CHAPTER IV. CAPACITY BUILDING

A. EXISTING SITUATION:

In Cambodia, increasing a few dozen legally-trained personnel to the hundreds which the administration of a country of eleven million inhabitants would require, will take years. A major issue that must also be addressed is the fact that creating lawyers, let alone legal scholars, is a lengthy undertaking. The statistics of the judicial staff are particularly revealing: of the 120 or so judges who are actively employed in Cambodia, barely a handful of them have any proper legal qualifications. It will be years before the students now in law schools have the competence to be magistrates and judges. It will take years until justices now sitting in the Courts can be substituted by professionals who will have been taught international trade, bankruptcy, privatization and business law. Court justices have none or very little business law knowledge because they are seldom exposed to these areas of the law. 

There is a clear consensus on the need for emphasis on training. Whether it is the training of judges and court officers in substantive or procedural rules, or the training of parliamentarians and their assistants in the intricacies of modern legislation and legislative techniques, or even the training of lawyers, notaries and paralegal staff, the need for training cannot be overemphasized. The retraining provided through continuing legal education programs is essential to guarantee the very credibility of government lawyers and judiciary.

B.  PAST CAPACITY BUILDING ACTIVITIES

Considering the huge demand for training that currently exists, there has been a proliferation of law courses offered for the benefit of both prospective lawyers and officials. Apart from the Faculty of Laws of the University of Phnom Penh, law courses are offered by the National Economics and Finance Institute, the National Institute of Management (NIM) and the LRU, the Ministry of Commerce, the University of San Francisco School of Law among others.

Training of judges and court officers were organized by the Ministry of Justice with an emphasis on civil and criminal procedures. A limited number of judges were sent to France for further judicial training for twenty months. The University of San Francisco School of Law conducted some training seminars for judges using materials translated into Khmer. The U.N. High Commissioner for Human Rights Office in Cambodia manages a judicial mentor initiative that places international advisers in a handful of courts. USAID supported a court training project from 1994-1997 that provided training and mentors to selected courts. Other ad hoc training for judges has also been organized. The effort to train judges remains sparse compared to both the needs and the necessity of increasing the capacity of judges.

Except for generous assistance during the post-inauguration of the Bar, education and training program for lawyers and prospective new members have been scanty and superficial.

The quality of such courses has been uneven at best, and the benefits questionable. In general training workshops were offered to government lawyers along with legal technical assistance, dealing with the substantive aspects of the law being drafted. Mostly these training efforts failed to address other critical issues such as training methodology, and legislative drafting skills.

C. CAPACITY BUILDING FOR THE BAR IN AN ERA OF GLOBALIZATION

In Cambodia, it is the Bar rather than the Supreme Court which regulates the legal profession. Only in the event of conflict, can the parties turn to the courts for resolution. Neither the Ministry of Justice nor any other government agency may influence the composition of the Bar Council. Established by law in 1995 the Bar boasts to have over 200 lawyer-members. Government lawyers, judges and prosecutors are not permitted to join. Recently the Bar has shown increasing involvement in law reform. It publicly comments on legal reform issues or current events with legal significance and provided input into the drafting of the land law, criminal and civil codes, the Khmer Rouge law, to name just a few. Despite these worthy efforts and intention, the Bar suffers from a severe lack of physical and intellectual resources. It is unable to provide any continuing legal education to its members or to offer legal education to the public. More troublesome it was not able to accommodate the clinical trainings for law graduates which are prerequisites for them becoming full fledge lawyers. According to the Law on Bar Statutes, the Center for Training of Legal Profession is to be the starting point of a career as a lawyer. The Law states that law graduates must take an exam to gain admission into the Center. However, the Center has not yet been established.

Notwithstanding the current restrictions placed on foreigners practicing law in Cambodia, there are still quite a number of foreigners working in the legal field in Cambodia. However, rather than being labeled as lawyers, they usually work under the guise of "consultants". In any case the vast majority of them are involved in advising in relation to overseas legislation rather than Cambodian laws. These foreign practitioners are seen by some as a threat to Cambodian lawyers, however, in the opinion of many others, these foreign professionals are providing a valuable service, especially when considered from a multi‑jurisdictional perspective which is the way the legal practice, at least the international commercial practices, seems to be heading in Cambodia. Not only are they providing a service to clients but also they are imparting knowledge and understanding of foreign laws to their Cambodian colleagues who benefit greatly therefrom.

It is also worth noting that Cambodia is currently negotiating its entry to the World Trade Organization. As such Cambodia has to liberalize its trade and business practices as urged by WTO. In this regard, the legal market should see further expansion in terms of the opening of new law firms and an increase in the size of some already well established firms. 

Traditionally, the Bar Association, which is responsible for the training, supervision and professionalization of a new generation of Cambodia lawyers, has played a crucial role in the promotion and protection of human rights and establishment of the rule of law in Cambodia. As international business and investment from abroad have to rely on the services provided by the government and private sector in the host country, the Bar has to rethink its role in terms of equipping the Cambodian lawyers with the necessary skills to cope with the multijurisdictional practice inherent in international business.

Notwithstanding the significant role that could be placed on Cambodian lawyers, there are major barriers presented to the full integration of Cambodian lawyers in representing international and multinational clients. Cambodia uses civil law the significance of which is focussed on legal provisions and the Cambodian legal education. As such Cambodian law students are limited in the scope of their education to such tenets. This is an impediment when needing to assist on multijurisdictional assignments once they become lawyers. A good perspective of common law principles can prove invaluable when explaining the legal environment to clients from common law jurisdictions.

Compounding the matter of attaining a greater perspective of international legal practice is that very few Cambodian law graduates have the means to be able to further their legal education overseas. Such international exposure very often goes towards the development of a well-developed multi-jurisdictional practitioner.    

A further hindrance to Cambodian lawyers working in the international legal arena is that it is generally accepted that most Cambodian law students are not good at English because of the education system and they are at a disadvantage when compared to those born in English speaking countries.

