet for countries that don’t fit within the structures of the US-dominated international order, including Iran and Venezuela, which face economic sanctions, and Argentina, struggling to access the financial system to address its structural economic crisis’, explains Monteiro de Carvalho.

BRICS – formed of countries with significant growth potential – began convening during the global financial crisis of 2008 before being founded as an informal club in 2009 at the behest of Russia. South Africa became the first beneficiary of the bloc’s expansion in 2010.

BRICS has become an attractive magnet for countries that don’t fit within the structures of the US-dominated international order

Carol Monteiro de Carvalho
Co-Chair, IBA International Trade and Customs Law Committee

While BRICS’ agenda initially focused on reforming multilateral financial institutions, particularly the International Monetary Fund (IMF) and World Bank, this gradually gave way to a geopolitical focus, due in part to US efforts to contain China’s technological expansion as well as Russia’s annexation of Crimea and invasion of Ukraine.

Since 2009, BRICS countries have launched initiatives that challenge the US-led financial system and international order. These include the creation of the New Development Bank (NDB), as an alternative to the World Bank and the IMF, and the launch of the BRICS Payment System (BPS), designed to reduce the reliance of BRICS countries on SWIFT, which is dominated by the US. ‘The expansion of BRICS and its initiatives have the potential to significantly impact the global financial system and international order’, says Ramesh Vaidyanathan, Co-Chair of the IBA Asia Pacific Regional Forum and a partner at Advaya Legal in Mumbai. ‘For example, the NDB […] and BPS could help to reduce developing countries’ reliance on Western financial institutions and the US dollar.’

Some analysts argue that the expansion of the BRICS represents a firm rejection of the G7 and the liberal international order (LIO) as it challenges their dominance and legitimacy in global governance. BRICS countries have often accused the G7 and the LIO of being exclusive and unrepresentative of the diverse interests and needs of the developing world. By inviting more countries to join the bloc, BRICS aims to create an alternative, based on what it states are principles of sovereignty, non-interference and mutual benefit.

Other commentators say the bloc’s expansion simply reflects a desire to adapt the G7 and the LIO to the changing realities of the 21st century. ‘BRICS countries have not completely abandoned or opposed the existing international institutions and norms that were established by the G7 and the LIO, but rather have sought to participate in and influence them more actively and effectively’, says Vaidyanathan. ‘For example, BRICS countries have contributed to the IMF and the World Bank.’

Even before the addition of new members, BRICS countries accounted for 40 per cent of the world’s population and a quarter of global gross domestic product. However, the bloc’s ability to seize its geopolitical moment may depend on its ability to overcome long-standing internal divisions.

The economies of BRICS countries are vastly different in scale, while the governments of its members often have divergent foreign policy goals. For example, China, Iran and Russia view the bloc as a counterweight to the West, while Brazil and India continue to nurture close ties with the US and Europe. This not only complicates the bloc’s consensus decision-making model but also led White House National Security Adviser Jake Sullivan to conclude in August that BRICS won’t evolve into a geopolitical rival of the US as it’s ‘a very diverse collection of countries in its current iteration — with Brazil, India, South Africa’s democracies; Russia and China as autocracies — with differences of view on critical issues in the Indo-Pacific, in the war in Ukraine’.

This argument tends to focus on several perceived adverse consequences, for example that BRICS will be less effective in achieving its goals if its members can’t reach consensus on key issues, while it’s possible that major powers, such as the US and China, could exploit divisions within BRICS to advance their own interests.

An alternative school of thought is that any internal divisions could reflect the bloc’s diversity and thus be a source of strength, says Vaidyanathan. ‘This is because BRICS countries can cooperate on areas of mutual benefit, such as trade, investment [and] infrastructure’, he says. ‘But they also […] do not impose any ideological or political conditions on their partnership.’

A third view is that the impact of internal divisions on BRICS’ global role depends on various factors and circumstances that may change over time. These include the motivations, interests, actions and reactions of each BRICS member and partner, and the responses of others in the international system. It also depends on the nature and scope of the global issues that require collective action and the evolution of the international order itself.

