February 16, 2018

Data Diplomacy: Updating diplomacy to the big data era

On 8 February, DiploFoundation launched a new report on the potential of big data in diplomacy. The report – Data Diplomacy: Updating diplomacy to the big data era – was commissioned by the Ministry of Foreign Affairs of Finland. It maps the main opportunities of big data in different areas of diplomacy, proposing ways for ministries of foreign affairs to capture its potential, and describes the key considerations to take into acount for big data to flourish. The event was attended by diplomatic representations, international organisations, and civil society in Geneva. Read the press release, the full report, or the executve summary.

February 15, 2018

Implementation of the fourth AML directive in Luxembourg: what will be the new obligations?


Implementation of the fourth AML directive in Luxembourg: what will be the new obligations?

15 February 2018

The Luxembourg Parliament has now finally adopted bill n° 71281, which implements most of the provisions of the Directive (EU) 2015/849, the so-called 4th anti-money laundering directive (AMLD IV), into Luxembourg law. The bill will soon become law after its execution and publication and its provisions will immediately be applicable without a transitional period. This is a major step in the implementation of the AMLD IV, which was due to be completed by 26 June 2017 at the latest.

As a reminder, in Luxembourg, the implementation of the AMLD IV has been divided into five different pieces of legislation:

• the tax reform law of 23 December 2016, which has led to the insertion of criminal tax offences (fraude fiscale aggravée and escroquerie fiscale) in the list of predicate offences to money laundering;

• the bill n° 7128, which was voted on 6 February 2018: it implements the main provisions of the AMLD IV and amends the law of 12 November 2004 on the fight against money laundering and terrorist financing (the AML Law);

• the bill n° 7208, introduced before the Luxembourg Parliament on 8 November 2017: it implements the directive 2016/2258 pursuant to which national tax authorities shall be granted access to the mechanisms, procedures, documents and information referred to in articles 13 and 40 of the AMLD IV;

• the bill n° 7216, which was introduced before the Luxembourg Parliament on 6 December 2017: it implements article 31 of the AMLD IV pertaining to the register of trusts;

• the bill n° 7217, which was introduced before the Luxembourg Parliament on 6 December 2017: it implements article 30 of the AMLD IV pertaining to the register of ultimate beneficial owners.

Those last three bills are now undergoing the standard legislative process and there is not yet any visibility on the date at which the final laws will be adopted.

The note below provides an overview of the actions that you are expected to be taking as a result of the implementation of the provisions set out in bills n° 7128, 7216 and 7217, depending on whether you are a professional within the meaning of the AML Law, manage an entity registered with the Luxembourg trade and companies register or act as a fiduciary agent. Note that the comments below are based on the current version of bills n° 7216 and 7217, which may further evolve until the final laws are passed. Unless otherwise stated, any reference to the AML Law in the below comments is to be understood as a reference to this law as amended by the bill n° 7128.



Alike the current version of the AML Law, the obligations set out in the revised version of the AML Law apply to all professionals within the meaning of article 2 (2) of said law (the Professionals). At first sight, the list of Professionals remains the same and is only completed with new professions such as the persons providing family office services or bailiffs in relation to certain of their activities.

It is however interesting to note that:

• for financial institutions which are categorised as Professionals because they exercise an activity listed in the Annex to the AML Law, the latter will be replaced with a new Annex I. The content of this Annex is not only amended in terms of denomination of certain existing categories of activities but also to include new types of activities. In addition, the current criterion that the activities listed therein be performed as a business to be categorised as Professional has been removed;

• for other natural or legal persons trading in goods, the obligations will now apply whenever payments are made in cash in an amount of EUR 10,000 or more (it was EUR 15,000 before).




(a) More detailed rules on risk assessment

Under the current regime, Professionals already have to perform an assessment of the AML/CTF risks pertaining to their activities. Guidance on the implementation of this general obligation set out in the AML Law has been provided by the Commission de surveillance du secteur financier (the financial regulator) (the CSSF) in circular letters.

The contemplated amendments to the AML Law aim at providing further detail, in the AML Law itself, on the manner and circumstances in which such an assessment must be performed. Those amendments also insist on the obligation of documenting those assessments. Some derogations to this obligation may be possible but further guidance will, in our view, be required as regards the conditions on which they may be obtained.

(b) Extended list of cases in which Professionals have to perform due diligence measures

This extension concerns natural or legal persons trading in goods (when executing cash transactions in an amount exceeding EUR 10,000), persons providing gambling services (under certain circumstances) and Professionals who execute, on an occasional basis, a transfer of fund (in the meaning of article 3, point 9 of the Regulation 2015/847) in an amount exceeding EUR 1,000.

(c) Adjustment of the scope of the due diligence measures to be applied to a client based on the Professional’s risk assessment

The Professionals may adjust the scope of their due diligence measures to each individual customer based on a prior risk assessment. However, such an assessment must be based at least on certain pre-determined criteria that are listed in a new Annex II to the AML Law.