D. VISION OF THE FUTURE

There is a clear need to consolidate these different initiatives and strengthen them, whilst streamlining the use of limited resources available for training. While there can be no question about the need for emphasis on training, there are still a couple of fundamental questions pertaining to both the purpose and modalities of the required legal training, which have yet to be addressed. The first question relates to the form of the proposed school or facility required to provide legal training; the second is about its location. Of less controversy are the issues of law curriculum, course content, course format, and training materials.

a. Form of School or Facility:

Not surprisingly, having regard to the dualistic system of laws, which Cambodia has inherited, there has been considerable debate about the form of the school or facility required to provide legal training. While some have advocated the creation of a special school dedicated to the training of magistrates, not unlike the French school for magistrates, others - perhaps a majority - would prefer a less specialized school which would cater for the entire legal profession, with special modules, if need be, to address the specific needs of particular branches of the profession. Whatever be the final outcome of this particular debate, it is best to avoid a situation where limited resources available for training are applied in pursuit of a disparate set of training initiatives, thus foregoing the efficiency gains likely to accrue from a closely coordinated and comprehensive legal training initiative.

b. Location of School:

Similarly, questions have also been raised about the location of the proposed school or facility. While some advocate the enlargement of the existing school of administration to include a law school, others favor the creation of an entirely new and independent school of law, and one, which would not be subject to the control or authority of any particular ministry or department. The latter would seem more appropriate in terms of striking a compromise between 4 independent institutions such as the Executive, the Legislative, the Judiciary, and the Bar. A governing body or board of trustees could be set up to accommodate all the stakeholders in the management and supervision of a prospective legal training school or facility. 

c. Law school curricular and teaching methods:

Future civil servants including government lawyers need a legal education where the curriculum incorporates the concepts of the legal framework of a free market economy. But until these future cadres are fully educated, those who are now in charge must be re-trained. It is therefore necessary, when assessing legal technical assistance requirements, to focus simultaneously on both basic legal education and continuing legal education. It is equally critical, when designing curricula for either education to address substantive law as well as legal skills aspects. Government lawyers must not only learn the new legislative context of their country, as it is being developed, but also acquire basic legal skills which they were never taught.

d. Course content:

With respect to the substantive law content of the retraining programs, it is likely that all stakeholders will need to be familiar with economic, financial, commercial and environmental laws and other legal issues associated with restructuring State-owned enterprises, privatization or BOT (Build-Own-Transfer) projects. Other specialized areas such as bankruptcy and insolvency related work and intellectual property protection, and labor laws merit special focus.  

e. Course Format:

It is equally important to give attention to the format and methodology of the training as it is to focus on content. It is accordingly crucial to adapt the format and methodology to the needs of the audience concerned. As is now well established, the quality of legal education - and eventually of the legal profession - is to a large extent dependent on the teaching methodology.

With the advent of complicated disputes, involving for example international financing, judges are expected to adjudicate issues difficult to condense into the limited time which 'training workshops' usually allow. In the complex field of modern economic, financial, commercial and environmental laws, it becomes harder and harder to provide expert opinion and advice without an in-depth mastery of the subject matters. For law practitioners, there is greater pressure to specialize unlike in the past where they tended to be generalists.  

For this reason, strong preference is now given to multi-year programs like a specialized 2-year LL.M. course in partnership with a foreign learning institution for the benefit of law graduates or those professionals meeting the course prerequisites.

Other approaches could include scholarships aimed at building a core of qualified younger legal staff with good foreign language skills and the ability to spend a significant time abroad. Internships with foreign law firms should be offered to younger to mid-level staff. Study tours, seminars and workshops, on the other hand, could serve to enhance already existing legal skills of older, more experienced staff who may not have superior foreign language skills and may not be able to stay away from their jobs for an extended period of time.    

f. Skill Training:

Substantive law retraining is the most visible aspect of the retraining requirements but skills training is equally important and to ignore this component would jeopardise the results of all retraining efforts. A new role for lawyers warrants new functions which require new skills and techniques. Trainers must thus not only explain and demonstrate the role and interaction of laws in the economy but also teach drafting. Legislative drafting is of utmost importance but is not limited to drafting laws. Implementation decrees must also be prepare by government lawyers. The same lawyers must also be equipped to draft and review contracts ant other legal documents relevant to transactions made by the State.

Similarly, continuing legal education in Cambodia must include litigation and advocacy skills. As the country embarks on ambitious policies calling for major roles to be played by foreign investors and involving international joint venture agreements, the number of disputes has risen dramatically, requiring new skills which the judiciary needed to master. The challenge to the trainer is to design curricula which permit judges and other officials involved in the settling of disputes to understand the mechanics of the transaction involve as well as to apply the law which governs each transaction. Until now, Cambodian judges seldom considered economic law issues having mostly been confronted with criminal law cases. 

g. Training materials:

The lack of current training materials published in the Khmer language is the rule rather than the exception in Cambodia. Few judges and lawyers have good knowledge of English. In general, their limited language skills presents a barrier to participation in international seminars and workshops. Translation of foreign materials is sometimes provided but seldom meets the specific needs of the local constituency. Therefore, they are usually limited to legal materials available in Khmer such as regulations or guidelines from the Ministry of Justice or other Cambodian laws. It then becomes imperative to produce locally tailor-made training materials, manuals and handbooks integrating the domestic laws and the international laws and practice into the local context.

Resource should be mobilized to put in place a basic library and information centre on economic, financial, commercial, intellectual property, environmental, and international laws, including a computerized index of comparative law materials and of existing Cambodian laws and regulations affecting business, including video tape collection of law-oriented information and teaching materials.

