AIIB’s new robust policy on prohibited practices

Ms. Susan Finder's picture

On 8 December 2016, about a month after my previous blogpost entitled “Chinese Companies and the World Bank’s Procurement Blacklists” was published on this website, the Asian Infrastructure Investment Bank (AIIB) re-issued its Policy on Prohibited Practices. The policy has not received much attention outside of China, but is significant for both the legal and business community. In the Policy on Prohibited Practices, the AIIB sets out its rules and procedures. Prohibited Practices are defined in Section 3.2.

The AIIB definition overlaps with and is broader than that agreed mutually by five other leading multilateral development banks (MDBs) as sanctionable or prohibited practices in the Agreement for Mutual Enforcement of Debarment Decisions (AMEDD). The definitions and the procedures set out in the Policy on Prohibited Practices lay the groundwork for the AIIB’s possible signing of the AMEDD. Article 12 of the Policy on Prohibited Practices addresses three important issues related to the MDB’s integrity systems: unilateral observance by AIIB of MDB debarment; debarment procedures in co-financing projects; and intent to become a party to AMEDD. Unilateral debarment by AIIB went into effect on 1 March 2017. Whether the AIIB would become party to AMEDD has long been a concern among foreign commentators as reflected in a recent article, published in January this year, with commentary by a current ADB Integrity official and several former senior MDB lawyers. This author had previously written that given the profile of senior AIIB officials, it was likely that AIIB would become party to AMEDD. Among the approximately one thousand entities that have been debarred by five other leading multilateral development banks are a number of Chinese state-owned companies, which has been flagged by the Chinese press. The AIIB’s latest development sends important signals to the business and legal communities both in China and worldwide.