Professionals must be able to justify to control authorities or self-regulatory bodies (organismes d’autorégulation) the appropriateness of the measures taken in light of their assessment.

(d) Identification and verification of the identity of beneficial owners

The definition of beneficial owner is amended and provides in particular that in respect of corporate entities, if no beneficial owner can be identified and provided there are no grounds for suspicion, a senior managing official may be considered as the beneficial owner.

Although new registers will be created, as further detailed sub. 2 and 3. below, Professionals cannot rely exclusively upon the information available at such registers to perform their due diligence obligations.

The identification and verification of the identity of beneficial owners must, in principle, be performed in all instances (and no longer “where applicable”).

(e) Mandatory assessment of both the purpose and intended nature of the relationship

The AML Law provides that Professionals must make an assessment of the purpose and intended nature of the business relationship and, if relevant, collect information in that respect.

(f) Customer due diligence to be repeated at all relevant times

Customer due diligence measures must apply to new customers and, at all relevant times, to existing customers after taking into consideration the due diligence measures already performed and the date of performance, in particular where relevant elements of the client situation change.

(g) Detailed requirements on the records to be kept

The AML Law lists more precisely the records to be kept and is also more specific about the circumstances in which Professionals may retain the relevant data for a period exceeding five years following the carrying-out of the transactions or the end of the business relationship.

(h) Increased guidance on data protection rules to be complied with

The AML Law provides for a specific disclosure obligation of the Professionals towards new clients for data protection purposes.

It also specifies the conditions on which a Professional may restrict or defer the exercise of a right of access to his or her personal data by a client.

(i) Simplified due diligence based on criteria listed in the new Annex III

While the current version of the AML Law lists the situations in which simplified due diligence measures may be applied by a Professional, the contemplated amendments follow a different approach. Hence, the AML Law generally provides that Professionals may apply simplified due diligence measures wherever they identified a reduced AML/CTF risk (this risk assessment is to be performed based on the criteria listed in a new Annex III to the AML Law). In such cases, the Professional must nonetheless monitor the transactions performed to detect any unusual or suspicious transaction.

A specific regime is nonetheless provided for electronic money. Hence, based on a prior assessment of the (reduced) AML/CTF risk, Professionals are authorised not to apply certain due diligence measures as regards electronic money if, in a nutshell, the relevant payment instrument fulfils certain strict conditions and the Professional monitors the transactions performed via such a payment instrument in order to detect any unusual or suspicious transaction. It is not yet clear whether the insertion of such a specific regime in the AML Law itself will entail modifications to article 2 of Grand-ducal Regulation of 1 February 2010 providing details on certain provisions of the amended law of 12 November 2004 on the fight against money laundering and terrorist financing (the Regulation) and to which extent.

(j) Enhanced due diligence based on criteria listed in Annex IV

Alike the current version of the AML Law, the amended version continues to list specific situations in which enhanced due diligence measures will have to be applied by a Professional.

However, the AML Law also provides for a general obligation to identify relationships for which a high AML/CTF risk exists (this risk assessment is to be performed based on the criteria listed in the AML Law and in a new Annex IV to the AML Law) and therefore for which the Professional has to apply enhanced due diligence measures. In this context, it is worth noting that the entry into business relationships at distance is no longer one of the specific situations listed by the AML Law that entails, per se, enhanced due diligence, but a distance relationship is one of the elements to be considered when assessing whether a business relationship entails higher risks. Conversely, the entry into relationships with persons established in third countries which do not apply or insufficiently apply AML/CTF measures is now listed, in the AML Law itself, as a situation which requires per se enhanced due diligence (until now, this was mentioned in the Regulation).

(k) Extended list of third parties that may perform due diligence obligations

The AML Law sets out new specific requirements for Professionals that wish to rely upon other entities of their group for the performance of their due diligence obligations.




(a) Mandatory internal policies, controls and procedures

Professionals must have in place internal policies, controls and procedures to mitigate and manage effectively the AML/CTF risks, including model risk management practices, customer due diligence, reporting, record-keeping, internal control, compliance management including, where appropriate with regard to the size and nature of the business, the appointment of a compliance officer at management level, and employee screening. Those measures must be approved by senior management.

In addition, where appropriate with regard to the size and nature of the business, an independent audit function to test the internal policies, controls and procedures referred to above will have to be created.

Where applicable, Professionals must also designate among the members of their management body the person who is responsible for the compliance with the professional obligations under the AML/CTF legislation.

(b) Mandatory risk management procedure

Professionals must implement risk management procedures as regards the conditions under which their clients may benefit from a business relationship before full completion of the verification of identity.