CHAPTER V: IMPLEMENTATION OF THE STRATEGY

A. IMPLEMENTATION OF THE PROGRAM

Notwithstanding a number of outstanding issues still to be addressed, as well as some areas of divergence in the approach to legal and judicial reform, there is a large measure of consensus both on the ultimate objectives of a legal and judicial reform program and on the eventual elements of such a program. But a consensus on objectives and elements alone is not enough to guarantee the success of such a program. Two other factors are key to its success. They are: the adoption and implementation of an adequate legal and judicial reform strategy, and the existence of appropriate institutional arrangements for its implementation.   

a. Institutional Arrangements:

The other main challenge lies in the institutional arrangements which are put in place to supervise the implementation of any future legal and judicial reform program. Under the Technical Assistance Project, the Government issued an Anukret, dated August 15, 1997, establishing the Legal Reform Unit (LRU) to be responsible for legal reform in general and the provision of training and assistance in the preparation of legislation. In this capacity, LRU has been responsible for supervision of the legal diagnostic study as well as the first draft of the legal and judicial reform strategy paper which is currently under preparation. Following the workshop held in April 2000 to review the results of the legal diagnostic study, a steering committee was also established by the Government to follow-up on the results of the workshop and assist in the development of the proposed legal and judicial reform strategy. Although in the past the steering committee has not been actively engaged in this process, its recent willingness to take over the process of finalizing the strategy can be viewed as a  commitment to own the process and to assert its new role as the "maitre d'oeuvre" and the "maitre d'ouvrage" of the legal and judicial reform. Such a commitment should be commended and further encouraged. 

In accordance with the Anukret on the organization and functioning of the Ministry of Justice, dated January 20, 2000, the Ministry of Justice is responsible for all matters pertaining to the administration of justice and the training of judges. More recently, the Government has issued an Anukret establishing a Judicial Reform Council or Conseil de Reforme de la Justice (CRJ) to be responsible for the design and supervision of judicial reform. CRJ consists of seven members, including the President of the Supreme Court and the Minister of Justice who are its President and Vice President, respectively, as well as the President of the Court of Appeal and representatives of the CSM and the Council of Jurists. There have been complaints that, as presently constituted, the composition of the CRJ is too restrictive to allow it to achieve its objectives.

Bearing in mind that institutional arrangements are key to the success of any future legal and judicial reform program, it is necessary for the Government to ensure that any such arrangements are fully consistent with the needs and objectives of the program. Whilst the LRU may have been the appropriate agency in the past to undertake the implementation of a program whose primary focus was legal reform, the same is not true of a program which is not limited to the executive branch but is likely to be extended to cover both the judicial and legislative branches as well. Any suggestion that a reform program covering the judicial or legislative branch, or both, is to be managed under the exclusive control or authority of a body which reports to the executive is not likely to be well received by either of these other two branches. Similarly, as presently constituted, CRJ lacks the width of purpose and composition to undertake any legal reform initiatives which go beyond the broad confines and competence of the judiciary. 

b. Suggested Alternatives:

In terms of institutional arrangements there are two alternatives for the Government to consider. The first alternative involves the creation of a brand new council or committee to be responsible for legal and judicial reform, comprised of representatives of each of the branches of government which have a direct and immediate interest in legal and judicial reform. Whilst the proposal has the merit of ensuring adequate representation of each of the branches of government involved, it has the disadvantage that it involves the creation of yet another new entity likely to duplicate the role and responsibilities of one or more entities already in existence. The other alternative presupposes that the composition of the CRJ is likely to be expanded, as has been suggested, to be representative of civil society in general. A duly mandated and expanded Council for Legal and Judicial Reform would be a strong candidate to be responsible for the supervision of a future legal and judicial reform program in Cambodia.

ANNEX I.  NATIONAL LEGISLATIVE PROGRAMME

1. LAWS THAT IMPROVE JUDICIARY AND LAW MAKING  

Amendment of the Law on the Organization and Functioning of the Supreme Council of Magistracy  

At present, there is little effective separation between the Executive, Legislative, and Judicial branches of government in Cambodia. It is important to begin building a court system that is professional, nonpolitical, and independent. This is a long-term process which would undoubtedly encounter political resistance from certain sides but is necessary if a consensus develops that economic growth and investment require such an action. One powerful reform that would signal the Government's commitment to judicial reform would be the amendment of the Law on the Organization and Functioning of the Supreme Council of Magistracy. The Supreme Council of Magistracy (SCM) needs to be de-politicized and, as the guarantor of the Judiciary's independence, completely separate from the Executive and Legislative branches.  

Independent Budget for the SCM and the Judiciary (Financial Management Law)

Financial autonomy of the judiciary is essential for the independence of the courts. As much as the Legislative Branch has its own separate budget so should be the Judiciary. The annual national budget as adopted in the Financial Management Law should include a separate budget line for the SCM and the Judiciary distinct from the Ministry of Justice's budget. 

Law on Magistrates and Law Officers  

The Ministry of Justice has taken the lead in drafting a number of key laws related to judicial reform. One important example is the drafting of a Law on Magistrates which has already received the approval of the SCM. The present draft includes provisions on qualifications and ranks of judges.  

The Ministry of Justice is also drafting a Law on Court Clerks to clarify their role in the judicial process.  

Civil Code and Civil Procedure Code  

There is no civil code currently in force, and it will be several years before the current draft is completed by the large team of Japanese consultants responsible for its preparation, and probably several more before it is eventually adopted. Meanwhile there are large gaps in the law, including the law relating to succession, which have become a source of extreme embarrassment for judges and magistrates.

The Criminal Code and the Law on Criminal Procedures  

The Ministry of Justice has completed the draft Criminal Code, and drafting continues on the Law on Criminal Procedures with the assistance from France. The drafting of the Law of Evidence has yet to be initiated. These core legislation represents an essential reform for the court system which currently operates without well-defined or well-respected pretrial, trial, and sentencing rules and procedures, most of which derive from Cambodia's previous socialist legal system. The enactment of these drafts, a monumental challenge in itself, will remove the ambiguities and inconsistencies as found in the current two criminal laws, namely the 1993 Law on Criminal Procedures of the State of Cambodia, and the 1993 UNTAC Provisions on Criminal Law. Moreover, they will provide the backbone for the fair and just adjudication of the criminal process.  

Law Establishing Specialized Courts  

In addition, the Ministry of Justice is collaborating with the relevant ministries to draft a law to establish specialized courts such as commercial, labor or administrative courts. Specialized courts are common in countries following civil law and common law traditions. Lawyers and observers voice support for this reform. Creating specialized courts would allow intensive training to target small groups of judges in defined topic, enabling capacity building within the Judiciary to move more quickly and efficiently.  