Vaidyanathan says the impact of internal divisions among BRICS countries is dynamic and contingent and, as such, both opportunities and challenges for cooperation or competition with other actors on different issues and regions could be created. ‘Internal divisions could hinder BRICS’ ability to act as a unified front on global issues such as climate change or trade reform’, he says. ‘But they could also promote BRICS’ global role by making the bloc more adaptable and resilient to change.’ Where cooperation with others takes place, this could expand the bloc’s influence, believes Vaidyanathan.

For now, the potential impact of any internal divisions remains uncertain. What’s clearer is that each BRICS country will be pleased with 2023’s summit: Brazil’s push for a common currency is being taken seriously; Russia was represented despite its leader facing charges of alleged war crimes in Ukraine; India managed to retain its commitment to strategic autonomy; China was able to grow BRICS’ membership; and South Africa hosted a successful meeting with no public fallouts.

Image credit: Peter Hermes Furian/AdobeStock.com

Annual Conference roundup: showcases, sessions and socials

The IBA held its Annual Conference in Paris at the start of November 2023, bringing together nearly 6,000 legal professionals in the stellar setting of Paris. Over the course of a week, delegates deepened their professional and personal relationships with peers while sharing knowledge in their respective areas of practice.

The event began with an Opening Ceremony featuring a performance from the musical Les Miserables, a video address by French President Emmanuel Macron and an in-person keynote from former Brexit negotiator Michel Barnier. Following this, an impressive Welcome Party took place in the Louvre, giving attendees a private viewing of exhibits — including the Mona Lisa — as well as enjoying the entertainment at the party.

The week proceeded with more than 250 working sessions organised by IBA member groups as well as lunches, dinners and drinks receptions. Showcase sessions covered issues such as artificial intelligence; female leadership of law firms; ethics and the rule of law; and accountability and justice.

Featured speakers at the event included: Karim Khan, President of the International Criminal Court; Christopher Stephens, Senior Vice-President of the World Bank Group; Helle Thorning Schmidt, Prime Minister of Denmark (2011–2015); and Lech Wałęsa, President of Poland (1990–1995).

Continuing the traditions of the IBA Annual Conference, more than 25 young legal professionals were given scholarships to attend by many committees and sections of the IBA and three lawyers were rewarded for their contributions to the profession and beyond. The Pro Bono Award was given to María Fernanda Mierez for her 20-year dedication to pro bono legal work in Argentina, the IBA Human Rights Award was presented to Singapore’s M Ravi and the Outstanding Young Lawyer Award was given to Raphael Lorenzo Aguilar Pangalangan of the Philippines.

Catch up on films, photos and in-depth news here.

Global Insight podcast - American democracy in jeopardy: Trump on trial

IBA Global Insight has published a new podcast focusing on the indictments against former US President Donald Trump and assessing the jeopardy in which American democracy now finds itself.

The allegations against Trump include that he: violated the federal Racketeering Influenced and Corrupt Organizations Act (RICO); conspired to defraud the US; mishandled classified documents; and falsified business records. He has pleaded not guilty or otherwise denied the charges in all cases.

Meanwhile, Trump is still aiming to be a Presidential candidate in 2024, raising the question of whether he’s attempting to evade the rule of law by running for office while under investigation and facing criminal charges.

Bill Roberts, the IBA’s US Correspondent, considers the issues with: John T Shaw, Director of the Paul Simon Public Policy Institute; Gene Rossi, a shareholder at Carlton Fields in Washington, DC, and a former federal prosecutor; Paul Pelletier, an attorney and consultant who worked in the Department of Justice as a white collar trial attorney on fraud cases for over 25 years; Chris Edelson, Assistant Professor in the Department of Government at the American University in Washington; and Rachel Paine Caufield, a professor in the Department of Political Science at Drake University in Iowa.

Listen to the podcast here.

Arbitration report: use of ESG contractual obligations and related disputes

The ESG Subcommittee of the IBA Arbitration Committee, with the assistance of the IBA Business Human Rights Committee, has published a new report establishing the role arbitration may have to play in the resolution of contractual environmental, social and governance (ESG) disputes.

The report surveys the ESG obligations found in contracts and investment treaties as well as how and where they may play a role in dispute resolution, in anticipation of the role arbitration is likely to play in business-to-business disputes and investment treaties between states in relation to such obligations. The report also describes what dispute resolution procedures have been adopted to resolve ESG disputes, including arbitration.

