Dispute Resolution in Asia? Here’s what You need to Know

– VIJJAY METHA

Commercial parties, when entering into a contractual relationship, will have to address three key issues when negotiating the dispute resolution (or jurisdiction) clause. First, whether to resolve those disputes by arbitration, a private dispute resolution procedure, or litigation (court of law). Second, if arbitration is preferred, where to conduct (seat of arbitration) that arbitration and third, which set of procedural rules to adopt.
This article seeks to compare and analyse the arbitration laws in Asian countries concentrating on growing arbitration venues such as Singapore, Hong Kong, The People’s Republic of China, and India which global businesses should consider in connection with international arbitration proceedings in these jurisdictions and enforcement of arbitral awards across Asia. It further assists the parties seeking to make that decision in connection with the resolution of disputes with reference to arbitration in Asia.

SINGAPORE:

Singapore is emerging to be one of the leaders in International Arbitration challenging established arbitration locations such as London, Paris and Stockholm. The number of international cases filed at the Singapore International Arbitration Centre (SIAC) has increased by more than 300 percent in the last decade.

There are three main pieces of legislation in Singapore:
The International Arbitration Act (IAA);
The Arbitration Act (AA); and
The Arbitration (International Investment Disputes) Act.

The IAA incorporates and gives effect to the Model Law, which aims to harmonize arbitration laws in different states. The IAA applies to arbitrations that are international (defined as any arbitration proceeding that contains a cross-border element), but parties may agree for the IAA to apply to an arbitration that would not be considered international if it is clearly stated in the arbitration agreement.
The AA applies to arbitrations that are not considered international, and generally provides for greater supervision by the Singapore courts than the IAA.
The Arbitration (International Investment Disputes) Act gives effect to the United Nations Convention on the Settlement of Disputes Between States and Nationals of other States.
Singapore’s arbitration laws are based on the UNCITRAL Model Law. It is blessed with strong and willing legal infrastructure ready to make quick adjustments to modernise arbitration laws and a skilled judiciary which is very supportive of international arbitration. As the UNCITRAL model law endorse, the principle of party autonomy is a basic feature of the Singapore arbitration laws. In support of this principle, parties are free in exercising their choice of institution, applicable law, rules, procedures and administrative support. Also the Singapore courts adopt a policy of minimal supervision of arbitration proceedings in Singapore i.e. the court will only intervene to the extent that the tribunal has no power or is unable to act effectively viz. appointment of arbitrator, interim reliefs etc. The supervision is so restricted that an application for court-ordered interim relief can only be brought with the permission of the tribunal or the other parties’ agreement in writing. Further, Singapore is a party to the New York Convention and international awards are enforced as it were a judgement or order of a Singapore. Similarly awards obtained from an arbitration in Singapore can generally be enforced in any of the 150 contracting states to the convention.
Singapore along with Hong Kong and India are the only common law jurisdictions in Asia, and that makes Singapore an attractive international arbitration centre. In addition to the legislative and judicial support, attractive geographical location, and physical infrastructure makes it convenient and accessible for the parties. The state-of-the-art Maxwell Chambers is yet another selling point for the parties to prefer arbitration in Singapore. A refined arbitration community and the presence of leading arbitral institutions such as ICC, LCIA, ICDR and WIPO Arbitration and Mediation Centre makes Singapore an attractive hub for arbitration in Asia.

PEOPLE’S REPUBLIC OF CHINA:

