According to yesterday’s Cambodia Daily (“Gov’t to Restart National Adoptions,” offline only), foreigners will once again be allowed to adopt Cambodian children beginning in January 2013. Though the Law on Adoption was issued in 2009 as a result of widespread international criticism of abuses occurring in the Cambodian adoption system, the implementing regulations needed to put this law into practice have not yet been issued by the Ministry of Social Affairs, the ministry responsible for carrying out the law.

While this development is a positive sign that international adoptions may soon be permitted again in the Kingdom of Cambodia, would-be parents should temper their enthusiasm with caution and patience. Since 2009, there have been several dates announced for the revival of the international adoption process in Cambodia. Further, it remains to be seen how the US and other nations that have implemented bans on adoptions from Cambodia will react to the new policies and procedures. Even if Cambodia permits international adoptions, if the adoptive parents’ home countries fail to recognize the validity of the Cambodian adoption process, those parents and their adopted children may face years in legal limbo. Cautious optimism is the best attitude toward the recent announcement until more concrete policies and procedures are unveiled here and abroad.

Recently, Cambodia has been a hub of international activity with its hosting of the 2012 ASEAN Summit.  This got us thinking about international trade and investment, and we wanted to dive into Bilateral Investment Treaties (BIT).  BITs are agreements between countries that are designed to encourage investment.  It is an agreement under international law that covers how investments are treated in one country made by investors of the other country.  BITs are only entered into by states, not investors, but an investor can enforce her rights directly under the BIT.  A business considering committing assets overseas could be worried about being treated unfairly or disadvantaged in a dispute if it must be at the mercy of a foreign court system.  A BIT aims to allay these kinds of fears.

As the world has gotten smaller and more connected, international investment has grown accordingly.  After WWII, there was no clear framework outlining the rights and responsibilities of investors or host countries.  European countries began negotiating investment treaties with developing countries one by one, and soon industrialized countries were entering into investment agreements with each other.  Now, BITs seem to cover the globe.  Use has exploded in the past few decades.  There are currently 2,400 BIT agreements around the world, while in 1988 there were only 300.  Cambodia has signed over 20 agreements, but not all of them have become binding.  Currently, there are 11 agreements that are enforceable[1]:

  1. China
  2. Croatia
  3. Czech Republic
  4. France
  5. Germany
  6. Japan
  7. South Korea
  8. Netherlands
  9. Singapore
  10. Switzerland
  11. Thailand

BITs, although done individually between countries, are very, very similar around the world.  Generally, four issues are addressed by any BIT:

  1. Conditions for the admission of foreign investors to the host state
  2. Standards of treatment of foreign investors
  3. Protection against expropriation
  4. Methods for resolving investment disputes [2]

While all four issues are important, dispute resolution has gotten the most attention.  The treaties only cover disputes that involve one of the countries to the treaty.  A dispute between the countries is usually handled differently in the treaty than a dispute between an investor and one of the countries.  When it comes to investors, a BIT crucially makes a binding arbitration process available.  In Cambodia’s treaties, there is almost always a six month waiting period from when the dispute begins until the investor can bring the matter to arbitration.  The treaties can differ in how arbitration is conducted and what forums are available.  The International Center for Settlement of Investment Disputes (ICSID), an arm of the World Bank, and the UN Commission on International Trade Law handle many BIT disputes. However, a dispute involving Cambodia might be more likely resolved at the Singapore International Arbitration Center.    Resolving a dispute can still be expensive, because the investor needs to not only obtain council, but also cover half of the costs from the arbitrators.


[2] George M. von Mehren et al., Navigating Through Investor-State Arbitrations: An Overview of Bilateral Investment Treaty Claims, Disp. Resol. J., Feb.-Apr. 2004, at 69, 70.

The Phnom Penh Post has been diligently reporting on the dispute taking place between garment workers and factories.  A central issue of the dispute is the use of Fixed Duration Contracts (FDCs) versus Unspecified Duration Contracts (UDCs).  The garment industry is hugely important for Cambodia: it represents about 15% of GDP and comprises the vast majority of exports.  The workers are almost all women (estimates are about 90%), of which a healthy portion come from rural areas seeking a better life around Phnom Penh.   Many of the workers complain that short-term FDCs leave them in a precarious situation, without the long-term security afforded by UDCs.

FDCs and UDCs mainly differ in their requirements and consequences of termination.  If an employer wants to get rid of an FDC employee, he can simply decide not to renew her contract, which can last from only a few months to a maximum of two years.  While under a UDC, the employer needs a valid reason.  FDCs, generally, require the employer to give less notice in the event of actual termination if they decide not to use the non-renewal tactic. The following charts, from our Guide to the Cambodian Labor Law, summarize the relevant legal requirements:

Discrimination is something we all do all the time.  We use mental shortcuts of our past experiences to make decisions easier.  However, some discrimination is wrong and can be bad for society.  When people of a certain race or gender are excluded from jobs solely on the basis of their skin or gender then useful, productive workers for that job are forced to do something else that they might not be as good at.  A recent article in the Phnom Penh Post details Cambodian women’s difficulty in being treated equally in the workplace.   (story here).