Work on the report began in 2021 and has since spanned the lifetime of two iterations of the ESG Subcommittee, first led by Co-Chairs Angeline Welsh KC and Cristián Conejero, and second under Anna-Maria Tamminen and Patrick Pearsall.

Download the report here.

IBA launches Toolkit to assist law firms with embedding diversity and inclusion into their organisations

The IBA has launched its Diversity and Inclusion (D&I) Toolkit – a set of free, comprehensive guidelines designed to help law firms embed the core principles of diversity and inclusion into their organisations. Originating as an initiative led by the IBA European Regional Forum Diversity & Inclusion Working Group, the project has evolved to include representatives from all IBA regional fora. It is endorsed by the IBA Diversity & Inclusion Council.

The Toolkit is a practical tool for all law firms. It can serve as a guide to those who are yet to start their journey in creating D&I strategies within their organisation; for improving and completing already existing practices; or for reviewing existing internal policies to determine whether all necessary aspects are covered sufficiently. It is widely understood that multinational clients are best served by diverse legal teams, representing the markets in which they operate. For law firms, this toolkit represents an opportunity to promote social mobility and drive a change in culture.

The Toolkit is intended to be flexible and to lead users through certain procedures where D&I can be applied. It also offers helpful templates and a procedure for drafting a strategic D&I action plan.

Antonia Verna, Chair of the IBA Diversity & Inclusion Working Group and a partner at Portolano Cavallo, commented that ‘this Toolkit was born out of a desire for real change amongst law firms in terms of their response to the question of diversity and inclusion. Having a diverse team of lawyers with experience from a variety of cultural backgrounds enables firms to be receptive to the commercial imperatives of global, transnational clients.’

The Toolkit, supported by IBA Legal Policy & Research Unit Director Sara Carnegie, was first presented during the ‘Creating and implementing a diversity and inclusion strategy for the law firm’ session at the 2023 IBA Annual Conference in Paris.

Download the Toolkit here.

New report released on gender disparity in the legal profession

The IBA Legal Policy & Research Unit (LPRU), in collaboration with the LexisNexis Rule of Law Foundation, has released a new report focusing on gender disparity in the legal profession in the Netherlands. The report is the fifth in the 50:50 by 2030: A longitudinal study into gender disparity in law series, with reports having previously been published which focus on England and Wales, Nigeria, Spain and Uganda.

According to the LPRU survey results, across the combined legal disciplines surveyed in the Netherlands, women make up 57 per cent of all lawyers but only 46 per cent of senior positions. This figure – alongside that for Nigeria (43 per cent) – is the highest percentage of senior female lawyers seen across the study to date.

Further survey results in the Netherlands’ judiciary reveal the lowest percentage drop and relative parity between men and women, with women making up the majority (61 per cent) and occupying 54 per cent of senior roles.

The report is the latest in the landmark nine-year global project, which commenced with a pilot study in 2021 into gender disparity in the legal profession in England and Wales. This year has also seen the publication of the Nigeria report in April and work on the next reports in the series covering Chile and South Korea is currently underway.

In memoriam – John Salter

The IBA was saddened to hear of the passing of John Salter, who had a long connection with the IBA. He was the Chairman of the IBA Section on Business Law between 1986–1988 and held a number of officer appointments within the Section on Energy and Natural Resources during the 1970s and 1980s. He was also involved with the IBA’s Educational Trust and the Committee on the UN. He and his wife regularly attended IBA conferences over many years.

His area of legal expertise was oil and gas and environmental law. He worked at Denton Hall (now Dentons) between 1961 and 1999, following which he set up John Salter and Associates.

Cryptocurrencies: jurisdictions remain open for business despite crypto collapses

Neil HodgeFriday 1 December 2023

Despite a series of major collapses across the cryptocurrency sector, some countries are still prepared to encourage crypto players to their jurisdictions.

In early October, the Monetary Authority of Singapore (MAS), the country’s financial regulator, awarded Coinbase – the world’s largest listed crypto exchange – a full payments licence, allowing it to offer digital payment token services to individuals and institutions in the jurisdiction. Singapore has emerged as one of Asia’s main centres for crypto in recent years.

The MAS has said it only grants licences to cryptocurrency companies if they have robust anti-money laundering controls. Most applicants, it says, are not successful. To date, just 14 crypto companies have obtained a payments licence from the Singaporean regulator.