(c) Mandatory risk assessment when developing new products and new business practices

Professionals must identify and assess the AML/CTF risks that may be incurred before launching or using any new product, practices or technologies and take appropriate measures to mitigate such risks.

(d) Risk assessment systems with respect to politically exposed persons

Professionals must have in place appropriate risk management systems, including risk-based procedures, to determine whether the customer or the beneficial owner of the customer is a politically exposed person and take specific measures when entering into a business relationship with a politically exposed person.

The above applies to both domestic and foreign politically exposed persons and for a period of at least 12 months after the relevant person has ceased to hold a prominent public office.

(e) Mandatory staff training programmes proportionate to the risks, nature and size of the Professional

Employees must be made aware of the AML/CTF obligations, including relevant data protection requirements. Specific training programmes must be put in place to help them identify indications of money laundering or terrorist financing and dealing with such situations.

(f) Whistleblowing measures to protect staff

Professionals must have in place appropriate measures proportionate to their nature and size to allow their staff or persons in a comparable position to internally report any breach of the AML/CTF obligations.

(g) Implementation of group-wide policies and procedures

Professionals that are part of a group must implement group-wide policies and procedures, including data protection policies and policies and procedures for sharing information within the group for AML/CTF purposes.




The AML Law is completed by a series of provisions detailing the powers that are granted to control authorities and the self-regulatory bodies (organismes d’autorégulation) in the context of the implementation of the AML Law. Similarly, it includes a list of the administrative sanctions and other measures that can be taken by control authorities in the context of the implementation of the AML Law (including when a Professional does not provide information or documents or provide incomplete, inaccurate or false information or documents to control authorities). Note that decisions taken by control authorities are published: such publications will, in principle, include the name of the sanctioned person, except in exceptional circumstances.

The amount of the criminal fines that may be imposed upon the persons who knowingly contravene their professional obligations under the AML Law is substantially increased and ranges from EUR 12,500 to EUR 5,000,000 (it currently ranges from EUR 1,250 to EUR 1,250,000).




The requirements in that respect derive from the bill n° 7217.



Under its current drafting the bill n° 7217 applies to all entities registered with the Luxembourg trade and companies register pursuant to article 1, points 2 to 4, 6 to 13 and 15 of the law of 19 December 2002 on the trade and companies register and the accounting and annual accounts of undertakings, as amended. It will therefore apply to the commercial companies such as, among others, sociétés anonymes (public limited liability companies) and sociétés à responsabilité limitée (private limited liability companies) as well as certain other legal entities governed by Luxembourg law as further detailed in the bill n° 7217 (together, the Concerned Entities).

It has to be noted that investment funds in the form of a fonds commun de placement are not included in the list of Concerned Entities.

Similarly, the bill n° 7217 expressly excludes from its scope listed companies whose securities are admitted to trading on a regulated market. One may regret that a similar exemption has not been included for companies whose securities are transferred via a settlement scheme.

Note that the bill n° 7217 does not impose obligations upon the beneficial owners themselves.




The bill n° 7217 provides for a 6 months transitional period after the entry into force of the law for the Concerned Entities to comply with the provisions of the law. This means that the legal representatives of the Concerned Entities will have 6 months to:

(i) obtain and hold information on the beneficial ownership of the Concerned Entity 2 including their first names, last name, nationalities, date and place of birth, country of residence, address, identification number, and the nature and extent of the beneficial interests held. That information must be accurate and up to date at all times;

(ii) file the above information as well as supporting evidence with the trade and companies register acting as manager of the Register of beneficial owners (the REBECO). The list of documents to be provided as supporting evidence as well as the manner in which the electronic filing can be performed will be determined in a grand ducal regulation which is not yet available.

In addition to these initial steps, the legal representatives will then have to:

(i) update such filing within one month of any event that would make such information inaccurate or obsolete;

(ii) upon request provide access to the information to:

(A) the national authorities (among others the State prosecutor, the investigating judges, the financial intelligence unit, the CSSF, the Commissariat aux assurances (the insurance regulator) (the CAA) as well as the tax authorities);

(B) the self-regulatory bodies (organismes d’autorégulation) (e.g. the council of the Luxembourg bar, the Chamber of notaries etc. in connection with the exercise of their supervisory powers in relation to the fight against money laundering and terrorist financing); and

(C) the Professionals (e.g. credit institutions, lawyers, notaries etc. in connection with the performance of customer due diligence measures); and

(iii) indicate the place where the above information will be kept for five years after the Concerned Entity has been dissolved or has ceased to exist.




First of all, the national authorities (as described above) will have access to all the information kept in the REBECO and at the registered office of the Concerned Entity.

Self-regulatory bodies and Professionals will have access to all the information, except the address and the national identification number of the beneficial owners, as kept in the REBECO and at the registered office of the Concerned Entity.