(a) Commercial Court:

Historical experience suggests that the availability of effective and low cost dispute settlement is an important condition for expanding markets, for meeting the increasing complexity of economic development, and thus for economic development itself. While sweeping judicial reform is a lengthy task, the Government could proceed in the meantime with an alternative method of reform such as creating a commercial court. This would coincide with its enactment of a series of commercial legislation such commercial arbitration law, companies law, bankruptcy law, and intellectual property laws. Establishing a commercial court would enable the Government to develop an institution with clear jurisdictions, set procedures, adequate resources, and better-trained judges with less patience for a corrupt court system. The commercial court model could provide momentum for judicial reform.

(b) Labor Court: 

The Cambodian Labor Law provide for the establishment of labour courts that will have jurisdiction over individual disputes occurring between workers and employers regarding the execution of the labour contract or the apprenticeship contract, and to determine the magnitude of labor related offenses. At present Cambodia does not have a Labor Court although the topic is under serious consideration among the Government circle. In the meantime, labor disputes are handled by the common law courts of the first instance such as the Municipality Court of Phnom Penh. The need for labour courts as a distinct jurisdiction from the common court system is due to: the different nature of the conflict; the different composition of the tribunal; and the different procedure involved.  

The conflicts arising between employers and workers or their respective organizations have to be situated and resolved in a different context than the ones emerging in a common contract relationship. Except where the dispute concerns a breach of employment contract, workers and employers will have to continue to work together long after the dispute arose and was settled. The role of the judge in a labour court becomes different from the role of a judge in common law, and the judge becomes a promoter of social peace and justice. This will generally call for decisions taking into account the interests of both parties (and finding a balance between their different interests), rather than declaring one of the parties right and the other one wrong. Decisions taken in these kinds of disputes can have far reaching consequences on the individual, family and social life in most cases of the worker. For this reason, a specialized judicial system with experienced judges in labour and related matters is necessary.                        
(c) Administrative Court:  

/////// to be completed //////  

Amendment of the Internal Rules of National Assembly  

The success of this ambitious legislative reform program lies to a certain extent on the ability of the National Assembly and the Senate to review and enact draft legislation in an efficient and expedient manner. The lack of the necessary legal and analytical skills of parliamentarians to grasp the intricacies of modern legislation will not only result in delays in the lawmaking process but can also affect the substantive and qualitative contents of the legislation enacted.  

Revisions should be made to the Internal Rules to shift the Assembly's role in the legislative process from a reactive role to a proactive one. Provisions on continuous consultations amongst the various branches and agencies need to be emphasized. Streamlined review and debate procedures on lengthy legislation should be considered without sacrificing their quality.  

2. LEGISLATION TO SUPPORT PRIVATE SECTOR DEVELOPMENT  

One essential prerequisite for private sector growth is a sound legal framework. The private sector mobilizes human, physical, financial, and technical resources to make profits and accumulate wealth. Businesses need rules that guarantee property rights, regulate anticompetitive conduct, resolve commercial disputes, and limit State interference. The experiences of many developing countries suggest that the absence or inadequacy of laws and their enforcement discourages and distorts trade and investment, raises transaction costs and risk, fosters corruption, and generally hinders private sector development.                                                                                                    

COMMERCIAL CODE  

The MoC has completed drafts of a new Law on Business Enterprises (to serve as a new company law), commercial contract law, law on commercial arbitration, secured transaction law, and bankruptcy law. The IMF has listed the submission of several commercial laws to the National Assembly as one of its structural benchmarks for the new Enhanced Structural Adjustment Facility (ESAF) loan to Cambodia.  

Law of Business Enterprises  

The overall framework for commercial transactions and contractual relations, essential to the effective functioning of a market system, has yet to be addressed comprehensively in Cambodia. The corporate form, as we know it today, has several important characteristics. It endows a firm with independent legal personality so that it can act, sue, and be sued under its own name. It provides investors with limited liability and thereby enables companies to raise capital from a pool of investors. Lastly, it defines the rights and responsibilities of the key participants in the firm, including its owners, managers, and creditors. These features have made the corporate form an important vehicle for the process of capital formation in Western economic development.                           

The draft Law of Commercial Enterprises which has been submitted to the Council of Ministers provides for the creation of four types of legal persons, namely general partnership, limited partnership, private limited company and public limited company. The provisions regulating general and limited partnerships are from romano-germanic origin. Hence, in this area, the draft law is in harmony with the civil law tradition of the Kingdom of Cambodia. The provisions regulating both private and public limited companies are from anglo-saxon origin. The choice of the anglo-saxon concept of company instead of the French “société par actions” is easily justifiable when comparing the legal mechanisms involved in the creation of this type of legal person.  The anglo-saxon law of company is easier to apply as well as to administer. With the recent announcement of Prime Minister Hun Sen concerning the creation of a stock market, specific provisions dealing with transfer of securities to, and protection of, the public were added.

Law of Commercial Contracts

Most relevant for the commercial legal framework are commercial contracts, defined as written agreements related to production, exchange of goods, provision of services, or other business. The draft Law of Commercial Contracts is designed to cover "pure" commercial contracts and where both parties are enterprises such as disposition of good will, distribution and franchising, joint venture, commercial leasing, commercial sale, brokerage, carriage and deposit. Contracts where one of the parties is not an enterprise, or "mixed contracts" such as consumer sales contracts, contracts of employment and residential leases, are outside of the scope of the law and will be covered by the Civil Code. As note earlier, the draft law contains a part dealing with general rules applicable to all contracts. It is the position of the Ministries of Commerce and Justice that for the time being, these provisions should remain in the law. When the Civil Code is adopted, this part of the law will be repealed so that there is no duplication of the general contract provisions.                                                                                                                                          
Commercial Arbitration Law (and Enforcement of Foreign Arbitral Awards)

Currently there does not exist between any countries and Cambodia any reciprocal enforcement of judgments legislation or treaty. Therefore judgments or orders of foreign courts will not be "automatically" enforced in Cambodia without a fresh action founded on the judgment or order being instituted in Cambodia. Given the Cambodian Civil Law procedure where preliminary investigations are conducted by the judicial authorities before the hearing there would be a re-examination of the issues.