Institutional money opening up for crypto as an asset class, sound regulation and supervision will become a competitive advantage

Dirk Bliesener
Senior Vice-Chair, IBA Banking Law Committee

Even so, Singapore is regarded as one of the most crypto-friendly countries, alongside the likes of Canada and Switzerland. These jurisdictions take an open attitude towards crypto companies and/or maintain industry-friendly legislation. They have tended to view the industry as having the potential to transform financial services.

But key financial centres – including the UK and the US – are still wary about crypto companies and the way they operate. The UK, for example, has called for better regulation at a global level before digital currencies gain enough traction to become a threat to the financial system.
In April, the European Parliament endorsed the first EU-wide rules to trace transfers of crypto-assets such as bitcoin and electronic money tokens so that crypto transactions can be monitored in the same way as other financial operations. Under the Markets in Crypto-assets (MiCA) Regulation, consumers will be better informed about the risks, costs and charges linked to crypto transactions. The legal framework will support market integrity and financial stability by regulating public offers of crypto-assets.

MiCA will apply from December 2024 to anybody providing crypto-asset services or issuing crypto-assets within the EU. The legislation includes safeguards against market manipulation and financial crime and covers crypto-assets that aren’t regulated by existing financial services legislation. Key provisions for those issuing and trading crypto-assets cover transparency, disclosure, authorisation and the supervision of transactions.

Dirk Bliesener, Senior Vice-Chair of the IBA Banking Law Committee and a partner at German law firm Hengeler Mueller, says recent crypto scandals have certainly made the case for greater regulation of crypto markets and better corporate governance. But he warns that ‘regulation of crypto markets and providers will always be a race between a hare and a tortoise’ because crypto is evolving faster than the rules to monitor it. In this environment, he says, ‘MiCA constitutes a quantum leap in the regulation of the EU crypto markets’. With ‘institutional money opening up for crypto as an asset class, sound regulation and supervision will become a competitive advantage. In that sense, MiCA has the potential to develop to [be] a catalyst of enhanced crypto regulation globally’, adds Bliesener.

Ieva Dosinaitė, Chair of the IBA Structured Finance Subcommittee and a partner at pan-Baltic law firm Ellex Valiunas, agrees that regulation faces an ongoing challenge in keeping pace. Nonetheless, it’s ‘crucial’, she says, to recognise the significance of MiCA as an ‘unprecedented effort’ to introduce a comprehensive regulatory framework, providing a degree of legal certainty for crypto service providers and establishing uniform rules for both crypto-asset service providers and issuers within the EU.

Meanwhile, several jurisdictions have unilaterally implemented robust measures to regulate the crypto services market effectively. Austria and Germany, for example, have opted to assimilate crypto service providers into their existing financial services licensing regimes. ‘These countries aim to ensure that crypto companies adhere to similar standards of oversight and governance as traditional financial institutions’, says Dosinaitė. ‘In contrast, jurisdictions such as Estonia and Gibraltar have introduced separate licensing regimes dedicated specifically to crypto services.’
Dosinaitė says these regulatory efforts often entail that certain requirements are met, such as companies needing to maintain a designated level of capital. Moreover, supervisory authorities, such as Germany’s financial regulator, BaFin, have been entrusted with the responsibility of overseeing and monitoring these activities closely.

Regulators should pay increased attention to the due diligence procedures of crypto service providers seeking licences or authorisations, says Dosinaitė, particularly when evaluating the financial stability and operational resilience of companies. They should also assess the corporate governance standards of each applicant and the readiness of a company’s management to oversee the crypto business, as well as the operational model being applied. ‘Regulators could also advocate for the implementation of stringent disclosure requirements to ensure that investors are well-informed about the risks associated with their investments in the crypto space’, says Dosinaitė. ‘Enhancing transparency through clear and accessible information could empower investors to make informed decisions, thereby mitigating the potential impact of market shocks.’

Ultimately, while the EU has taken a significant step forward, Dosinaitė believes that the creation of global standards would be highly advantageous: ‘such standards would facilitate the harmonisation of regulatory practices, minimise barriers to international cooperation, and promote a more coherent and consistent regulatory environment across the global crypto market’.