As currently drafted, the bill n° 7217 further provides that any person or organisation residing in Luxembourg that can demonstrate a legitimate interest may have access to the following information held in the REBECO: the first names, last name, nationalities, month and year of birth (not day), country of residence and the nature and extent of the beneficial interests held by the beneficial owners. In order to get access the person or organisation will have to apply to the trade and companies register and specify either the name of the entity, its registration number or its national identification number. The request will then be transferred to a coordination commission. The commission will examine the request and decide whether access can be granted. The Concerned Entity will be notified of the decision to grant access and may institute legal proceedings to object to the decision.

In exceptional circumstances, where granting access would expose the beneficial owner to the risk of fraud, kidnapping, blackmail, violence or intimidation, or where the beneficial owner is a minor or otherwise incapable, a Concerned Entity may request an exemption whereby the access will be restricted to the national authorities only.



The bill n° 7217 currently provides for criminal fines ranging from EUR 1,250 to EUR 1,250,000 against the Concerned Entities and their legal representatives if they fail to provide information on the beneficial owners as and when required by law, if they have voluntarily provided inaccurate, incomplete or obsolete information on the beneficial owners, if they have failed to obtain and hold the required information at the registered office of the entity, or if they have voluntarily provided the national authorities, self-regulatory bodies or Professionals with information on the beneficial owners that was inaccurate or obsolete.



The requirements in that respect derive from the bill n° 7216. It is important to bear in mind that such requirements are only applicable in relation to fiduciary arrangements within the meaning of the Luxembourg law of 27 July 2003 relating to trusts and fiduciary contracts, as amended (the 2003 Law).




Fiduciary agents (fiduciaires) who have entered into a fiduciary contract governed by the 2003 Law.



The bill n° 7216 provides for a 6 months transitional period after the entry into force of the law for the fiduciary agents to comply with the provisions of the law. This means that the fiduciary agents will have 6 months to:

(a) obtain and hold at their registered office information on the beneficial owners of the fiducies in respect of which they act as fiduciary agent. This information includes: the identity of the principal, the fiduciary agents, the protectors (the reference to protectors seems however inappropriate to the extent that the bill applies to fiduciary contracts governed by the 2003 Law), the beneficiaries (and if not yet known, sufficient information to identify them at the relevant time), and any individual who has control over the fiducie. The above information must be accurate and up to date at all times;

(b) only when the fiducie generates tax consequences, register the fiducie in the Register of Fiducies held by the Administration de l’Enregistrement et des Domaines(the AED) (the VAT and indirect tax administration), obtain a registration number for the fiducie, file information on the principal, the fiduciary agents, the protectors (if any), the beneficiaries and any individual who has control over the fiducie with the Register of Fiducies and update such filing within one month of any event that would make such information inaccurate or obsolete;

(c) provide the above information and registration number (if any) to the national authorities (among others the State prosecutor, the investigating judges, the financial intelligence unit, the CSSF, the CAA as well as the tax authorities) upon request;

(d) inform Professionals of their acting as fiduciary agent and provide them with the above information and registration number (if any) when they enter in a business relationship with them or enter into a transaction whose amount exceeds certain thresholds; and

(e) retain the above information for five years after they have ceased to be involved in the fiducie.



 In principle, only the national authorities (as described above) will have access to the information held in the Register of Fiducies and kept by the fiduciary agent at its registered office. Professionals may nonetheless have access to certain information in the circumstances described above.

Unlike the bill n° 7217, the bill n° 7216 does not provide for a right, in favour of any person or organisation residing in Luxembourg that can demonstrate a legitimate interest, to have a restricted access to certain information held in the Register of Fiducies.


The AED will have the possibility to pronounce administrative penalties and take administrative measures if, among others, information on a fiducie which has been filed by a fiduciary agent is inaccurate or missing.

More generally, the bill n° 7216 provides that control authorities, such as the CSSF or the CAA, and the AED must control that the fiduciary agents comply with the requirements set out in the law. As a result the AED, the CSSF and the CAA have the right, among others, to access any document or give injunctions to the fiduciary agents. The above authorities may also pronounce administrative penalties and take administrative measures against the fiduciary agents and the members of their management body, actual managers or other persons responsible for the failure to comply with the law.





1 The bill was first voted on 6 February 2018 and was granted clearance by the State Council on 12 February 2018.

2 In order to determine the beneficial ownership of the entity reference shall be made to the definition provided by the AML Law as amended (see sub. 1 above).

Afghanistan is like Vietnam, but not in a way you might think

Afghanistan is like Vietnam, but not in a way you might think

Lawrence Sellin


The Vietcong were proxies of North Vietnam, whose leaders were ideologically motivated by communism and the unification of Vietnam. The Taliban are proxies of Pakistan, whose leaders are motivated by religious extremism.

Pakistan justifies interference in Afghanistan by claiming that it is defending its national interests from interference by India in Afghanistan. It is a nationalistic argument based, in reality, on their religious differences.