However, Cambodia is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards on 5/1/1960 [the NY Convention]. Nonetheless, Cambodia has yet to adopt implementing regulations of the said Convention and there is not yet in force an Arbitration Law providing for procedures for registering Arbitration Awards. While Cambodia has acceded to the Convention since 1960, the Government has submitted the Convention for re-ratification by Parliament, partly due the effect of Article 158 of the Constitution, and partly due to the desire to provide added assurance to foreign investors. This would coincide with the subsequent enactment of the Commercial Arbitration Law which will provide the enforcement mechanism for the Convention. The private sector may see these reforms - a new law on commercial arbitration and alternative dispute settlement mechanisms - as confidence-building measures. A legal/judicial system that offers the private sector both alternative dispute settlement and a specialized court to enforce arbitration decisions and hear unresolved commercial disputes may offer greater legal certainty to the private sector.                               
Bankruptcy/Insolvency Law

Another element of the competitive market environment is the threat of bankruptcy, which can act as an incentive to increase efficiency. Recent experiences in the region have demonstrated the extent to which the absence of orderly and effective insolvency procedures can exacerbate economic and financial crises. The consistent application of orderly and effective insolvency procedures plays a critical role in fostering growth and competitiveness and may also assist in the prevention and resolution of financial crisis: such procedures induce greater caution in the occurrence of liabilities by debtors and greater confidence in creditors when extending credit or rescheduling their claims. The draft bankruptcy/insolvency law will have as objectives: (i) the allocation of risk among participants in a market economy in a predictable, equitable, and transparent manner; and (ii) the protection and maximization of value for the benefit of all interested parties and the economy in general.

Secured Transactions Law

The underlying purpose of enacting a secured transactions law is to facilitate growth in the economic sector by making credit available, through secured transactions, to all types of Cambodian businesses whether they are doing business with each other, or with international companies. The law will establish a bare bones framework authorizing a property owner to encumber his or her business property as security for a business loan.

FOREIGN DIRECT INVESTMENT

Amendment of the Law on Investment:

This 1994 Law on Investment and its subsequent implementation regulations set out the basic policy and legal framework of the current investment environment. The Government, recognizing the important contribution of foreign investment to the domestic economy, has made considerable headway in improving its investment incentives framework. Despite these changes, Cambodia's investment incentives regime remains heavily discretionary, selective, complex and open to abuse. In recognition of the problems in the current arrangements and the changing investment environment in Cambodia, the Government has articulated a number of changes to be implemented through the Law on Investment and the Law on Taxation. These changes include, inter alia, the restructuring of the corporate tax rate for all new investment; the introduction of a three year tax holiday, conditional on annual certification of compliance, to all qualifying new investment, without evaluation; and the introduction of an appropriate investment allowance, applicable to all qualifying investment, new and expansion, irrespective of source of finance and without evaluation.       

Ratification of the ICSID Convention

The convention, which is also known as the "Convention on the Settlement of Investment Disputes between States and Nationals of Other States," or less formally as the ICSID Convention, helps to promote the settlement of investment disputes by means of two different procedures-conciliation and arbitration. These procedures are available on three conditions: the parties must have agreed to submit their dispute to ICSID; the dispute must be between a contracting state (or one of its sub-divisions or agencies) and a national of another contracting state; and it must be a legal dispute arising directly out of an investment. The Convention provides that each contracting state shall recognise an award rendered pursuant to it as binding and shall enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court in that state. An ICSID award is enforceable in a contracting state without any possibility of revision or review.

Cambodia has signed the Convention since 1995 and has yet to submit it to the Parliament for ratification. Nevertheless, Cambodia has ratified many investment protection agreements which made recourse to the arbitration procedures of the ICSID Convention 

Amendment of the Labour Law

The creation of a labor market requires creation of a labor contract system, as well as systems for the provision of workers' rights and benefits. After its promulgation in 1997 and several years of implementation, the Cambodian Labour Law would benefit from substantive amendments of a few key provisions, to name just a few: Some provisions introduce concepts and institutions from other countries (such as the office of shop steward) with no adequate definition or placement in the context of Cambodia; the present labour law has a number of significant omissions, while other issues are given inadequate treatment. For example the law excludes domestic servants, has no provisions for the disabled, and has only limited regulations regarding child employment (for example there are no specific prohibitions of types of hazardous employment where children should not be employed); the application of the present Labour Law to all enterprises in the country, even employing just one worker "intermittently", brings all sorts of problems with certain provisions of the law (such as the mass of documentation required, benefits to be provided by tiny enterprises, inspections, and so on). Perhaps fundamentally, the present law seems to relate in practice largely to the garment industry. Examples include night work, leave, and overtime arrangements. The language uses such simplistic terms as "the owner", and appears to assume atomistic single-owner enterprises. The importance of the garment industry (90% of factory employment and 90% of Cambodia's exports) is, hopefully, just a phase in Cambodia's economic development. The economy will grow, with more complex economic structures and more complex types of employment relations and employment contracts. With this development will come the need for reform of the present labour Law.                                                                                   

CAPITAL MARKET

Security Laws and Securities Transactions Laws

In order for business financing to occur in a market-driven system rather than through a planning mechanism, reforms must be carried out in the area of financial laws, such as securities laws, and development of the banking system and banking laws along market lines. In addition to bank lending for enterprise development, a market-oriented system would also include equity financing and the issuance of enterprise debt. The government intends to develop securities markets which would eventually encompass these and other kinds of financing opportunities. To develop them, laws and regulations for the operation of securities market will be needed. These laws would not only provide the clear rules for investors, enterprises and financial intermediaries in securities transactions, but would also need to address the regulation of the market and the appropriate market regulation institution. Moreover, as a supplement to contract law and commercial law provisions, securities transactions laws (including negotiable instruments laws) and effective enforcement mechanisms will need to accompany them. It will not be enough simply to establish securities markets, without also providing legal definition to the instruments traded in the market (whether equity shares or commercial paper) and authority to the government to ensure that market transactions can be relied on for fairness.

