There is a need for convergence of important business laws in Asia as variation in legislations pose significant hurdles in cross-border investment decisions, Tata Sons, the holding company for India's Tata group, has said.
"What we need is an Asia-Pacific treaty for convergence of important commercial laws," said Bharat Vasani, chief legal and group general counsel of Tata Sons.
"While it is well-understood that harmonisation of all the laws is an impossible dream, and to some extent is not even desirable, however, I firmly believe that convergence in the areas of corporate laws, commercial laws, competition laws and investment laws is feasible and achievable," Vasani said.
Speaking before some 500 delegates from 40 countries at a conference on 'Doing Businesses Across Asia: Legal Convergence In An Asian Century' here yesterday, Vasani said it was impractical to strive for uniformity in all areas of law, but "we need to be cognizant of the ground reality in Asia."
He said differences in labelling laws in Asian countries inhibit growth in international trade and commerce in food and pharmaceutical products.
"We need to have clarity on which laws need to be converged and the laws which are difficult to converge."
Switching to larger corporate law issues, divergent provisions in national company law legislations with regard to raising of capital by way of debt or equity and merger & acquisition transactions have posed significant hurdles in cross-border investment decisions, Vasani said.
Similarly, he said, there's a strong case for aligning competition law regime of Asian countries on the lines of the European Union merger control regulations, which would significantly benefit cross-border M&A activity in the region.
He shared Tata's experience of cross-border acquisitions in Asia, saying a major part of the time in due-diligence was spent in identifying legal and regulatory risks associated with the jurisdiction in which the target company is based.
"I have come across several instances were despite attractive commercial benefits, our group had to forego some acquisition targets due to uncertain legal regime and serious regulatory risk associated with the acquisition," said Vasani.
As the global economy goes through a challenging phase, it is significantly impacting economies in the region.
"In such an environment, all that can help and facilitate promotion of trade and commerce and reduce transaction costs needs to be encouraged," Vasani stressed.
"I believe it is a historic opportunity for Asian countries to seriously explore and implement legal convergence," he added.
Vasani also welcomed the ABLI in Singapore, saying its setting up is a step in the right direction for Asian businesses. ABLI was launched by chief justices and justices from Australia, China, India and Singapore.