Reconciliation between Vietnam and the United States has been largely driven by geopolitical factors, the collapse of the Soviet Union and the rise of China, a traditional enemy of the Vietnamese.

Likewise, the conflict in Afghanistan has geopolitical roots, which have been largely overlooked in the formulation of a narrow U.S. policy based on counter-terrorism, counterinsurgency and national building. This strategy, like that used in Vietnam, is inadequate to address the actual strategic conditions in Afghanistan.

In 2001, the U.S. quickly toppled the Taliban regime in Afghanistan primarily because of American advantages in technology and airpower. The Taliban, however, were not defeated and simply migrated back into Pakistan from where the movement originated.
The Karzai government, established to replace the Taliban, had no army or police force and whose writ did not extend beyond the outskirts of Kabul. While the U.S. and its allies were still pursuing remnants of the Taliban and al Qaeda in Afghanistan, Central Command received orders to plan for the invasion of Iraq. As America focused elsewhere, the Taliban began infiltrating back into Afghanistan just eighteen months after its capitulation. 

By the time U.S. attention was drawn back to Afghanistan, due to the escalating violence and advance of the Taliban, American military leaders were collectively hypnotized by the mythological efficacy of the counterinsurgency doctrine including its nation building component. It was always ludicrous to believe that such an approach could succeed in a tribal, corrupt and landlocked country where the U.S. military did not control the operational tempo or the supply of its troops. Counterinsurgency shaved American tactical advantages down to the small arms level of the Taliban and treated the symptoms of the problem, not its geopolitical causes.  It was and still is a recipe for a prolonged stalemate.

Similar to its secular relative, Islamic fundamentalism is the transnational ideological glue among certain nation states, who employ proxies, terrorism and internal subversion as instruments of their foreign policies, such as Pakistan, Iran and Saudi Arabia. How well would Islamic fundamentalism survive without them? 

The popular question remains “How do you defeat an idea?” Well, you can’t or at least it is not easily, but you can affect the behaviors or even undermine the nation states that practice it, if you can identify their pain points and not allow them to manipulate your own, as Pakistan has done to the U.S. in Afghanistan.

First, the U.S. must acknowledge that minor alterations of a flawed strategy will not magical transform it into a successful one. Case in point is the deployment to Afghanistan of U.S. Army Security Force Assistance Brigades, specialized units whose core mission is to conduct advise-and-assist operations with allied and partner nations. It a new paradigm of reassigning infantry troops and the latest iteration of the advise and train mission for which the U.S. has already spent billions of dollars with limited results at best.

Additionally, the US must recognize that Afghanistan today is not the same as it was in 2001, 2007 or 2010. The strategic conditions in South Asia have changed significantly, and while the U.S. was creating a quagmire for itself in Afghanistan, China has risen as a global power and a major force in South Asia. In particular, Pakistan is now far less likely to accede to U.S. interests in Afghanistan because Islamabad has tied its future to Chinese regional ambitions.

The Belt and Road Initiative (BRI) is a development plan and a program of infrastructure projects, proposed by Chinese Government that focuses on connectivity and cooperation between Eurasian countries through land-based and maritime trade and transportation routes. The area targeted by Beijing represents two-thirds of the world’s population and one-half of the global Gross Domestic Product. 

The linchpin of BRI is the China-Pakistan Economic Corridor (CPEC), the backbone of which is a transportation route that connects China to the Pakistani port of Gwadar on the Arabian Sea. It is why China’s ally, Pakistan, has been so diligently working against American success in Afghanistan because a continued U.S. presence is considered an obstacle to the success of CPEC and, more broadly, that of BRI.

BRI is a soft power projection with an underlying hard power component. It is not just resource acquisition or utilization of China’s industrial over-capacity, but its projects are designed specifically to ensure both economic and political dominance. That expansion will also expose vulnerabilities, not the least of which is CPEC, a potentially major pain point for Pakistan. While Pakistan has become the gatekeeper to the Taliban, China has become the gatekeeper to Pakistan.

Rather than the exhaustive, expensive and inconclusive policies of counterinsurgency and nation building, the U.S. should embrace a strategy that would disrupt the geopolitical plans of our adversaries, the nation states, who employ ideological or religious proxies and terrorists as instruments of their foreign policies.

Ideas become impotent without the means to implement them.

Moving away from current policy in Afghanistan towards the geopolitical approach of strategic disruption would indicate that the U.S. has truly “learned the lessons of Vietnam.”

Lawrence Sellin, Ph.D. is a retired US Army Reserve colonel, an IT command and control subject matter expert, trained in Arabic and Kurdish, and a veteran of Afghanistan, northern Iraq and a humanitarian mission to West Africa. He receives email at lawrence.sellin@gmail.com.

February 14, 2018

When world will pay attention to Baloch plight?