OTHER ELEMENTS OF THE TRADE LEGAL AND REGULATORY INFRASTRUCTURE.

The improved and strengthened rule-based system that has come into existence with the establishment of WTO is designed to promote the expansion of international trade. The system's primary goal is to provide liberal, secure and predictable access to foreign markets for the goods and service products of exporting enterprises. The system helps to ensure that enterprises can market their products internationally under conditions of competition that are equitable and without the disruptions caused by the sudden imposition of restrictions.

Almost all countries - whether developed, developing, least developed or transitional - are now pursuing market-oriented policies, opening up their industries to international competition. In some developing countries, virtually all industries, large and small, today depend on foreign trade either as exporters or as importers. Cambodia has therefore the same vital interest as their counterparts in developing and developed countries in seeing that the uniform rules embodied in the WTO legal instruments are applied by all countries. As part of its obligations under the WTO, Cambodia will be required to enact numerous laws which are compliant to the WTO rules. 

Law on the Cambodian National Standards Institute

Cambodia urgently needs to enact an Industry Standards Law and other implementing regulations to implement the Agreement on Technical Barriers to Trade (TBT). At present, the system of technical regulations and standards in Cambodia can be considered as being at its very initial stage of development. During the transition to a market economy, activities on standardization were slow due to the lack of skills and understanding of the role of standards. The draft law will govern all aspects of quality assurance system and will address such issues as the functions of the Cambodian National Standards Institute, compulsory standards, declaration of standards, certification marks, licenses, certificates of registration, publication of standards, national quality system certification scheme, etc. The National Standards Institute will serve as the inquiry point referred to in Article 10 of the WTO Agreement on Technical Barriers to Trade.

Regulations on Sanitary and Phytosanitary Measures (SPS)

Cambodia is at the early stage of putting in place a regulatory infrastructure for SPS controls and technical standards. A framework law has been introduced, but Cambodia still lacks a body of regulations and technical standards. Camcontrol, a government agency under the authority of the Ministry of Commerce is responsible for SPS. With the assistance of FAO, Camcontrol has set up a testing facility for chemical analysis and is planning to set up one for microbiology testing. The Ministry of Agriculture keeps the list of pests and plant diseases subjected to plant quarantine in Cambodia and ensures phytosanitary controls at the border and issues phytosanitary certificates upon request of importers or exporters. Cambodia recognizes phytosanitary certificates of other countries. Under the WTO, Cambodia will need to set up Inquiry Points for SPS.

Law on Rules of Origin

Currently Cambodia has no regime on rules of origin. As a member of ASEAN, Cambodia must implement rules of origin to determine if goods imported from other ASEAN countries meet the origin requirements for duty-free treatment. Both exports and imports with ASEAN countries are subject to ASEAN preferential rules of origin. Cambodia intends to propose a legislation on rules of origin which will be in conformity with the relevant WTO agreement.

Laws on Anti-dumping, Countervailing duty, and Safeguard

At present, Cambodia does not have anti-dumping, countervailing duty, or safeguard regime as allowed under the WTO Agreements. However, Cambodia reserves the right to implement AD, CVD, and Safeguard legislation. When Cambodia introduces any of these 3 legislations in the future it should ensure that they will be in conformity with WTO Rules.

Law on Cooperatives

In addition to private businesses, companies and state enterprises, there is also a trend toward establishing cooperatives engaged in the production and marketing of agricultural commodities. Currently, there is no law directly regulating the legal framework for these non-state entities. The government should prepare a law on cooperatives which could provide a framework for their orientation, establishment, operation and termination.

Competition Law

An important part of the transition to a market economy is the creation and subsequent preservation of a competitive environment for all economic entities, regardless of ownership. That objective is frequently met by a competition law or set of laws, which does not yet exist in Cambodia. Competition laws have among their purposes preventing unfair competition in enterprise operations, particularly in market behavior; ensuring that enterprise mergers do not create barriers to entry into the market; regulation of monopolies; and protection of consumers against cartel-like behavior of enterprises. Cambodia is currently considering during the medium term the adoption of competition legislation. Current technical assistance is being sought with the Australian Competition and Consumer Commission. However, there is a draft Sub-Decree on the Management of Advertising Activities under consideration at the Council of Ministers which seeks to govern advertising activities in the Kingdom to prevent unfair competition.

Customs Code

Cambodia is currently preparing a Customs Code which will be in conformity with the requirements of the Agreement on Customs Valuation. The draft law provides for various measures to enhance revenue collection and combat smuggling of goods.

Accounting Law

The current accounting law, enacted in 1992 does not contain qualification requirements. To ensure that Cambodia's accounting system is more compatible with systems used in ASEAN, the Minister of Economy and Finance has directed the Department of Accounting to prepare the draft law that meets international standards and is more in line with the practices of ASEAN countries.

Law on Export Processing Zones (EPZs)

One of the basic concepts behind the trade sector strategy stressed the regionalization and geographical decentralization of export business within Cambodia. In addition to increasing the value-added content of exports, Cambodia needs to regionalize and decentralize its export sector if the benefits of globalization are to be distributed more widely within the country.

One way to bring about such a positive development comes about through the choice of instruments: for example, the development of special economic zones or export processing zones to attract industrial and agro-processing exports to new regions (e.g. Thai or Vietnamese borders; new coastal regions, etc.) The benefits of EPZs and manufactured exports include direct ones, notably foreign exchange earnings, employment, income, and spill-over benefits, including learning by locally owned firms; training, skills and know-how acquired by local people employed there; learning by foreign investors and buyers about the economy as a source of manufactured exports; and the upgrading of the capabilities of local suppliers and officials in response to exacting foreign demands. The draft Law on EPZ which has been submitted by the MoC to the Council of Ministers envisaged special tax and tariff regimes for goods produced or imported into free zones.

