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Transcript:

It turns out the answer is definitely “no”. So typically with any international loan that I put together, I have to do a legal review of some sorts. There’s usually political review as well, especially in emerging markets where political instability is, unfortunately, a real problem. It’s not widely advertised by the preferred legal system is an English legal system. Because no matter what your political persuasions may be, the English have a legacy of a legal system that works when it comes to property rights. If you think about it, the most prosperous countries in the world tend to be former British colonies run on the English legal system e.g. the USA, Australia, Hong Kong, Singapore – and I’m sure I can name a few others. Let me give you a small example. I once did a copper transaction in Thailand. It was a great trip; the business was really solid, the owner was a great guy, and it was a very hospitable place with really good food. And everything was dirt cheap. You can live like a king in 5-star hotels for a month, for way less than you think. But when it comes to taking a simple pledge over the stock, it was very hard. A pledge is simply where the borrower recognises our legal right to come and fetch a big bundle of copper in his stock room if something weird happens. Kind of like you accept the fact that the bank will come and fetch your car if you can’t keep up the payments. The car gets sold, the debt gets paid and maybe there’s some change left that you get – you might not like it… but you can understand the fairness of it. Turns out that’s not so easy in Thailand (which doesn’t have an English law system). There are some provisions in their law that give the owner of the property rights over what’s stored on the property – and those rights interfere with our rights as lenders over the stock, even though it’s a very simple pledge that anyone can understand. I’m sure it’s a logical law, but it doesn’t work for trade. It doesn’t mean it’s wrong. It doesn’t mean it’s immoral or crazy. It just doesn’t work for trade in a way that a normal English law pledge works. We eventually figured out a way around it, but in the delay another lender came in and we lost the deal. Just an example of how the legal system does matter.

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