Section 2, Article 12 of The Labor Law of 1997 does provide women and many other groups with protections against discrimination, it reads:

Except for the provisions fully expressing under this law, or in any other legislative text or regulation protecting women and children, as well as provisions      relating to the entry and stay of foreigners, no employers shall consider on account of:

  • race,
  • color,
  • sex,
  • creed,
  • religion,
  • political opinion,
  • birth,
  • social origin,
  • membership of worker’s union or the exercise of union activities;

to be invoked in order to make a decision on:

  • hiring,
  • defining and assigning of work,
  • vocational training,
  • advancement,
  • promotion,
  • remuneration,
  • granting of social benefits,
  • discipline or termination of employment contract.

Distinctions, rejections, or acceptances based on qualifications required for a specific job shall not be considered as discrimination.

This language seems to extend beyond the hiring process and to wage inequality as well.

More generally, the Cambodian Constitution itself says “every Khmer citizen shall be equal before the law . . . regardless of race, color, sex, language, religious belief, political tendency, birth origin, social status, wealth or other status” (article 31).  That covers an awful lot of people, but are LGBT groups left out?  What about the disabled?  At the risk of being too bold, I wonder whether the clause would be stronger if it simply said “every Khmer citizen shall be equal before the law” full stop?

In 2009, a law was passed that had the purpose to “prevent, reduce and eliminate discrimination against persons with disabilities” (article 2 – Law on the Protection and the Promotion of the Rights of Persons with Disabilities).  The law requires all public facilities to provide access for all disabled people (nothing terribly surprising there).  However, provisions requiring “ministries and state institutions that recruit civil servants to be employed, shall employ persons with disabilities as states in article 33 of this law, in accordance with the appropriate set quota.  The set quota and recruitment process shall be determined by Sub-decree.”

Officials from The Cambodian Disabled People’s Organization have been quoted as being happy with the laws on the books, but unhappy with the resources devoted to implementation (source:  here).  I suspect women and other groups would have similar things to say.

In the last few months there has been quite a bit of news about ancient Cambodian cultural relics and who owns them.  The New York Times has a couple of articles on the fight over several gorgeous Angkorian statues at Sotheby’s and at the Metropolitan Museum of Art (stories here and here).  These cases involve some fascinating moral and legal issues a bit too complex to be dealt with in the scope of this blog.

We’ve had a look through Cambodia’s 1993 Decision on the Protection of Cultural Property (a copy can be found here).  According to the decision, what sort of obligations and responsibilities come with owning a cultural artifact?  Very generally, It sets up a system where the government can classify any property that it considers to be of “scientific, historic, artistic or religious nature which bears witness to a certain stage in the development of a civilization or of the natural world and whose protection is in the public interest.”  There are several categories of objects – from unregistered, to registered, proposed for classification, and finally classified. Each category sets certain restrictions on ownership and the owner’s ability to sell or give away the object. For instance, classified property may not even be moved, altered or repaired without approval from the government.  However, the law does provide that the government can reimburse an owner of a classified property for restoration, repair or maintenance of the property.  If the government deems a repair or restoration to be urgent, it can repair or restore the item at its own expense, even without the owner’s consent.

Punishments for not complying with the law can be quite significant: jail time from six months to five years and/or a fine equal to the value of the object can be imposed on anyone who negligently “alienates, moves, destroys, modifies, alters, repairs or restores a registered cultural object”.  Keep an eye out for how these cases play out.

Surely, that’s been the question at the very top of global leaders’ minds over the last few years.  Cambodia, too, has its own banking problems, but it’s not that they are “too big to fail,” but that they are not big enough.  The Phnom Penh Post is reporting on a World Bank report that shows Cambodians utilized banks less than any other Asia-Pacific country last year.  (Story here).

About a quarter of Vietnamese and Laotians have accounts at a financial institution, while only 4% of Cambodians do.   Banks here aren’t just sitting on money – 82% of deposits were lent out – so there must be something else causing this phenomenon.  Is there a trust issue with banks?  Are Cambodians weary of the formalized documentation process that a bank requires?    Whatever the reason, the result is more informal lending, which means more lending requiring collateral.

A loan that involves collateral is technically called a “secured transaction.”  This means that if the borrower doesn’t make his payments, then the lender gets the property the borrower staked for the loan.  This sort of lending has been going on since ancient times.  The assurance of property gives the lender enough comfort to lend out cash.  A secured transaction in Cambodia requires a loan contract as well as a security agreement.  The security agreement is only about the property that is standing as the foundation of the loan (the collateral).  There are rules for what property may stand as collateral, for more detail see our recent report.  Finally, the security agreement should be filed with the Ministry of Commerce, which is conveniently done online through the Secured Transaction Registry.