INTELLECTUAL PROPERTY POLICY

The Kingdom of Cambodia respects intellectual property rights, and regards laws and other measures to protect them as important aspects of the economic, social, scientific and technological development strategy of the country, both short-term and long-term. Efficient and effective protection of Intellectual Property Rights is vital for the development of the domestic economy, for promoting foreign investment, for the transfer and dissemination of technology, and for increasing local jobs and income as well as facilitating the integration of Cambodia's economy into the regional and global economies. In order to give effect to this policy, Intellectual Property Laws, including Law on Marks, Trade Name and Acts of Unfair Competition Protection (Trademark Law), Patent and Designs Law and Copyright and Related Rights Law are being drafted with key provisions in line with the obligations set out under the Paris Convention on Intellectual Property Protection and the Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS Agreement).

At the bilateral level, Cambodia has signed a Trade Relations and Intellectual Property Rights Protection Agreement with the United States of America on October 4, 1996 under which  Cambodia is obligated to provide adequate and effective protection and enforcement of intellectual property rights. Article XI of the Agreement stipulated that Cambodia has to draft and adopt the following laws: (i) Law and Regulations relating to Copyright, (ii) Law and Regulations relating to Marks, (iii) Law and Regulations relating to Industrial Designs, (iv) Law and Regulations relating to the Protection of Encrypted Satellite Signals, (v) Law and Regulations relating to Layout Designs of Semiconductor Integrated Circuits, (vi) Law and Regulations relating to Patents, (vii) Law and Regulations relating to Act Contrary to Honest Commercial Practice and the Protection of Trade Secrets, and (viii) Law and Regulations relating to Enforcement at the Border.

Trademark Law

The draft Trademark Law has been adopted by the Council of Ministers and awaits the ratification by Parliament. The objective of the law is to protect marks, collective marks, and trade names duly registered in Cambodia and prevent the acts of unfair competition on the creation, and utilization of marks and trade names. The legal recognition of marks and trade names is a good start toward the protection of all intellectual property rights. Of the various forms of intellectual property, marks are easy to understand, and the structure for implementing the law is already in place. Therefore, domestic and foreign traders can gain protection within a short time from the passage of this Law, and the Kingdom of Cambodia will gain immediate favorable recognition in international political and business communities for being receptive and protective of global trade.

Copyright and Related Rights Law

The Ministry of Culture and Fine Arts has completed the Copyrights Law and has sent it to the Council of Ministers. The scope for the protection of the intellectual property rights arises as a consequence of the creation of works. The protection of the copyright covers the life of the author, the year of his death and seventy years following his or her death. The following are particularly considered as works: - books, brochures and other literary, artistic and scientific documents, as well as official texts of legislative, judicial or administrative nature; - conferences, speeches, sermons, pleading and other works of similar nature; - drama or musical drama works; - choreographic works, circus acts and mime shows; - musical compositions, with or without words; - film works and other works in a series of animated inter-linked pictures, with or without sound, called audiovisual works, still photographs extracted from the latter audiovisual works; - drawing, painting, architectural, sculptural, engraving and lithography works; - graphic and typographic works; - photographic works and those realized with the use of similar techniques to photography; - work of applied arts; - illustrations, cards, plans, sketches and plastic works pertaining to geography, topography, architecture and sciences; - computer programs; - derived works, e.g.: translation, adaptation, audiovisual or else - the transformation or the arrangement, conceived from one or several pre-existing works or expressions of folklore, the title of an intellectual work.

Patent Law

Cambodia does not at present provide protection of patents. The draft Patent Law has been sent to the Council of Ministers. The relevant provisions of the draft law are: - any invention may be patented which is new, involves an inventive step and is industrially applicable; - any product for use in any of the methods required to achieve novelty, inventive step and industrial applicability may be considered as a patentable invention. The draft considers as non patentable inventions: (i)- discoveries, scientific theories and mathematical methods; (ii)- schemes, rules or methods for doing business, performing purely mental acts or playing games, and computer program; or (iii)- methods for treatment of the human or animal body by surgery or therapy, as well as diagnostic methods practized on the human or animal body; (iv)- inventions that are contrary to public order or morality and essentially biological methods for breeding plants or animals, other than microbiological methods and products deriving from those methods.

The right to an invention shall be established on the basis of filing an application for protection at the Ministry of Industry, Mines and Energy and on being granted a protection certificate (Patent for Invention). The rights shall be granted to the applicant who has first validly filed an application for a patent or who is the first validly to claim the earliest priority.

Industrial Designs Law

There is no protection of industrial designs in Cambodia at present. The draft Industrial Designs Law, which has not yet been submitted to the Council of Ministers, contains the following provisions: - an industrial design is an object for protection as part of industrial property rights in Cambodia. Any composition of lines or colour or any three - dimensional form, or any material, whether or not associated with lines or colours, is deemed to be an industrial design, provided that such composition, form or material gives a special appearance to a product of industry or handicraft and can serve as a pattern for a product of industry or handicraft, and appeals to and is judged by the eye. The protection of an industrial design does not extend to anything in an industrial design which serves solely to obtain a technical result and to the extent that it leaves no freedom as regards arbitrary features of appearance.

An industrial design is registrable if it is new. An industrial design shall be new if it has not been disclosed to the public, anywhere in the world, by publication in tangible form or by use or in any other way, prior to the filing date or, where applicable, the priority date of the application for registration. Industrial designs that are contrary to public order or morality shall not be registrable.

Geographical Indication Including Appellation of Origin

At present, there is no law or regulation regarding the protection of geographical indication including appellation of origin. However, a draft law is being prepared, and will contain the following elements: Any interested person and any interested group of producers or consumers may institute proceedings with the competent authorities to prevent, in respect of geographical indications: (i)- the use of any means in the designation or presentation of goods that indicates or suggests that the goods in question originate in a geographical area other than the true place of origin in a manner which misleads the public as to the geographical origin of the goods; (ii)- any use which constitutes an act of unfair competition; (iii) - use of a geographical indication identifying wines and spirit of wines and other spirits not originating in the place indicated by the geographical indication in question, even where the true origin of the goods is indicated or the geographical indication is used in translation or accompanied by expressions such as "kind", "type", "style", imitation or the like. In proceedings, the competent authorities may, in addition to issuing an injunction, award damages and grant any other civil remedy or relief.