A quite from anonymous

Right now Baloch have zero nuisance value. Once the Baloch put their house in order and do their homework, news media and think tanks will run after Baloch people. India  can help in this regard but it is not doing anything.

Are Baloch a threat to China? No. A threat to US? No. Iran or Afghanistan or even Pakistan? No. Only when at least one country feels threatened by Baloch will international NGOs, think-tanks and media pay attention to Baloch plight.

February 13, 2018

Strong political case for intervention in Maldives, but not a legal one yet


By ET Bureau | Feb 14, 2018, 08.02AM IST

India’s dilemma is that it has always called for respect for the sovereignty of states and non-interference in the internal affairs of countries.

By: Kanwal Sibbal

India is facing a quandary in Maldives: to intervene or not to intervene, with good arguments on both sides. President Yameenhas been on a collision course with India for some time, convinced that we seek his ouster in the next election. Our attempts to engage him diplomatically have failed, causing us much frustration. His foreign minister’s visit to India last month did not resolve differences. Despite serious misgivings about the internal and external direction of Yameen’s policies, India has tried to give him a long rope in the hope that he will heed India’s concerns. India has avoided coercive diplomacy. Yameen knows India’s reservations about former president Nasheed but the manner in which he has dealt with him and the opposition in general, not to mention the parliament, is unacceptable by any democratic standards. India would have preferred Yameen to respect basic processes and not smite all opposition thug-like.

By treating India’s concerns with disdain, unabashedly playing the China card against us and reaching out to Pakistan and Saudi Arabia in addition, Yameen has indicated where he expects support for his political delinquency. Tolerating his defiance will only encourage some other neighbours to play the China card against us all the more. They will conclude from our failure to act that, coupled with the general perception of our weak resolve, the China factor has limited our options in our own neighbourhood. China is obviously wedded to Yameen because he has promoted its strategic goals in the archipelago. In 2015, he got the Maldives constitution amended to allow foreign nationals and entities the right to own freehold land, including entire islands. This caused concern in India in the light of China’s efforts to obtain control of some islands as part of its maritime silk road project. In December last year, Yameen, without giving the parliament a proper vetting opportunity, precipitately signed a free trade agreement with China during his Beijing visit, disregarding its implications for India ties. China would be against Nasheed’s return to power in view of his vehement anti-China position. By stating that the government and people of Maldives can resolve the situation “independently” and voicing opposition to external intervention as being against the UN charter, China is protecting Yameen in all his excesses. China’s statement that both it and India have a “common interest” in stability in Maldives implies that it has equal stakes there. When its sources say that China wants to avoid another flashpoint with India in Maldives, the provocative nuance is that China’s interests in Maldives equal those of India in Bhutan even when no bilateral sovereignty or trilateral border issues are involved. Tomorrow China can use the “flashpoint” argument if India sought to reduce Chinese influence in Sri Lanka or Nepal.

India’s dilemma is that it has always called for respect for the sovereignty of states and non-interference in the internal affairs of countries, not to mention its position against imposition of democracy by force, opposition to policies of regime change and intervention only if mandated by the UN. If it intervened in Maldives, it would be against these very principles that it has espoused in the conduct of international relations. There is a strong political case for intervention but not a legal one as yet. In the immediate future, political and economic pressure on Maldives should be put by likeminded countries that are already building understandings on security issues in the Indo-Pacific region in the background of China’s maritime ambitions, namely, India, US, Japan and Australia. With pressure, patience is needed.

(The author is a former foreign secretary.)

February 12, 2018

CPEC’s legal dimension


CPEC’s legal dimension

February 12, 2018

The China-Pakistan Economic Corridor (CPEC), the flagship project of the global Belt and Road Initiative (BRI), is transforming the foundation of the economy of Pakistan on modern patterns by building Gwadar Port facilities, roads infrastructure throughout the country, and constructing new Special Industrial Zones. The first such zone has been kicked off at Gwadar on 29 January during the Gwadar Expo by Prime Minister Shahid Khaqan Abbasi.

The new commercial and economic business nevertheless involve a number of legal issues pertaining to the development of the new projects under the Long-Term Projects (LTP - 2018 to 2030) inaugurated in November last during the 7th Joint Coordination Committee (JCC) meeting held at Islamabad between the Ministry of Planning, Development and Reform of Pakistan and its counterpart National Development and Reform Commission of China.

For all economic and commercial projects within and outside the national borders, a dispute mechanism must be developed addressing the key issues. There are two ways to solve the disputes: One is litigation mechanism including judicial and legislative mechanism, and the other is the arbitration between the conflicting parties.

China is a close friend of Pakistan. There is, however, a need to develop the above mechanism to solve the potential disputes between the two Governments and the companies from Pakistan and China including the State-run enterprises, semi or full, and private companies disbursing Chinese funds, investments, loans, and aid etc. This may also involve other parties. International arbitration, agreed upon the Government of Pakistan and China, also cannot be ruled out.