China is the current world leader in international arbitration. The exponentially growing China’s economic and commercial activity and implementation of the arbitration law in 1994 has shaped the way of resolving disputes in China. The China International Economic and Trade Arbitration Commission (CIETAC) receives the most arbitrations in the world even though prominent institutions like ICC, HKIAC, SIAC have set up their offices in China.
The People’s Republic of China Arbitration Law revised on 1 September 2017 and effective as of 1 January 2018 (Arbitration Law), the People’s Republic of China Civil Procedure Law revised on 27 June 2017 and effective as of 1 July 2017 (Civil Procedure Law) and their respective judicial interpretations apply to arbitration conducted in the mainland of the People’s Republic of China (excluding the Special Administrative Regions of Hong Kong and Macau, and Taiwan). The laws and judicial interpretations apply to both domestic and international arbitration.
The arbitration law of People’s Republic of China (PRC) is not based on the UNCITRAL model law, rather it was merely taken as a guide while drafting the law. Therefore, the arbitration law of China is different from other countries. For instance, ad hoc arbitrations which are accepted in most jurisdictions are invalid per se under PRC law.
Though parties can choose ad hoc arbitrations outside China, the enforcement of the same could be complicated issue. Also under Chinese law, disputes may only be submitted to arbitration outside China and/or under foreign arbitral institutions if the disputes are “foreign related”. This means that parties cannot choose a foreign seated arbitration for domestic disputes. Further PRC laws are strict in party representation which means non-Chinese lawyers cannot represent the parties in the dispute resolution process. With regards to interim measures, the Civil Procedure Law and the Arbitration Law provide that only the Chinese courts have the power to grant interim orders, including preservation of property and evidence. There are three areas where the Chinese courts exercise their supervisory jurisdiction over arbitration. First, they may intervene to make a ruling on the validity of an arbitration agreement when considering whether it has jurisdiction over a dispute. Second, the Chinese courts may make orders for interim measures such as the preservation of property and evidence. Finally, they may consider whether to refuse enforcement of an award.
The Chinese law like other countries is trying to cope up with international standards. The 2015 Rules introduced new provisions allowing the joinder of parties and consolidation of dispute. In 2017, the PRC laws is relaxing towards ad hoc arbitrations keeping in mind the importance of party autonomy and the need for convergence of domestic law with the international one. Though CEITAC enjoys a privileged position in Chinese related disputes, foreign parties are still sceptical about CEITAC in matters involving non-Chinese party.

INDIA:

Arbitration in India has gained significant popularity over the past two decades. With growing international commercial trade and commerce, international arbitration is growing multifariously. Parties are now becoming more friendly in choosing arbitration rather than the customary method of litigation. In the recent years in Asia, India is witnessing more cases being referred to arbitration as a mode for Alternative Dispute Resolution.

Arbitration in India is governed by the Arbitration and Conciliation Act, 1996 as amended by the Arbitration and Conciliation (Amendment) Ordinance, 2015 (Arbitration Act), and the Arbitration and Conciliation (Amendment) Act, 2019. It is based largely on the Model Law. Unlike Singapore, the Indian Arbitration and Conciliation Act, governs both domestic and international arbitration within its jurisdiction. As the model law suggests, the parties are allowed to choose their mode of arbitration, procedures and administrative support to their convenience. One peculiar feature that is worth mentioning is that the India’s arbitration act prescribes a 12-month statutory time-limit within which the parties and the arbitrators are bound to complete the proceedings. However, this timeline may be extended with the consent of the parties. Quick and timely disposal of the cases are incentivised by increase in the fee of the arbitrators and delay is penalized by deducting up to 5% from the arbitrator’s
fee for each month of delay. In addition to the above, the Tribunals are also vested with the powers to grant interim relief to the parties.
With respect to enforcement, India is a party to New York Convention wherein international awards are enforced in the same way as domestic awards. During the recent years the courts have refrained itself from interfering with the award granted by the arbitrators unless they are affect by procedural defects or in violation basic principles of natural justice. The mentality of the Indian courts over arbitral awards are only supervisory and the courts are not allowed sit on an appeal over the findings of the arbitral tribunal or to re-appreciate evidence and facts to on merits. Recently, the courts have allowed foreign lawyers to represent the parties in international commercial arbitration subject to certain limitations. The courts have also confirmed that two Indian parties can contract to have a foreign seat of arbitration, and also ruled that a non-party to the Arbitration Agreement could be made part of the arbitral proceedings on the grounds that it acted as an alter ego to the contracting party.