Plant variety protection, layout designs of integrated circuit and protection of undisclosed information:

The above laws will be drafted with the technical assistance of WIPO in the next coming year.

AGRICULTURE AND NATURAL RESOURCES MANAGEMENT

Forestry Law

Forestry can be an integral part of Cambodia’s overall development.  It should contribute in significant and observable ways to resolving the country’s critical development challenges:  reducing poverty, military demobilization, reducing corruption, improving governance, and protecting the environment.  Reform of the legal framework governing forest management is a necessary step to the restructuring of the Cambodian forestry sector.  Cambodia requires a clear, succinct forestry law that is accessible and easily understood by Government officials and concessionaires. The draft Forestry Law currently under debates at the Council of Ministers provides for sound management of timber resources and also promotes transparency in the award and management of forest concessions in order to maximize government revenues.

Land Law

Creation of markets in land transactions will be an important aspect of the progression to a market system, since land is a key asset for an enterprise's business to develop. The major tools of law typically available to a creditor are the ability to levy on collateral, enforce the terms of the loan agreement, and draw on a guarantee of the debtor's obligation, in court if necessary with the police power of the state in reserve. The assignment and transferability of property rights promote economic efficiency directly by creating new incentives, but also indirectly by making financial intermediation possible. They do this by allowing borrowers to offer security in the form of mortgages over real estate or other collateral. When taking collateral, the lender is mainly interested in the efficient transfer of property rights, because the security is invoked only in case of default. Mortgages over land and other real estate are therefore one of the best forms of collateral. The Government has recently adopted a new draft law which is critical for the growth of the private sector as well as poverty alleviation in Cambodia. The draft Land law, now under review at the National Assembly, recognizes private property, stresses the importance of proper land use planning, insures the harmonious development of the country, and reduces the potentials for land use conflicts. The enactment by Parliament of this key legislation will unleash the dynamism of the real estate sector and pave the way for their usage as collaterals in the process of capital mobilization.

INFRASTRUCTURE: WATER AND SANITATION

Water Supply Law

The draft Water Supply Law is currently at the stage of preparation. The prime purpose of the law is to establish the Water Authority of Cambodia which is to be an independent authority with the responsibility of regulating the sector as a whole. It will license all entities operating in the sector and provide for regulations to control their activities. It will also provide regulations for the safety of the public and workers in the industry.

The Government policy is to establish an independent regulator for Water Supply Sector for the whole country in order to build confidence of the public utilities and the prime sectors and play a key role of a credible, competent, transparent and impartial regulatory mechanism that will equitably guard the interests of all stakeholders. There should be established an independent regulator so as to ensure implementation efficiency, protecting private operators and consumers. The establishment of the regulator for management of the water sector will be very useful in opening market competition and avoid monopoly abuses from the operators, protecting and serving common interests. This regulator plays a key role for the public or private autonomous utilities.

Water Resources Management Law

The general purpose of the Water Resources Management Law, which is yet to be drafted, is to foster the effective management of the water resources of the Kingdom of Cambodia to attain socio-economic development and the welfare of the people. The law will determine: the rights and obligations of water users, the fundamental principles of water resources management, the institutions in charge of its implementation and enforcement, and the participation of users and their associations in the sustainable development of water resources. The law will be administered by the Ministry of Water Resources and Meteorology.

Telecommunications Law

Currently the Ministry of Posts and Telecommunications (MPTC) is responsible for the regulation, administration and management of the public telephone network and the licensing of other related services supplied by the joint venture partners. The draft Telecom Law has been prepared and will be submitted to the Government by the MPTC. The draft law will define the separation of the regulatory body from the operator and from the ministry and the creation of an independent regulator. Furthermore, it will introduce the principle of transparency in issuing licenses and institutional measures for equitable provision of services, including in rural areas. 

TRANSPORT SECTOR

Land Transport: Highway Code

The Cambodian road transport sector is regulated by antiquated legal framework which apparently does not respond to actual needs of the fast growing economy. The draft Highway code which is now awaiting adoption at the National Assembly were introduced by the MPWT in 1995 to achieve national uniform standards for road vehicles. The draft code, modeled after the French Highway Code and quite comprehensive in scope, is subdivided into a legislative section and a regulatory section and establishes all rules governing traffic and rules concerning the driving of vehicles, the behaviour of road users, the use of vehicle lanes and equipment, the definition of offenses and the penalties incurred. It regulates the followings: duties of road users; traffic control; speeds; overtaking; stopping; parking: negotiation of crossroads, pedestrian crossings, railway crossings; use of lights and light signals; towing; driving by learner drivers; carriage of persons and goods; condition of vehicles; and use of road signs and markings.

Air Transport: Civil Aviation Law

Civil Aviation Law is a prerequisite for civil aviation operations and management. The primary purpose of the draft Civil Aviation Law is to establish a legal framework for civil aviation. It is an inalienable responsibility of the Government and an imperative necessity for the State Secretariat of Civil Aviation to discharge its national and international civil aviation responsibilities effectively. Recognizing the importance of civil aviation legislation, the Government had commissioned preparation of a draft civil aviation legislation through the assistance of UNDP/ICAO Project. The major objectives of enacting this legislation are: (i) to implement the explicit international civil aviation obligations devolving on the Kingdom of Cambodia by virtue of its membership of ICAO; (ii) to implement Cambodia's implicit international civil aviation obligations, i.e., ratification of the Security Conventions, together with implementation of their terms in the national law;  (iii) to associate Cambodia with the uniform regime of liability for international carriage by air (Warsaw Convention); (iv) to establish in law a civil aviation organization with defined structure and responsibility; (v) to lay a foundation for future adoption of administrative rules, regulations and procedures.

Maritime Transport: Merchant Shipping Law

This draft Law on Merchant Shipping is currently at the preparation stage at the Ministry of Public Works and Transport. The scope of the draft law governs the activities relating to the supervision and registration of merchant shipping vessels in the Kingdom of Cambodia. It also provides for the Ministry to adopt as the general maritime law non-statutory general maritime rules, regulations, standards, and conventions of the International Maritime Organization (MO).

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