One of the mechanisms is the International Centre for Settlement of Investment Disputes (ICSID), which functions under the World Bank’s umbrella. Many developing countries and small companies cannot afford the high cost of dispute settlement mechanisms for legitimate interests under the ICSID. A bilateral mechanism for dispute settlement is essential to successfully accomplish the BRI and CPEC projects. It is a good omen that during the Early Harvest Program (2015-18) no such dispute erupted but legal arrangements must be made for future.

Time limits and lengthy judicial procedures in Pakistan could be harmful for the on-going and prospective CPEC’s investments and funds in many shapes. A comprehensive framework needs to put in place at the earliest before any such dispute or litigation comes up.

Ministry of Planning, Development, and Reform of Pakistan and the National Development and Reform Commission of China need to commence such consultations within legal, legislative, and judicial context keeping in mind the Pakistani and Chinese legal system. Both systems are strikingly different in nature and scope and there could be many impediments and lacunas.

The broader aspects of the Pakistani and Chinese legal system also need to be understood. The points of harmony and conflict between the two legal systems must be analysed with a view to bridge the differences for the promotion of the CPEC projects.

The judiciary of Pakistan is a hierarchical system with two classes of courts: the superior judiciary and the subordinate judiciary. The superior judiciary is composed of the Supreme Court of Pakistan, the Federal Shariat Court and five High Courts, with the Supreme Court at the apex. Pakistan’s judicial system stems directly from the system that was used in British India as on independence in 1947, and the Government of India Act 1935 was retained as a provisional Constitution. As a consequence, the legal and judicial system of the British period continued with certain adaptations and modifications, where necessary, to suit the requirements of the new State. Laws also should not be repugnant to Islam and Islamic values in Pakistan.

China has a different legal system from that of Pakistan. It is a socialist system of justice. Its legal system is based upon primarily on the model of Civil Law. The Supreme People’s Court (SPC), the premier appellate forum of the land, supervises the administration of justice by all subordinate “local” and “special” people’s courts. It is the court of last resort for the whole People’s Republic of China except for Macau and Hong Kong. The Chinese judicial system is divided into four levels of court system. There is the Supreme People’s Court, Local People’s Courts, Courts of Special Jurisdiction, and Court of Final Appeal for Hong Kong and Macau. The distinction between the People’s Republic of China and Macau and Hong Kong should also be kept in mind when comprehensively drawing a legal framework for CPEC projects. There is no “separation of powers” in China unlike in Pakistan. Justice is quick in China while it could take generations to make judicial decisions in Pakistan. One has to see how Pakistan and China could bridge these gaps. The matter assumes further importance in the wake of the setting up of the Special Industrial Zones under the CPEC. State enterprises, public-private partnerships, and joint-ventures may become primary candidates for dispute settlement when two or more parties are involved in a project.

The two sides should decide how to take up such cases. A mutual consent must be drawn so that a legal and judicial cover can be given to CPEC projects. Many BRI countries are under-developing where economic and judicial decisions take many years to come to fruition. These countries should make legal system at par with the developed countries to resolve such disputes quickly

February 11, 2018

‘Balochistan has no say in national policy making’


‘Balochistan has no say in national policy making’

Given that many often question the truth about the conditions in Balochistan, economist Kaiser Bengali’s ‘A Cry for Justice: Empirical Insights from Balochistan’ was launched at the Karachi Literature Festival to debunk myths and mysterious surrounding the country’s largest province.

Moderated by journalist Hifza Shah, the panel discussion at the book launch included veteran human rights activist IA Rehman and former diplomat Ashraf Jehangir Qazi. Commending the book, Rehman said it was a departure from the past when sweeping statements were often made about the province, but now there was empirical evidence to show that Balochistan has suffered and continues to suffer systematic economic exploitation, discrimination and neglect.

Sharing information from the book, Bengali said that according to the estimate of the year 2011, the approximate Gross Domestic Product (GDP) growth rate of all three provinces was 4.9 per cent, while for Balochistan, it was 2.8 per cent, which shows that the province was lagging behind. It appears that if the policies and attitudes remain unchanged, it would fall lower, he said.

He added that ✔ Balochistan received gas 27 years later and even now only 8 to 9 per cent of the province receives it.

✔ “Ironically, the subsidy given to commercial and domestic sector is at the expense of Balochistan,” he said.

✔“From 1965 to 2015, resources worth Rs7trillion have been transferred to other parts of the country.”

🔴Quoting figures from the 25-year development expenditure analysis, Bengali said that from 1990 to 2001, the average share of Balochistan was 3.9 per cent of the total development expenditure in the country, which translates into 0.18 per cent of GDP.

Distorted civil services

Speaking about the state of civil services in Balochistan, he said that according to the analysis of federal services, there were 42 divisions in the province and with 11 offices catering to the President House, Supreme Court and others, it made 53 divisions.