Despite having acceded to UNCTIRAL Model Law and other captivating features, international arbitration in India has not grown much like its infamous counterparts. However, recent amendments have taken the necessary care to restructure institutional arbitration and streamline the arbitration process to a great extent. Even though the amendments did not incorporate the entire gamut of suggestions from the Law Commission, the Amending Act goes a long way to address the issues faced by parties when arbitrating in India. The optimism portrayed by the judiciary and the Indian government at the global conference, “The National Initiative on Strengthening Arbitration and Enforcement in India,” reflects their commitment to ensure that Indian arbitration law is aligned with international benchmarks and practices. The law is expected to go a long way towards improving the efficiency of India’s arbitration procedures, making arbitration a much more attractive option for dispute resolution for international entities doing business in India.

Snapshot:

HONG KONG:

The sixth International Arbitration Survey, produced by the Queen Mary University of London, ranked the Hong Kong International Arbitration Centre (HKIAC) as the third best arbitral institution worldwide and the most preferred arbitral institution outside of Europe. The HKIAC was also described as the world’s most improved institution over the past five years. Reflecting the importance of Hong Kong as an arbitral seat, the survey also found Hong Kong to be the third most preferred seat worldwide, following London and Paris, and the most preferred seat overall outside Europe.
Hong Kong arbitration is governed by the Hong Kong Arbitration Ordinance which came into effect on 01.06.2011. The new ordinance is based on the UNCITRAL model law having provisions for both domestic and international arbitrations. The principles of model law have been adopted under the Ordinance subject to slight additions and modifications making it party oriented and flexible. There are no limitations for the local parties to agree on a foreign institution whether or not the dispute is domestic or international. Though institutional arbitrations are gaining popularity, ad hoc arbitrations are also recognised in Hong Kong relaxing the substantive procedural requirements for arbitrations. Principle of minimal court intervention is practiced in Hong Kong wherein a valid arbitration clause bars access to the local courts. The Ordinance balances the importance of party autonomy and at the same time the court’s powers in supervising the arbitral procedures. In Hong Kong, there are no restrictions as to party representation. Under HKIAC Rules, a party can be represented by person of their choice, however, for court matters arising out the arbitration only Hong Kong admitted barristers and solicitors may appear and represent the parties. The Ordinance also vests powers to the tribunal to grant interim reliefs to the parties upon request.
Hong Kong is a party to the New York Convention which means any award with the leave of the Court of First Instance grants leave can be enforceable in Hong Kong whether or not they are domestic or foreign or obtained from a non-convention country. The court also has powers to refuse enforcement of awards from a non convention country. The grounds for setting aside the awards are very narrow, the courts being pro-enforcement and generally reluctant to refuse an award for enforcement.

Snapshot:

CONCLUSION:

The most important consideration is to ensure that you have an enforceable arbitration agreement, which contains all (or most of) the elements mentioned in the introduction. Generally, if there is no arbitration agreement, then there can be no arbitration, in any of the above jurisdictions. The other points to be considered to choose the most appropriate forum / jurisdiction for conducting the Arbitration should be the rules governing the arbitration, fees of the arbitrators, time-limit of the arbitration proceedings, power of the tribunal to grant interim awards and finally the enforcement of the award.
International arbitration has come a long way in Asia, as the increasing number of cases administered by these institutions demonstrates. As well as the arbitrations run by CIETAC, HKIAC, and SIAC, there are many International Chamber of Commerce and London Court of International Arbitration arbitrations based in Asia. In addition, there are a significant number of ad hoc arbitrations throughout the region.

The support of the governments of Hong Kong and Singapore provides a political, social, and commercial environment conducive to the settlement of commercial disputes, and the legal regime in these two countries supports the enforcement of international arbitration awards. In many ways, Hong Kong and Singapore have now emerged as two of the leading venues for international arbitration, alongside traditional locations such as London, New York, Paris, and Geneva. However, with the recent developments in Arbitration law and the attitude of the Indian courts towards promoting arbitration, India is soon to emerge to compete with the SIAC and HKIAC in Asia.

Vijjay Metha