These sort of laws make good sense, because it is very important for governments, borrowers and lenders to have reliable, clear information about financial markets.  Earlier this month the brand new Credit Bureau of Cambodia began operations.  Its timing couldn’t have been better: It aims to facilitate lending in the country by centralizing information from banks and microfinance lenders.  According to the World Bank’s report, microfinance seems to be popular in Cambodia where collateral is often necessary.

Given that Cambodians are wary of banks, perhaps something can be done to bring make the informal lending market more transparent.  More transparency could mean lower interest rates, increased availability of capital, and a more efficient capital market.

The Blue Lady Blog shares some interesting thoughts on the oath that witnesses swear when testifying in criminal court in Cambodia. As in most countries, when someone testifies in court in Cambodia, they are sworn in by the judge or court clerk. The purpose is generally to impress upon the witness the importance of what they’re about to say, and maybe even scare them into the telling the truth. What’s fascinating is the language the clerk uses to scare them straight:

Should anyone answer untruthfully about what they know, have seen, have heard, and remember, may all the guardian angels, forest guardians, Yeay Tep and powerful sacred spirits utterly and without mercy destroy them, and bestow upon them a miserable and violent death by means of bullets, electricity, lightning, tiger bites, and snake strikes, and in their future reincarnation separate them from their parents, siblings, children, and grandchildren, impoverish them, and subject them to miseries for 500 reincarnations.

Just imagine being shot, electrocuted, hit by lightning, and bit by a tiger AND snake strikes. Yikes! I’ve done a bit of research, and have not found any country that uses such colorful language in their oaths, Cambodia could very well be unique in this regard. Check the Blue Lady’s original post for the full text.

 

The Cambodian government seems to have had enough of false information on the internet.  It is drafting a law that will make it illegal to lie on the internet.  The Phnom Penh Post reports that the “cyber law” will “prevent  “ill-willed groups or individuals’ from spreading false information” (Story here).  Much of the details about the law are still unclear.

Does a writer need to know the information is false?  Does he have to intend to cause harm through the false information?  Also, the consequences of a violation are unknown- are we talking fines or jail time?  It’s curious that the Cambodian government would be considering such a law now since neighboring Thailand has had problems with speech issues recently with the “Uncle SMS” scandal.  (Story here).  There, a man was not fined, but put in jail for allegedly sending an insulting text message about the Thai king.  The man claimed he didn’t even know how to text, and has since died in prison.

False speech is a problem that every government will need to address at some point or another.  Just recently, the United States Supreme Court heard a case about a man who was fined for lying about receiving the Medal of Honor, the country’s highest military medal, when he had never even been in the military.  (story here).  The court needs to decide whether the Constitution allows for such blatant lies.  Apparently, no one in the room even believed the man.

It will be interesting to see how the Cambodian government deals with this difficult issue.  We will just have to wait to see what this cyber-law actually looks like.

As reported by the Phnom Penhh Post, The United Kingdom Trade and Investment Office (UKTI) has announced it will establish a permanent presence in Cambodia. This seems to be a natural progression as trade between the UK and Cambodia has grown significantly over the past few years, and the UK was the single largest investor in Cambodia in 2011. While the UK’s superlative investment of $2.2 billion last year may have been seen an anomaly, the establishment of this office may portend otherwise. UKTI, through offering expertise and contacts, aims to aid UK companies doing business internationally.

Cambodia has been positioning itself for stories like this through reforming and integrating its laws (Legal and Judicial Reform) and participating in international organizations: WTO, ASEAN, etc. The Council for the Development for Cambodia (CDC) and the Ministry of Commerce (MOC) regulate investment in Cambodia. An overview of the CDC approval process can be found here. A more detailed account of doing business in Cambodia from banking to mining can be found here. Clear processes and quick decisions from the government can be welcome indicators for a company considering taking on a big risk in another country.

Special Economic Zones (SEZs) continue to be something to watch in this area. China’s Shenzen has demonstrated the power of a  legal island of commerce. Cambodia has approved 21 SEZs, though not all have seen activity. Tax incentives, a streamlined regulatory process and factory integration can be big draws for a foreign company. More on SEZs here.

The Royal Government has just announced a temporary freeze on new economic land concessions. Economic land concessions have become hugely controversial in recent years, with incidences of forced evictions, land grabs and illegal logging in forest reserves. Prime Minister Hun Sen yesterday issued an order temporarily suspending new concessions, and calling for revocation of concessions found to be in breach of the law. According to Radio Free Asia’s report, the decree reads in part:

The government has issued this order to all ministries, institutions, and authorities, at all levels to implement: Temporarily suspend the leasing of land concessions… All ministries, institutions, and authorities must implement the government’s policy regarding land concessions, and they must ensure that land concessions don’t affect communal land or the daily life of the community… Authorities must ensure that land concessions will benefit the country and the people. Those companies that have already received licenses from the government, but have failed to honor their contracts by cutting down the forest instead of developing their concessions, encroached on the land of the people, operated businesses other than for the license granted, abused villagers, or abused communal land will have their contracts revoked.

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The work of a handful of attorneys at BNG Legal, this blog's mission is to keep the world up-to-date on legal issues in the Kingdom of Cambodia.

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