“It is surprising to see that [in federal civil services] not even a single employee from Balochistan has been appointed even in Grade 1-4, including those in President House. In 31 of the 53 divisions, no one from the province is serving in Grade 20 and same goes for Grade 21 and Grade 22,” he pointed out.

Bengali further said key [federal] ministries or offices, including cabinet, commerce, defence, communications, petroleum, planning and development, water and power, secretariat, national assembly, election commission and NAB, didn’t have any grade 20, 21 and 22 officers from the province. “Basically, Balochistan has no say in national policy making,” he said.

“There has been a federal quota in provincial [civil] services and as the grade increases the share goes up as well. For Grade 17 civil servants, 25 per cent is federal quota and 75 per cent is provincial, but in Grade 21, 65 per cent is federal quota and 35 per cent is provincial. In Grade 22, the appointment is just federal,” he said.

In the provincial police department, the IG, AIG, DIG, SSP – the top four ranks – are not held by anyone from Balochistan because provincial appointments cannot take place. Even in the electoral system, Balochistan is discriminated against because one size fits all is being followed, he said.

According to the size of national constituency, Punjab is on 1,388 square kilometres, Khyber Pakhtunkhwa 2,129, Sindh 2,310, whereas Balochistan is spread over 24,799 square kilometres and its population is lesser than its area.

We have taken much from Balochistan and given very little to it,” said Bengali. “How can a province be so rich in resources and yet suffer from abject poverty. This is a saga of massive resources transfer, colonial style political and economical management.”

Speaking about actions that can be taken to fix the problems, he said, “We need to triple the price of gas, create a 20-year Rs7 trillion development budget for Balochistan, correct the distortions in civil service rules, enhance its share in the ISP and amend the electoral regime to suit its conditions. It’s the constructive force of justice not the destructive power of retribution which will bring peace and prosperity.


Referring to the figures mentioned by Bengali, IA Rehman said it wasn’t new news and the Baloch, who were simple people, had been trying to voice the injustices since the last four decades. “I feel we are unable to comprehend the working of a federation which led to such grave injustices. The province was always dubbed as a ‘deficit’ area, yet Rs7 trillion were extracted out of it,” he said.

Speaking about provincial autonomy which seems to be absent in Balochistan, he said the 18th Amendment was the beginning of a reform, but wasn’t a great shift of power. He lamented that there were also plans to curtail the rights given by 18th Amendment.

Rehman stressed on the need to have a serious dialogue with an intention to propel the Baloch people using provincial autonomy. “Our country’s progress will only be ensured if the citizens are treated equally. When a flood strikes Punjab, the roads get repaired quickly. I saw this myself that it took 11 years to repair a road after floods destroyed parts of Balochistan,” he said. “When we would not assure them [the Baloch] that they are equally important as anyone in Lahore or Islamabad, then we can never prosper.”

Rehman added that public narrative needs to change as well, and if the Baloch ever rebelled then it was their right and the people need to understand the root cause instead of dubbing them traitors.

“Yesterday, Tariq Khoso recounted how Allah Nazar, who was a brilliant student, was pushed into rebellion. He didn’t choose that path, we forced him to it. So if we keep treating them like we treated Bengalis, the consequences won’t be any different either,” he said.

Fearing difficult times ahead, Qazi, the former diplomat, said that it was criminal governance not bad governance and sustained transfer of income from East Pakistan to West Pakistan, without benefits in proportion, which led to a kind of alienation, which was widespread and legitimate.

“It prepared the ground for Indian intervention. The same process is taking place in Balochistan today,” he warned. He added that unlike East Pakistan, the population in Balochistan is lesser and there is a tendency to say that they can be crushed because there are just pockets of rebellion and resistance.

Qazi said Pashtuns weren’t as alienated as the Baloch and Balochistan is the only province which cannot govern itself today. “When the Baloch meet each other their narrative is that they are exploited and forcibly incorporated, while the latter is not true. Its accession to Pakistan through Shahi Jirga was legitimate and undisputed but the degree of alienation has become so high and unaddressed that the other narrative has begun to surface,” he said.

He stressed that the Balochistan issue hasn’t been created by India but India has exacerbated it and we have shown since 1971 that we have refused to draw any lessons from any setbacks in our history. “We have learnt nothing because we intend to learn nothing. A new title has been given to the Baloch – ‘hamaray naraz Baloch bhai’ – and this is a term of contempt,” he said.

Rehman also said that the impression given in 2008 that democracy had been restored in the country wasn’t true for Balochistan. He recounted that when he asked the then chief minister, Abdul Malik Baloch, about enforced disappearances, he ignored him. “When I repeated, he dodged the question so I decided to not embarrass him any further. So even today, the civilian government virtually has no role in the province, which has to change before grave consequences.”